What Employers Need to Know About MA’s New Paid Family and Medical Leave Act

There’s nothing like voter fear to get politicians moving!

In an unusual show of bipartisanship, the Mass legislature quickly came together in June and produced Bill H.4640, commonly called the “Grand Bargain.” Signed immediately by governor Charlie Baker, the public-private collaboration places Massachusetts in the company of seven other states that have established paid family and medical leave benefits (PFML).

Nearly universal in developed countries and popular with voters according to most polls, paid PFML policies are less common in the U.S.  There are many reasons for this, but they can be summarized under ‘culture and cost.’

But times are changing. In Massachusetts’ case, sources say that H.4640 may cost business and workers about $800 million in payroll taxes.  However, most workers are relieved that they won’t have to suffer financial hardship increasing their family or when a medical emergency happens.

Companies are also taking note:  according to a February The New York Times article, 20 of the largest employers now offer some form of paid parental and emergency leave.  FML is a trend that is not going away.  President Trump and lawmakers have called for national legislation on PFML.

If you are a Massachusetts employer, here is what you need to know about H.4640’s PFML legislation before it takes effect next summer:

  • Starting July 1, 2019, expect an increase in your payroll taxes of .63%, split roughly between the company and employee unless you opt to pay the entire amount. If you have fewer than 25 employees, you won’t be required to contribute, but you will still have to remit the employee’s payroll contribution.
  • Taxes and benefits are set aside and will be paid from a Family and Employment Security Trust Fund solely for the benefit of covered individuals. After a seven-day waiting period, the Fund will pay employees up to a maximum of $850 per week. 
  • Although funding the trust begins next summer, let your employees know that benefits won’t be available until January 2021.  You will be required to post an approved workplace FMLA policy so that employees understand their rights and obligations, how much notice they must provide before an absence, and which events are covered.
  • Workers will be eligible for up to 20 weeks of paid medical, 12 weeks of paid family time off, and up to 26 weeks for military family members.
  • Former, as well as current employees, may be covered under the law.  A “covered individual” is defined as:
    • a current MA employee beginning with the date of hire
    • self-employed individuals who elect coverage and report self-employment earnings
    • and former employees, so long as they haven’t been separated from employment for more than 26 weeks at the start of the former employee’s family and medical leave.
  • If your company already offers paid family leave that either meets or beats the State plan, you can opt out of the program. Run through the costs to decide which option is best for you.
  • Expect that labor costs may rise. Along with the shared taxes on employers and workers to pay for PFML, the Act mandates an increase in minimum wage of $12 beginning in January.  By 2023, MA will join other states mandating a $15 minimum wage.

 Reasons to get on board

Perhaps you share the Greater Boston Chamber of Commerce’s testimony that cost, eligibility, and benefits are key concerns under this Act. Since most states’ PFML policies are relatively new, we can only look at trend data as it becomes available. Here are some general benefits to your business and the local economy:

  • Companies in states that offer PFML may be more competitive in a tight labor market where quality workers are already hard to find. A 2017 PEW Research Center poll showed broad support for paid family and medical leave.  Millennials, in particular, look for such benefits when shopping for jobs.
  • PFML policies decrease stress when workers add to their families or experience a serious illness. Happy workers tend to be more productive, valuable, and loyal to their employers.
  • Many families apply for assistance while taking unpaid leave.A Rutgers University study found women on paid leave to be 39% less likely to need public assistance and 40% less likely to receive food stamps in the year following a child’s birth compared to those who didn’t take any leave.

What HR can do to prepare for employees taking leave

Find yourself a good staffing agency like Partnership Employment.  Since employees are eligible for up to 20 weeks of paid medical, 12 weeks of paid family time off, or up to 26 weeks for military family members, you will need to find a partner to help with long-term qualified replacements.

Here is the good news: since wages are paid through the Fund and not by you, hiring a skilled temporary employee becomes an affordable option.

And when an emergency strikes, and you lose a key employee, having access to immediate talent is critical.  That’s where we come in:

Partnership Employment offers 24-hour client services in the areas of finance and accounting,  legal,  administration, technology, and human resources.

Why not call (508) 770-1777 to discuss PFML temporary employment options today?