Paychex HR and Payroll Services in Denver, Colorado

A series of co-mingled laws dating back to the earliest days of the COVID-19 pandemic in March 2020 provided billions of dollars in aid that included funding to help finance the requirement for certain employers to offer emergency paid sick and emergency family and medical leave — and later credit for qualified employers who voluntarily offered this coverage.

The end of the National Public Health Emergency resulted in the end of these requirements for certain employers to offer the emergency leaves. What remains now for businesses still trying to recover from the negative financial impact of the pandemic is the potential to claim payroll tax credits if they were eligible but did not claim these credits previously or if they need to adjust the amounts they claimed.

Note: These tax credits need to be reconciled with other tax credits and government funding to ensure that no double-dipping takes place, which includes any tax credits/amounts already claimed and received for Paycheck Protection promise (PPP) loan forgiveness and the employee retention tax credit.

It’s important to understand the framework of leave and associated credit for any employer who needs to amend any prior quarter’s Form 941 in 2020 and 2021 to claim or adjust the credit, so it is done accurately. This requires the use of Form 941-x.

Tax Credits Under Family First Coronavirus Response Act

The Families First Coronavirus Response Act (FFCRA) originally offered payroll tax credits to American private employers with fewer than 500 employees to offset the costs of the requirement to provide employees with qualifying paid leave for specified reasons related to COVID-19. When that mandate sunset at the end of 2020, the American Rescue Plan Act (ARPA) extended and expanded the payroll tax credits, allowing covered employers to take the credits until Sept. 30, 2021, if they voluntarily provided employee paid leave under the FFCRA framework.

However, the credit could be impacted by state and local COVID-19 leave requirements and the interaction with the requirements under FFCRA. Plus, an employer could only qualify for the federal tax credit if the leave met the requirement of the original FFCRA mandate.

It should be noted that the credit cannot be claimed by private employers with 500-plus employers even if they offered comparable leave.

The following highlights the changes under ARPA and delineates by date because if you plan to claim the credit on payroll taxes paid through March 31, 2021, or after April 1, 2021, there are different requirements.

What is the Purpose of the Tax Credits?

Employers who provided employees with qualified paid leave related to COVID-19 that fell under the Emergency Paid Sick Leave Act (EPSLA) and/or the Emergency Family and Medical Leave Expansion Act (EFMLEA) can receive tax credits to reimburse 100 percent of leave wages paid.

April 1, 2020 through March 31, 2021

Generally, American private employers with fewer than 500 employees were eligible to claim the credits. Self-employed individuals could have claimed the family leave credit for up to 50 days.

April 1, 2021 through Sept. 30, 2021

In addition to private employers, healthcare providers and certain governmental and state/local employers became eligible to claim the credit under the same requirements. The limit on the family leave credit for self-employed individuals increased to 60 days.

Under ARPA, new non-discrimination rules also were established that apply to the credit for either leave, disallowing a credit for any employer who discriminates in favor of highly compensated employees, full-time employees or employees based on employment tenure.

Calculation of Maximum Hours

April 1, 2020 through March 31, 2021

• Full-time employees were entitled to 80 hours of leave under the EPSLA if they were normally scheduled to work at least 40 hours each workweek.
• Part-time employees who worked less than 40 hours per week were entitled to EPSL in the amount up to the number of hours that an employee works, on average, over a two-week period.

The U.S. DOL included additional guidance in its Temporary Final Rule for the calculation of maximum EPSL if a traditional weekly schedule does not exist or if a schedule varies.

Under the EFMLEA, calculate hours of leave based on the number of hours the employee is normally scheduled to work. If the normal hours scheduled are unknown, or if the part-time employee’s schedule varies, you may use a six-month average to calculate the average daily hours.

April 1, 2021 through Sept. 30, 2021

The maximum number of days for which qualified sick leave wages could be paid and the number allowed for an employer to get a credit would be reset to 10 days. Hours were calculated as noted above. However, employees couldn’t carry over unused hours. If an employer chose to provide leave under the EPSLA or EFMLEA, they would be eligible to claim the credit again.

What Are the Qualifying Reasons for Taking Leave?

April 1, 2020 through March 31, 2021

An employee qualified for EPSL if they were unable to work (including unable to telework) related to COVID-19 because the employee:

1. Was subject to a federal, state, or local quarantine or isolation order
2. Had been advised by a healthcare provider to self-quarantine
3. Was experiencing COVID-19 symptoms and is seeking a medical diagnosis
4. Was caring for an individual subject to an order (described in 1) or self-quarantine (described in 2)
5. Was caring for his or her child whose school or place of care is closed (or childcare provider is unavailable)
6. Was experiencing any other substantially similar condition specified by the U.S. Department of Health and Human Services

Part-time employees would generally have been eligible for Emergency Paid Sick Leave in an amount equivalent to their regularly schedule hours for a two-week period.

Under the EFMLEA, an employee would have only qualified for leave under No. 5 above.

April 1, 2021 through Sept. 30, 2021

The American Rescue Plan Act changed leave under the EFMLEA. Employees qualified for all six reasons to take leave that was available under the EPSLA, plus both leaves gained additional reasons under No. 3 (above), as follows:

• Employers could have claimed the credit for sick leave wages paid for employees taking leave while they awaited the results of a diagnostic test for COVID-19 after being exposed to the virus or because their employer requested the test.
• Leave taken for the employee to obtain a COVID-19 vaccine or to recover from any health issues resulting from the vaccine.

What Are the Wage Calculations for Paid Sick Leave?

Employees were to be paid based on:

• For reasons Nos. 1 to 3 above, the higher of the employee's regular rate of pay, or the applicable state or federal minimum wage, up to $511 per day
• For reasons Nos. 4 to 6 above, the higher of 2/3rds of the employee's regular rate of pay, or the applicable state or federal minimum wage, up to $200 per day

What Should Businesses Know About the EPSLA?

The American Rescue Plan Act of 2021 changed some of the provisions of the FFCRA, including the reallocation of which portion of the credit is non-refundable. The amount of the credit stayed the same.

April 1, 2020 through March 31, 2021

• If the credit exceeded the employer’s total liability of the portion of Social Security in any calendar quarter, the excess was refundable to the employer.

April 1, 2021 through Sept. 30, 2021

• If the credit exceeded the employer’s total liability of the portion of Medicare in any calendar quarter, the excess is refundable to the employer.

Additional changes included:

• The credit increased by the cost of the employer’s qualified health plan expenses and by the certain employer’s collectively bargained contributions to a defined benefit pension plan and certain amounts of collectively bargained apprenticeship program contributions.

Paid sick time provided under this Act was not preempted by other federal, state, or local laws. The IRS created FAQs that provide an overview of the tax credits.

What Should Businesses Know About the EFMLEA?

Under the EFMLEA:

Through March 31, 2021

An eligible employee qualifies for leave for caring for his or her child whose school or place of care is closed (or childcare provider is unavailable) would be paid by their employer after the first 10 days of leave at a rate of not less than two-thirds of their current rate of pay for the number of hours the employee would otherwise be scheduled to work, up to a maximum of $200 per day or an aggregate of $10,000, for up to 12 weeks in a 12-month period.

April 1, 2021 through Sept. 30, 2021

Other changes under ARPA are an increase in the maximum aggregate amount to $12,000 for up to 12 weeks in a 12-month period and the expansion of eligibility to include employers of healthcare workers and emergency responders

Recordkeeping

Employers must retain documents and information regarding leave for a period of four years, regardless of whether the decision was made to grant or deny the request for leave.

For tax credit purposes, the U.S. DOL requires employers to maintain the following for four years:

• Documentation to show how the employer determined how much paid leave the employee was eligible for (e.g., records of work performed, telework, and paid leave credits)
• Documentation to show how the employer determined the amount of qualified health plan expenses that were allocated to wages.
• Copies of any completed IRS Forms 7200 and 941 that the employer submitted to the IRS (or provided to a third-party payer to meet an employer’s employment tax obligations).

How Paychex Can Help

The passage of multiple laws created complexities for businesses owners who want to take advantage of the paid leave tax credits. However, employers must review their obligations under existing state and local COVID-19 leave laws, as well as any other federal, state or local laws related to an employee’s right to leave.

This is a good time to re-evaluate your HR needs. Consider how our HR Services, tax services and payroll solutions could save you time by helping alleviate extra work and the potential risk of non-compliance.

Implementing a formal onboarding process is a key part of enhancing employee retention and productivity. Onboarding can help new hires adjust to their jobs more quickly, acquire many of the skills and the knowledge needed to contribute to the organization, and get up to speed on the social and performance elements of their new positions. Read on to learn more about the importance of onboarding and what it takes to implement a solid employee onboarding process at your business.

The First Six Months: Establishing a Formal Employee Onboarding Process

The first six months can be critical for a new employee as they form impressions that can impact retention and performance. Establishing a clear, formal onboarding process can set each new employee up for success by helping them navigate the company environment and understand what it takes to succeed in their new position. A formal onboarding and orientation process may include written materials, orientation courses and presentations from HR and managers, meetings with internal stakeholders, shadowing and training, and ongoing mentorship.

Why Is Onboarding Important?

In a competitive hiring landscape, it's important to take steps to make a great first impression and focus on how the business welcomes new hires. From the time an offer is extended until the day the new hire becomes fully productive, the employee onboarding experience can lay the foundation for long-term success.

Here's a closer look at some reasons why having a formal employee onboarding process is important.

Helps Communicate Cultural Norms

Each business has its own organizational culture. The earlier an employee understands what is expected of them and what it takes to succeed within the organization, the more likely they are to become a productive and satisfied employee. Communicating cultural norms can include sharing written, formal policies, and explaining why they are important and how they're enforced. It may also involve explaining the organizational structure, outlining internal processes and communications protocols, and ensuring that the employee understands what steps they can take to approach specific challenges. Finally, successful onboarding also requires communicating the intangible factors of the work environment.

Shortens the Time to Productivity

Conventional wisdom suggests that it takes weeks or months for an employee to get up to speed in a new position. But thorough onboarding programs can drastically reduce the time to productivity. One of the most important aspects of this is communicating the responsibilities of the position, the expectations and metrics for success, the reporting lines, and processes associated with the position. One-on-one time with the employee's manager to answer questions can help the employee understand their role as part of the big picture, and providing necessary training can also help increase productivity earlier in employment. Spending time explaining team dynamics, team processes, and norms of communication is another way to underscore employee success.

Fulfills Brand Promise and Differentiation

Your onboarding process should help give employees the tools and knowledge needed to represent the business. Best practices would include communicating these values and unique selling points. Provide clear examples of how each position would represent these values as part of their role, from a vice president of sales interacting with key clients to an assistant representing the brand on the phone. Finally, site visits or themed presentations that show successful examples of company branding can reinforce these points.

Supports Training, Development, and Performance

As your company develops an onboarding program, it should include both standardized components and specialized adaptations for individual employees and positions. Your onboarding process should have the flexibility to provide specialized training to help each employee succeed in their specific position. In addition, consider building in support that provides a development plan incorporating mentorship, future training opportunities, and growth assignments. Managers, mentors, and HR staff can then support employees as they grow.

Reduces New Employee Turnover

With quit rates reaching record levels, many businesses continue to struggle to provide a positive employee experience. The Bureau of Labor Statistics (BLS) revealed that the nationwide quit rate was 2.6 percent or about 4 million individuals in February 2023, one of the highest rates since 2000 when BLS first collected this data. And according to the Society for Human Resource Management (SHRM), employee turnover can be as much as 50 percent in the first four months of employment.

These statistics support the idea that the risk of employee turnover can be present even during a new hire's first days and months. Many HR leaders understand this and have identified the importance of having a new-hire onboarding process. According to the 2022 Paychex Pulse of HR Survey, 35 percent of HR leaders said focusing on the onboarding process to help new hires feel engaged and be productive as soon as possible works best when it comes to fostering overall employee engagement.

Acclimates New Hires

Part of a successful onboarding process includes providing new hires with information about your industry, business history, and big-picture strategy. They should also become acclimated to your culture, values, and the people they'll be working with. As part of this introduction process, allow employees to reflect on their own background, values and strengths, and career aspirations. Then empower them to contribute to their role and place in the company, identify potential growth opportunities, and provide them with the resources and information they need to be successful.

Encourages Employee Engagement

Taking a concerted approach to acclimating new hires also aids in employee engagement. Consider establishing onboarding programs that account for factors such as the unique ways each new hire may like to learn. Successful onboarding programs embrace a variety of learning methods and resources (video, interactive elements, webinars, apps, animation, etc.) that promote greater interest and engagement. Shadowing team members or establishing mentoring programs can also offer real-life information that you can't capture in new-hire materials. When new employees can take what they've learned and apply it to the actual workspace, it increases their sense of comfort and builds confidence in their ability to contribute to a new work environment.

Assists With Recruiting

A positive onboarding experience can increase word of mouth to future candidates and boost an employer’s reputation as a great place to work. During onboarding, allocate time for new hires to begin forming a solid relationship with their manager, create opportunities for new hires to meet colleagues from around the business, and build on the interactions they had during the recruiting process.

Begin or Improve Your Employee Onboarding Process Today

When you take the time to recruit and hire high-quality talent, it's important that you also acclimate them to their jobs and the business in engaging and effective ways. Learn more about how you can streamline the onboarding process to help new hires get up and running more efficiently with Paychex.

If you hire employees, you want their employment to be a positive experience. However, an applicant, or current or former employee may take legal action against your company that could put the company at risk. To help mitigate your exposure from costly claims, employment practices liability insurance can offer some protection. Learn more about EPL insurance, how it compares to other common types of business insurance policies, costs associated with such a policy, and how EPLI can help protect your business.

What Is EPLI?

Employment practices liability insurance, commonly referred to as EPLI or EPL insurance, is a type of business insurance policy that helps cover company losses associated with certain employment claims alleging violations of the rights of an employee or applicant for employment. If a job applicant, or current or former employee takes legal action against your business, EPLI may help cover defense costs and damages, regardless of the outcome of the action. Learn more about what may be covered under EPLI policies.

EPLI may be purchased as a standalone business policy. It's also common to bundle this coverage as part of a business owner's policy or general liability policy.

What Is the Difference Between EPLI and Workers' Compensation Insurance?

EPLI and workers' compensation insurance are separate types of coverage. EPLI helps protect the company against certain employment-related claims including wrongful employment practices. Although there is no legal requirement to carry this coverage, it may be a good business decision for any company hiring employees. Workers' compensation insurance policies, on the other hand, cover medical expenses and lost wages for employees who experience a work-related injury or illness. Workers' compensation insurance is mandatory for most employers in most states.

Is EPLI the Same As Errors and Omissions Coverage?

No, EPLI and Errors and Omissions (E&O) insurance are distinct coverages. Generally, EPLI provides protection from certain employment-related claims, while E&O covers liabilities stemming from customer or client claims. For example, errors and omissions would help cover court costs and settlements if a customer were to file a lawsuit alleging negligent actions in your professional services. A common claim errors and omissions might cover is a suit for breach of contract. E&O policies often cover the business owner and employees.

What Is the Difference Between EPLI and Directors and Officers (D&O) coverage?

D&O coverage is a form of professional liability insurance that protects the personal assets of company executives, officers, and board members in the event they are sued for alleged wrongful acts in managing a company. It can provide coverage for employment issues (but only for covered individuals, i.e., directors and officers) and can also cover things like breaches of fiduciary duty. Additionally, any business with a board of directors, including small companies, can have a D&O insurance policy. While EPLI can also be beneficial for businesses of any size, the policy’s aim is to protect the company from allegations from applicants and current or former employees. Whereas D&O insurance provides liability protection for claims brought by people outside of a company, such as dissatisfied clients or investors.

EPLI Claims Examples

Employment-related claims can result in significant negative impacts to a business's bottom line, reputation, and productivity. Common EPLI claims may include:

• Wrongful termination: While many employees are employed at-will (meaning that the employee or employer can terminate the employment relationship for any reason or no reason at any time except where prohibited by state law or public policy), employees may claim that they were wrongfully terminated.
• Charges of workplace harassment: An alleged harasser can be the victim's supervisor, a supervisor in another area, a co-worker, a subcontractor, or someone outside the company, such as a delivery person or vendor. Harassment victims may include any individuals affected by the offensive conduct, not just the person targeted by the harasser.

Who Needs Employment Practices Liability Insurance Coverage?

With the number of employment-related claims filed with the EEOC, given the steep costs associated with employment related claims, nearly any business with a workforce can benefit from EPLI coverage and mitigate their financial exposure. While no industry is immune from employment-related risk, a few examples of industries that could particularly benefit from EPLI coverage include:

• Retail, an industry known for high turnover rates, may be susceptible to claims alleging age discrimination, harassment, or wrongful termination.
• Hospitality, which could experience claims of harassment.
• Professional services, in which businesses may have to handle claims around issues such as harassment, gender and age discrimination, failure to promote, and wrongful termination.
• Manufacturing and construction, where ebbs and flows in the amount of work a business has can lead to layoffs which increases the chances that employees will claim they were wrongfully terminated.
• Healthcare, where employees may allege experiencing harassment.

How Much Does EPLI Cost?

The cost of EPLI insurance policies will vary, and depend on your industry, employee count, the jurisdiction where you operate, whether your business has any history of similar employment-related litigation, and if you have established and consistently enforced employment policies, often documented in an employee handbook, in place. Often, an EPLI policy covers legal defense fees and settlement costs or damages (up to your policy's limit), whether you win, settle, or lose a case.

EPL Insurance Can Help Protect Your Business

Employment practice claims have become one of the fastest-growing sources of litigation. Make sure your business is prepared to mitigate the cost of these claims with protection through employment practices liability insurance. You may also want to learn more about how you can manage overall risk with our comprehensive guide on business insurance basics.