Your employees may encounter a situation where they have to take time off from work to care for, or deal with, a medical situation. As an employer, are you allowed to terminate an employee after a certain period of missed time? Are you required to pay employees for this missed time? The answers to these questions depend on which state you operate in as some states have established the Paid Family Medical Leave program (PFML). Let’s take a closer look at what PFML is.
What is the Family Medical Leave Act?
In order to establish what PFML is, we need to first know what FMLA is. Back in 1993, the government passed the Family Medical Leave Act (FMLA) in order to protect employees from termination due to extended leave for certain medical scenarios. This act provides employees with up to 12 weeks of unpaid time off for serious family health issues or situations. Situations covered under FMLA include:
- foster care placement
- family or personal illness
- military leave
Additionally, FMLA guarantees that when an employee returns to work, they can return to the job they held before the leave or a job that is essentially equal in pay and status. Furthermore, Family Medical Leave states that employers must continue to carry insurance benefits for these employees.
What is Paid Family Medical Leave?
Since the likelihood that an employee would experience financial hardship increases the longer they are out of work on Family Medical Leave, some states have adopted a Paid Family Medical Leave program. Currently, twelve states and the District of Columbia offer, or will offer, PFML. These states are:
- New Hampshire
- New Jersey
- New York
- Rhode Island
As defined by the U.S. Department of Labor, Paid Family Medical Leave provides employees with paid time away from work due to medical reasons that require a long-term absence. This leave can be taken for family reasons, such as caring for an ill family member or a new child, or medical reasons, such as a personal serious illness or injury.
What are the rules of PFML?
PFML typically provides a weekly benefit payment to an employee that is a percentage of the worker’s usual income through a State run program. State programs are funded through small, mandatory payroll deductions from employers, employees or both. Each state works a little differently when it comes to how PFML is funded.
For example, Massachusetts PFML is funded from both employee and employer contributions. Currently, employees contribute 0.344% of their wages (0.12% to medical leave and 0.224% to family leave) and employers contribute 0.336% for a total of 0.68% of an employee’s wage.
Another consideration in Massachusetts is the number of qualified employees a business has. Businesses with 25 or more covered individuals are responsible for making employer contributions for covered individuals. Businesses with less than 25 covered individuals do not need to make an employer contribution. However, businesses still need to send the employee portion of the contributions on their behalf.
Other specific rules surrounding PFML vary by state. Below, are a list of rules for the New England states that offer PFML.
Percentage of Wages: 95% of an employee’s weekly wage (up to an amount equal to 40 times the state minimum wage) and 60% of a worker’s average weekly wage (above an amount equal to 40 times the state minimum wage).
Maximum Weekly Benefit: $780.
Length of Benefits: Up to a maximum of 12 weeks in a 12-month period.
Eligibility: all private-sector and many public-sector employees that have earned at least $2,325 during a base period of the first four of the five most recently completed quarters.
Percentage of Wages: 50% of an employee’s weekly wage, for medical leave, or 67% for family leave.
Maximum Weekly Benefit: $170 for medical leave and $1,068.36 for family leave.
Length of Benefits: Up to a maximum of 26 weeks in a 52-week period.
Eligibility: most private-sector employees that have been employed for at least 26 consecutive weeks by their current employer.
Percentage of Wages: 80% of an employee’s weekly wage (up to an amount equal to 50% times the statewide average weekly wage) and 50% of a worker’s average weekly wage (above an amount equal to 50% the statewide average weekly wage).
Maximum Weekly Benefit: $1,084.31 in 2022.
Length of Benefits: Up to a maximum of 26 weeks in any benefit year.
Eligibility: employees already covered by Massachusetts unemployment insurance law, excluding some public-sector workers. Employees will have to have earned at least $5,700 during a base period of the past four completed quarters.
Percentage of Wages: Approximately 60% of an employee’s weekly wage.
Maximum Weekly Benefit: $978.
Length of Benefits: Up to a maximum of 30 weeks in a 52-week period.
Eligibility: employees already covered by Rhode Island unemployment insurance law who have earned at least $4,900 over the entire base period.
New Hampshire recently passed the first and only voluntary, state-sponsored paid leave plan. Eligible New Hampshire employers (public employers and private employers with more than fifty employees) and eligible employees are entitled to opt in to the plan.
Percentage of Wages: Up to 60% of an employee’s weekly wage.
Maximum Weekly Benefit: Social security wage maximum.
Length of Benefits: Up to a maximum of 6 weeks per year plus a seven-calendar day unpaid elimination period per year.
How should employers handle PFML?
First off, as an employer, it is key to know if you have employees that work in a state that requires PFML contributions. Even if your business operates in a state (like Maine) that does not require PFML, but has remote employees working in a state (like Massachusetts) that does, you must properly contribute to PFML for those employees.
Next, it is important to know that employee PFML contributions are considered post-tax deductions, meaning they are subject to taxes. In addition to withholding withhold proper PMFL contributions on covered individuals, be sure to withhold proper payroll taxes on their wages. Employers should file these contributions to the state on a quarterly basis. Furthermore, report employee contributions to PFML in Box 14 on the Form W-2 at year end.
It is also your responsibility to hang a PFML labor poster in your place of business or provide that poster to your remote employees.
Finally, employers need to setup an employer PFML account with the state(s) in which their employee(s) works. When an employee submits an application for paid leave for any reason, employers need to review the application for accuracy. The state will be responsible for distributing PFML benefits to the employee. These benefits are subject to federal income tax. However, the benefits are not subject to FICA or FUTA taxes.
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