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The American Rescue Plan Act Part 2: Expanded Employer Tax Credits for Paid Sick and Emergency Family Leave

As mentioned in part one, employers should be aware of a number of key provisions under Biden’s new stimulus bill, the American Rescue Plan Act (ARPA). I’ve provided summaries of some of the most significant in this three-part series. This is part two of the series, and I cover expanded tax credits. (Read Part 1 here»»)

Employer Tax Credit Extension for Providing Paid Sick and Emergency Family Leave

The FFCRA’s requirement that employers with fewer than 500 employees extend paid leave benefits to employees expired on December 31, 2020. However, the tax credits continued to be available for covered employers who provided paid leave to employees for FFCRA-qualifying reasons through the first quarter of 2021. Now, with ARPA, the tax credits are extended, and the employee’s leave clock is essentially reset.

From April 1, 2021, through September 31, 2021, qualifying employees may take an additional 10 days of paid sick leave, and employers providing it are entitled to a tax credit as reimbursement. The maximum tax credit for providing paid sick leave for an employee’s own health condition is still the employee’s regular rate of pay (*note this is the regular rate of pay, not hourly pay), with a maximum of $511/day. Similarly, the maximum tax credit for all other covered paid sick leave is two-thirds the employee’s regular rate of pay, with a $200/day maximum.

ARPA also provides a tax credit for up to an additional 12 weeks of partially paid leave under the FFCRA’s Emergency Family and Medical Leave Expansion. Also, the initial two-week period of unpaid Emergency Family and Medical Leave is eliminated, but the maximum tax credit is still two-thirds of the employee’s regular rate of pay, with a $200 maximum per day. Accordingly, the maximum amount of tax credit available to an employer under this provision increased from $10,000 to $12,000.

Finally, employers must either implement all the paid leave provided for under the ARPA or none. Employers cannot select the aspects it wishes to offer and only receive tax credits for those paid sick leaves. It’s an all-or-nothing deal.

Best Practices Tip: If you are a covered employer under FFCRA, you should offer the entire paid leave package unless there are circumstances unique to your business that make it undesirable. It not only ensures that you’ll receive tax credits – i.e., free money – but it is likely to boost employee morale and help get employees back to work.


To read part one of the series where I  discussed expanded qualifying reasons for paid sick and emergency family leave, click here.


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