The Treasury Department recently announced that the 2017 Tax Cuts and Jobs Act offers most employers a substantial tax credit for providing paid family and medical leave. How substantial? Between 12.5 and 25 percent of the wages paid. Moreover, it's possible to take the tax credit retroactively this year as long as you put the required policies in place before Dec. 31. And, your short-term disability policy may qualify you for the credit.
To qualify, you must have an employer-employee relationship as defined by the Fair Labor Standards Act.
Qualifying employees have been employed for 1 year or longer and are paid no more than a specific amount calculated each year -- $72,000 in 2018. The employee is not required to work any specific number of hours annually, so employers can take the credit if they grant paid leave to part-time employees.
The leave must be taken for purposes approved in the federal Family and Medical Leave Act.
What leave is permitted under the FMLA?
Generally, the FMLA allows leave upon the birth, adoption or fostering of a child; when caring for one's own serious health condition or that of a spouse, parent or child; when dealing with a qualifying exigency related to a spouse, child or parent's active-duty military service; and to care for close relatives who are covered service members with serious injuries or illnesses.
What must the policy specify?
To get the credit, the employer must have a compliant policy in place that covers the time period when the leave was taken. 2018 policies can be made retroactive. Starting next year, the policy must be in place before the leave is taken.
- The policy must cover all qualifying employees. For example, you may not exclude union employees.
- The company must provide at least two weeks' annual leave for each qualifying full-time employee and a proportionate amount of leave for each qualifying part-time employee.
- The program must pay at least 50 percent of the qualifying employee's wages during the leave.
- If the company employs any qualified employees who are not covered by title I of the FMLA (such as part-time workers), the policy must include "non-interference" protections.
Here is an example of compliant "non-interference" language:
"[Employer] will not interfere with, restrain, or deny the exercise of, or the attempt to exercise, any right provided under this policy. [Employer] will not discharge, or in any other manner discriminate against, any individual for opposing any practice prohibited by this policy."
For more information on how to set up a compliant policy for this tax credit, contact an experienced employment law attorney.