Updated April 7, 2020
The new Families First Coronavirus Response Act (FFCRA) requires many small businesses to provide paid sick and family/medical leave in response to COVID-19. Eligible employers may then receive tax credits for the leave wages paid.
This article will walk you through everything you need to know about using OnPay to pay workers for FFCRA-related paid leave and receiving your eligible tax credits.
- Is my small business required to provide FFCRA paid leave?
- How FFCRA pay types are defined in OnPay
- How to process FFCRA pay for employees
- How tax credits for FFCRA payments are processed
Is my small business required to provide FFCRA paid leave?
The new legislation applies to most small businesses with under 500 employees. To learn more about which businesses are required to offer this new paid leave, see our overview of paid leave and tax credits through the FFCRA.
How FFCRA pay types are defined in OnPay
There are three new pay types in OnPay that can be used to pay workers for FFCRA-related emergency sick or family leave.
For sick leave (up to 2 weeks paid)
Note: An employee can only use 80 hours total of FFCRA Sick, FFCRA Care, or a combination of the two according to the law. Once these items are exhausted, an employee can then take up to 10 weeks of the FFCRA Extended pay.
- Use this pay type for an employee who is unable to work because they are in quarantine (pursuant to Federal, state or local government order or advice of a doctor or medical professional), and/or are experiencing symptoms of COVID-19 and are seeking or awaiting testing or diagnosis.
- Limits: The employee should be paid their regular rate up to a daily limit of $511. Any amount above the daily limit will not be eligible for a payroll tax credit.
- Use this pay type for an employee who is unable to work because they have to care for a family member who is under quarantine or has been advised to self-quarantine (pursuant to Federal, state or local government order or advice of a doctor or medical professional), or to care for a child (under 18 years of age) whose school or place of care has been closed or is unavailable due to COVID-19, and/or the employee is experiencing any substantially similar condition or circumstances.
- Limits: The employee should be paid two-thirds of their regular rate up to a daily limit of $200. Any amount above the daily limit will not be eligible for a payroll tax credit.
For extended family and medical leave (up to 10 weeks paid)
- Use this pay type for an employee who has been employed for at least 30 calendar days and is unable to work due to a need to care for a child (under 18 years of age) whose school or place of care has been closed or is unavailable due to COVID-19.
- Limits: The employee can be paid up to 10 weeks at two-thirds their regular rate of pay, with a daily limit of $200 and aggregate limit of $10,000.
How to process FFCRA pay for employees
The new FFCRA pay types can be added as you run a regular payroll.
To start, from the main dashboard navigate to Payroll > Run Payroll in the menu to the left.
You'll start on the Select Employees step. Check the Include box for any workers who should be included on this pay run, and adjust any pay period or check date info in the top as needed. (You can read more about how to run a standard payroll in OnPay here.)
Click the blue box for step two, Enter Hours, to proceed.
For any employee who should receive an FFCRA pay type, click the button to expand the window to see additional Pay Items. In the Select Pay Type box, type FFCRA and you will see the three pay type options populate. Select the type appropriate for this employee, and click the blue Add Item button.
If you are unsure whether the employee qualifies for FFCRA Sick, FFCRA Care, or FFCRA Expanded, you can review how these pay types are defined above.
To add the hours for the new pay item, click the blue pencil icon next to it.
A dialogue will pop up to prompt you to enter hours for each day in the pay period.
Note: You will only be able to enter hours dated April 1, 2020 or later. The FFCRA was made effective on April 1 and its provisions have been extended to March 31, 2021, per the Consolidated Appropriations Act of 2021.
In this window, enter hours for each day and click the blue Next button to progress through days in the pay period. The hours save as you go. When you have entered all of the hours for the employee, click Close.
Note: The FFCRA outlines daily and aggregate limits to the required paid leave eligible for tax credits. When you enter an employee's hours for FFCRA pay, if the value exceeds the limit then the hours will automatically prorate to fulfill the maximum value but not exceed it. If this happens, you will receive an alert like this:
Once you have added any applicable FFCRA pay types to employees, you're ready to review and approve payroll as normal. Click the orange Review Payroll step to proceed.
Any added FFCRA pay types will show as their own line item in the wages summary for each employee.
Click the green Approve Payroll button to progress to the last step.
On this screen, you will see a dialogue box for FFCRA pay types, summarizing the value of eligible tax credit.
Make sure everything looks correct, and then click the blue Approve Payroll button to submit the payroll.
How tax credits for FFCRA payments are processed
OnPay will automatically reduce your 941/943 tax liability by the eligible amount paid in the FFCRA leave wages, and an apportioned amount of employer medicare and cost of employer share benefits (if this amount is logged in OnPay), based on the FFCRA pay included on the payroll.
If there is any remaining credit value, you can redeem that amount via a refund from the IRS directly, or OnPay will continue to reduce the tax payment of your future pay runs until the total of all credits is used.
Keep up to date with all of this and more by checking our COVID-19 Resource Center. We’re updating it regularly as there are new developments and government guidance.
Please note that as COVID-19 legislation is changed or extended, always refer to IRS guidance for the most up-to-date information.