A new update for The Farmer’s Office and The Labor Contractor’s Office is available for download now via the Tools > Check for Updates option.
This update includes new features to correctly handle the new Covid-19 related paid leave (Emergency Paid Sick Leave and Emergency Family & Medical Leave) that employees may be eligible to take. It also includes a wizard to assist in setting up entries in the chart of accounts, wage type, worker’s comp table, and leave definition tables that you will need for the Covid-19 paid leave.
Covid-19 Paid Leave Programs
If you need more information about the Covid-19 paid leave programs, please see our Covid-19 Resource blog. FELS and WGA have published very helpful information on their websites and the IRS has a FAQ section that you should be familiar with. Datatech support personnel cannot assist you with answers to questions about the rules for the leave programs or how they should be administered.
Employers that have under 500 employee at the time an employee request leave are required to offer the paid leave. Paid leave is funded by the federal government by means of a credit on your regular federal tax deposit. In other words, if you have $1,000 in paid leave wages and medicare taxes and you normally would deposit $5,000 in federal payroll taxes for the payroll period, you can deduct the $1,000 in wages and taxes and only deposit $4,000.
Employers are allowed to take a credit on their federal tax deposits for wages, Medicare taxes, and the cost of qualified health plan (QHP) coverage for employees on leave. Covid-19 paid leave wages are not subject to the employer tax on social security, so no credit is provided for social security taxes because the employer doesn’t have to include taxes for these wages in their deposits.
Covid-19 paid leave wages are still subject to employee Social Security and Medicare taxes. The fact that the wages are subject on the employee side for Social Security tax but not the employer side required extensive changes throughout the payroll system to handle the calculations separately.
Although the wages themselves and federal payroll taxes are funded by the federal government through payroll tax credits, employers may still have some overhead costs from these wages that are not covered.
Covid-19 paid leave wages are likely still subject to worker’s comp insurance. By default the wage type will be subject to worker’s comp. Check with your insurance provider to see if Covid-19 paid leave wages can be excluded from worker’s comp premiums. If so, you can adjust your worker’s comp entries accordingly.
Covid-19 paid leave are subject to state and federal unemployment taxes.
The primary features that have been implemented for this update include:
- The addition of a “Paid Leave” setting for the Base Pay Type on the wage type setup.
- The addition of a Paid Leave Type setup to give you a way of identifying Covid-19 paid leave by the G/L #, Cost Center/Crop ID, Job Code, and wage type used on the checks.
- A new general ledger account to post Covid-19 related wages and Medicare taxes to for the purpose of deducting from your regular payroll tax deposit.
- Change to the employer social security tax calculations to support not taxing Covid-19 paid leave wages for this tax.
Currently, the social security tax calculations have been modified for the Payroll Journal, Tax Liability Report, and Taxable Wages by Quarter only. Future updates will includes changes for other reports that calculate the employer portion of the Social Security Tax, including the Federal & State Wage & Tax Summary. When the IRS releases changes to the 941 Form, we will likewise release and update to this form.
(The 941 and 943 forms will be revised to claim the wage/tax/QHP credit and account for the exemption of Covid-19 paid leave wages from the employer Social Security tax.)
When & How Should You Update Your Program?
To support these new features, this update will perform updates on several payroll tables, including the employee and check tables. These updates may take considerable time, depending on the type of database you are using and the speed of your server and related hardware.
We recommend installing the update on your server and running the program initially from the server on each company to perform these database updates. It may be best to schedule installation of the update before or after regular working hours.
As mentioned in previous posts, we recommend setting up cost centers and job codes specifically for this new paid leave program. We also recommend that farm labor contractor’s set up a grower account for the Covid-19 paid leave wages. Since the paid leave is funded by the government, the wages do not need to be billed to actual growers. Creating a specific paid leave grower account to put the wages under may be useful for reporting purposes later.
For instance, if you need to determine total worker’s comp or unemployment insurance costs on Covid-19 paid leave wages, a simple way to do this is select wages entered under the paid leave the grower account.
More Features To Come
We have additional features planned to support handling the Covid-19 paid leave wages in both the payroll system and HR program. More details will be provided as these features are released. The purposes of this initial update is to provide the capabilities needed to properly handle the wages, taxes, and credit for the federal tax deposits.
What if I have already issued Covid-19 Paid Leave Wages?
If you have already issued Covid-19 paid leave wages before installing this update, it will be necessary to void and re-issue the payroll checks to correctly handle the wages and payroll taxes. A separate post will cover this process.
The next blog posts will cover the setup steps that are necessary and how to enter checks for Covid-19 paid leave.