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Payroll and workforce administration for U.S. employers during COVID-19

The United States federal government, as well as states and localities, have responded to the spread of COVID-19 by providing guidance for employers and employees. The following are key payroll and workforce administration considerations for employers as they continue to develop their response.

Alight Solutions does not practice law or tax, or give legal or tax advice, so please confer with your legal/tax counsel regarding your specific circumstances.

Paid leave

As employers extend leave and paid time off (PTO) policies to support their workforce in response to the COVID-19 pandemic, they should examine existing policies against any state and local requirements. Currently, at least 10 states and 20 localities (county, city) have paid sick leave laws guaranteeing workers can earn a minimum amount of paid sick time. At least five states, as well as San Francisco, California, have paid family/medical leave laws that attempt to address the needs of employees to receive some type of wage continuation and job protection when time away from work is necessary to care for newborns and ill family members. While some existing employer leave policies will already meet the state/local requirements, others may need to be updated.
 
The Families First Coronavirus Response Act (FFCRA), signed by the president on March 18, 2020, includes both an Emergency Family and Medical Leave Expansion Act and an Emergency Paid Sick Leave Act. However, both leaves apply to employers with fewer than 500 employees, so they are not covered in this article. More information about the FFCRA is available here.

Payroll tax changes

Numerous state agencies/departments have announced the availability of extensions for various tax filings and payments, waivers of interest and penalties, withholding exemptions, and employer tax credits.
 
Aimed at preventing the spread of COVID-19, many employees, voluntarily or under an emergency order, have moved to work from home who did not previously do so. As a result, employers are questioning how to address income tax withholding for employees who may now have different work and resident taxing jurisdictions. Some states and localities are issuing guidance on how to handle this scenario, while others are leaving it to employers to make a determination.
 
Employers should also note that The Coronavirus Aid, Relief, and Economic Security (CARES) Act permits them to delay payment of the 6.2% employer portion of the Old-Age, Survivors, and Disability Insurance (OASDI) payroll tax incurred between March 27, 2020, and December 31, 2020. Under the Act, 50% of the tax payment is due by December 31, 2021, and the remaining 50% of the tax payment is due by December 31, 2022.
 
The CARES Act also provides a 50% refundable payroll tax credit of  up to $10,000 in qualified wages (and health benefits) per employee for certain employers that keep employees on the payroll during certain periods. There are additional conditions and agency guidance is expected, but in general, the credit is available to employers with:
 

  1. Operations that were fully or partially suspended due to a COVID-19-related shut-down order; or
     

  2. Gross receipts that declined by more than 50% when compared to the same quarter in the prior year. Notably, this provision uses the Affordable Care Act definition of “full-time employee” to determine an employer’s size and category for reimbursement, but agency guidance is expected related to the details of the calculation.

Federal student loan payments and garnishments

Under the CARES Act and by U.S. Department of Education action, federal student loan payments and garnishments will be temporarily suspended from March 13, 2020, through September 30, 2020. This does not impact private student loan payments or garnishments. The employer’s payroll department should review student loan garnishments and be ready to respond to employee inquiries about stopping applicable garnishment withholdings. The Department has provided additional detail through Questions and Answers for borrowers, and includes that any garnishment proceeds received during the temporary suspension will be returned to the employee.

State WARN laws

Under current economic conditions, many employers are being forced to evaluate and streamline their business to remain competitive in the marketplace. As a result, employers have taken various actions, including the implementation of flexible schedules, reduced workweeks, voluntary and enforced furloughs, layoffs, unpaid vacations, hiring freezes, and travel limits, as well as cuts in perks, reduced bonus budgets, pension cuts and wage freezes. It is important for employers to ensure that any reduction in force is structured in accordance with applicable labor laws, including Worker Adjustment and Retraining Notification (WARN) laws at both the federal and state level.
 
At least 15 states and Puerto Rico have WARN laws affecting private employers, and it is important to note that the federal WARN law does not preempt those state laws that are more restrictive.

Wage payment at termination

Most states—via law/regulation—specify a time period in which an employee who separates from employment (i.e., discharge, layoff, or resignation) must be paid by an employer. While these laws are not new, the current health pandemic has resulted in a higher number of terminations. As a result, it is important for employers to be aware of these requirements and comply with them as applicable. Also, employers wanting to collect overpayments from an employee’s final paycheck at termination should be cognizant of the state restrictions, including if an employee’s written authorization is required.
 
At least 15 states and Puerto Rico have WARN laws affecting private employers, and it is important to note that the federal WARN law does not preempt those state laws that are more restrictive.

Accrued vacation payout at termination

The majority of states approach termination pay either by defining or including vacation as part of wages due an employee at termination and/or by allowing employers to follow their own company policy or contract when determining vacation pay. There are also a number of states that do not have any laws in place but instead refer to and abide by case law, attorney general’s opinions, and/or state Department of Labor wage and hour guidelines.

Unemployment insurance

State unemployment insurance (UI) programs are addressing the pandemic in various ways, including, but not limited to:

  • Expanding access to UI for employees with wage reductions as a result of a business closure or limited hours through more flexible eligibility requirements (i.e., no waiting period, no work search requirements)

  • Expediting benefits claim processing and payment distribution

  • Providing relief for employers through penalty waivers for increased claims and tax payment and reporting extensions

Many UI programs are making detailed information available on their websites. Links to state websites may be accessed through the U.S. Department of Labor website. Employers should visit the websites in the states they do business and/or have employees for details.

Conclusion

The considerations summarized here are important, but they really highlight the need to fully consider both existing applicable requirements, as well as those being developed specifically inlight of the COVID-19 pandemic. Alight will continue to provide updated information through our client alerts and website, Alight.com.