COVID-19 Brings Regulatory Changes - Learn How to Rapidly Implement in Workday®
Workday® has become a major force in HCM and Finance systems in part because of its promise to allow businesses to keep up with a rapidly changing world. Congress passed and the President signed H.R. 6201 “Families First Coronavirus Response Act” on Wednesday March 18th. This bill makes some sweeping changes to paid sick leave, FMLA, and some tax credits which could have a major financial reporting impact. In this article we’ll summarize these changes for you and then discuss how, through Workday, you can rapidly be compliant.
Summary of Families First Coronavirus Response Act
The following is a summary, there are additional technical and legal details that may require examination, the goal here is to provide a high level view of the changes:
For employers with less than 500 employees the “Emergency Paid Sick Leave Act” requires them to provide two weeks (10 days) of paid sick leave (to full time employees) for COVID-19 related leave, ordered quarantines, lack of childcare, or to care someone with a COVID-19 related issue.
For large employers FMLA has been expanded* so that a person can now take FMLA related leave:
because of a public health emergency
if they are unable to work because they must care for a child
*Employees could already take FMLA if they get a COVID related illness or to care for someone who had it, so this provision simply extends to childcare related to the emergency but not to any specific illness within the family.
The FMLA leave in #2 must be paid after 10 days at 2/3 of the employee’s FLSA rate.
There is a tax credit equivalent to wages paid under #1 or #3 that your company can claim.
How Workday can Help with Compliance
To implement Paid Leave in Workday, a time off plan in which full time employees are immediately granted two weeks (10 days) can be created and implemented relatively easily. Additionally, you should consider the following:
PTO Pay Rate: On the payroll side you may need a new earning code to properly calculate the PTO pay rate.
Non-Exempt Employees: Be sure you are using the FLSA labor rate for any non-exempt employees. Workday has a lot of automation around FLSA rates - now is a perfect time to make sure you are utilizing the automation available to you in Workday - you can use to aid with compliance around this new regulation.
Absence Plans: For FMLA expansion many large employers have established absence plans related to FMLA . However, in Workday terms, you now have a cascading leave where the first 10 days are unpaid but then the subsequent leave must be paid. Furthermore, the paid leave is capped at $10,000. Employers may wish to tie this new plan to a new earnings code to monitor the $10,000 limit. Additionally, as if there weren’t enough moving parts, the new earnings code can calculate at the 2/3 pay rate if that is how an employer elects to implement this leave.
Workforce Communication: Employers will want to take advantage of using Workday to communicate these changes. Workday has robust tools for workforce communications. If you are having a difficult time communicating HR policy changes, leverage these tools to improve communications.
Refundable Tax Credit: On the finance side, for wages paid out, employers are eligible for a refundable tax credit. That means you need to track every dollar paid in this type of leave and reduce your tax liability (or increase your tax receivable position) accordingly.
By using new pay components, it will make it easier for both payroll and the general ledger tracking purposes. You could go even further by creating a second pay component that makes the accrual entry automatic when payroll is calculated. From an HR perspective, you may wish to modify absence policies to encourage employees to take this type of leave (versus older, non-tax advantageous plans) to capture the maximum tax credit.
Summary
As you can see Workday time off, cascading leave, pay components, and tight integration to Workday Financials can help you get all of this off the ground quickly. Our experts at Makse Group have already gone through the entire text of this bill and have developed configurations to help rapidly deploy these to our customers. If you are feeling overwhelmed or confused you are not alone. Our team can help make strategic business decisions in a time when so much is uncertain.
