What Does the Paid Family Leave Act Mean for Your Small Business?

Posted on Aug 22, 2017

By Christie Streit. CPA

Story Highlights

Premiums need to be remitted beginning on January 1, 2019, and the benefits are available to participants beginning in 2020.

The Washington Legislature approved the paid family leave program on June 30, 2017 – but now what? What does the Paid Family Leave Act mean for your small business?

First, you may be wondering when it will become effective. The bill states that premiums need to be remitted beginning on January 1, 2019, and the benefits are available to participants beginning in 2020.

The bill also offers eligible workers up to 12 weeks of paid time off for birth, adoption, or for a serious medical condition. “Serious medical condition” refers to a condition that is afflicting either the worker, or the worker’s family (both fathers and mothers qualify following birth or adoption).

The amount received by the worker is capped at $1,000 per week and workers who earn less than the state average would receive 90% of their income. Employees who have worked at least 820 hours in the past year will be eligible.

Who’s Paying?

In this instance, both the employee and the employer are responsible for premiums. The total premium is 0.4 percent of wages, with employers paying approximately 37% of the premium, while employees pay approximately 63%. Premiums will be calculated each pay period.

Just to run some numbers, if your entire company payroll is $1M per year, the total premium would be $4k (.4% of $1M). The employer would then be responsible for $1,480 and the employees would pay $2,520 for the year (based on actual payroll for each individual).

Self-employed individuals can opt-in to the coverage and pay only the employee’s share of the premiums.

Exceptions and Exemptions

There is some good news for employers who have fewer than 50 employees: they are exempt from the employer portion of the cost. However, they can still choose to pay the employer portion if they want to be eligible for small business assistance funds.

Further, employers who pay employer premiums and have fewer than 150 employees may apply for grants of anywhere from $1,000 to $3,000 to offset wage costs while an employee is on leave.

Companies that already offer similar programs can opt out of the bill, as long as the programs they are offering are at least equivalent to the state program.

Employees of businesses with fewer than 50 employees will still be eligible to receive the benefits and are required to pay their portion of the premiums. With that in mind, make sure you add your new benefits to the payroll deductions beginning January 1, 2019 and remit those premiums!

Have questions?

Please get in touch with Christie Streit if you have questions about the information in this post.

© Clark Nuber PS and Developing News, 2017. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Clark Nuber PS and Developing News with appropriate and specific direction to the original content.

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