There has been a lot of discussion about Family and Medical leave in the past few year…generally because the economy has been strong and it is hard to attract top talent. This wasn’t as big of an issue during the economic recession of 2007/08 when employees were willing to take anything the company had to offer because there were fewer jobs. But things have changed.
Today, with the battle for top talent, companies are searching for not only ways to attract employees but ways to keep them after they have attracted them to their company. Because of this, Family and Medical Leave has become a much hotter topic and one that is front and center for most companies. Small companies are no exception…they are competing for the same talent pool along with the larger companies.
In an effort to stay competitive with benefit packages, Family and Medical Leave have become more mainstream and in some cases a requirement. And now there are certain laws in place which makes it a requirement for many companies…at least to some degree. But there are some differences and some things to keep in mind when looking into these areas. Here are some areas every business owner should understand as it pertains to Family and Medical Leave.
Federal Law and Requirements
Federal law has required certain businesses to offer family and medical leave for decades. An increasing number of states have also enacted or considered passing laws requiring businesses to offer family and medical leave. For small businesses, there are some important factors small business owners should keep in mind about family and medical leave with regard to the FMLA and Pregnancy Discrimination Act.
The federal Family and Medical Leave Act (FMLA) mandates that employers having 50 or more employees within a 75-mile radius of the worksite allow them to take unpaid leave for up to 12 weeks to address their own medical issues, care for a sick family member, and upon the birth or adoption of a child. Under this law, the employer cannot terminate an employee for taking leave, thus providing job security.
In addition, the federal Pregnancy Discrimination Act prohibits businesses with 15 or more employees from discriminating against women based on pregnancy, childbirth, and related medical conditions. It requires them to be treated the same as other employees who have medical impairments. As a result, if a business with 15 or more employees permits sick or disabled employees to take leave, pregnant women are also allowed to take leave if temporarily unable to perform their jobs.
State Law and Requirements
If a small business has fewer than 50 employees (which is a large number of businesses), they are exempt from the requirements of the federal FMLA. However, some states have enacted their own laws applying similar requirements to businesses with fewer employees. States have figured out a way to still require small businesses to comply with similar laws, even for the smallest of businesses.
In addition, a few states have enacted laws requiring employers to provide paid leave to many of its employees. The statutes requiring paid leave typically allow the employee to continue to receive a certain percentage, for example, 50% or 75%, of their average weekly pay for a certain time period. However, this is usually for a shorter period of time than the 12 weeks of unpaid leave guaranteed by the federal FMLA. This paid leave is funded by state-administered insurance programs to which employees contribute, attempting to lessen the burden on small business owners.
Tax Credits to Business Owners
The Tax Cuts and Jobs Act of 2017 provides a tax credit for employers who allow employees to take paid family and medical leave during 2018 and 2019 (unless Congress decides to extend the credit). Thus, even if a business is not required to offer paid family and medical leave to its employees, if it chooses to, it can then claim a direct reduction of its income tax liability for the year of up to 25% of the compensation paid during the leave. The amount of the tax credit depends upon the percentage of the employee’s wages paid during the leave.
However, the tax credit is also subject to a number of limitations that every business owner should understand in detail before attempting to take the tax credit. We would be happy to sit down and go over these with you in more detail to see how they may affect your business or your CPA may be able to provide you with the details. Either way, it is important to get the details before taking any tax credits so they aren’t rejected by the IRS in the future.
Some Thoughts from One Business Owner to Another
Regardless of whether it is required by law, offering paid or unpaid leave to employees can be costly for a small business. There are other issues to contend with besides the paid medical leave. For example, other employees may have to cover the workload of the employee who is on leave in addition to carrying out their own duties. Or a business may have to hire and train a temporary employee to do the absent employee’s job.
But there are also some distinct advantages to small businesses that offer family and medical leave. They are generally more attractive to potential employees and they are more likely to retain their current employees. This can put help put them on equal footing with larger companies if there are comparable benefits offered. It can also allow valuable employees to take a temporary leave of absence and preserve their job, encouraging them to return when the underlying reason for the leave has been resolved.
What to do next…
As part of our legal services for businesses, we can provide guidance to help you navigate through this important yet sensitive issue. We can also ensure that your business is in compliance with applicable federal and state laws regarding family and medical leave. Even if your small business is not required by law to offer family and medical leave, we should have a discussion to determine whether offering leave to employees would be beneficial to your business. And if you do decide to offer these benefits, we can assist you in setting up a paid leave plan for employees that would enable your business to take advantage of the current tax credits.
If you ever have any questions about Family and Medical Leave or any other aspect of your business, just ask and we’ll be happy to answer them. Or if you just want to better understand how you can minimize and lower your risks (which every business owner wants) then please read some more about risk management and how you can help determine your own risk. I’d also be happy to meet with you (complimentary of course) to discuss your own personal situation further and give you some insights about how you might want to proceed.
I hope you have found this helpful and given you a different way to look at your business. If it has, please share this with others inside your company and your colleagues who are running or leading other businesses. Our primary mission at Generations Law Group, LLP is to help everyone find productive ways to lower their business AND personal risk. This is just one way you can start to do this…but it will tell you a lot about you and what has happened over the past few years with regard to your business risk. Let’s make sure your risk is as low as it can be while you continue to grow.