What your paycheck can expect from Paid Family and Medical Leave Act kicking in

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PITTSFIELD — Come July, employees across the state will begin to notice a dip in their paychecks.

That's because the first phase of the Massachusetts Paid Family and Medical Leave Act will kick in.

On July 1, the state will start taking deductions from the paychecks of employees at all private companies to fund the program. The law will be fully implemented in 2021.

With formal state guidance on how to implement the program not anticipated until after its launch in July, Berkshire business owners and tax professionals gathered Monday morning at Pittsfield City Hall for a presentation on the legislation, organized by 1Berkshire. Additional sessions have been scheduled later this week in North Adams and Stockbridge.

Benjamin Knox Steffans, a lawyer for employment law firm Steffans Legal, answered questions and addressed the ins and outs of the new act.

"A lot of people are concerned because [with] any financial regulations like this, people want to know how they can do it and where things go," said Katie Dobson, a certified public accountant with Smith, Watson and Company. "I'm trying to learn as much as I can because this is about to start."

The act is designed to improve upon the federal Family and Medical Leave Act, which is unpaid. When the law takes full effect in 2021, employees will be able to apply for 12 to 26 weeks of paid time off.

But exactly how much employees are charged will vary depending on the size of the company and other factors.

For companies with 25 or more employees, the business will be responsible for paying at least 60 percent of an employee's medical leave contribution. Businesses with fewer than 25 can pass on the total cost of the contribution to individual employees, but the state has cut a break for employees in this situation. They will pay a reduced deduction that amounts to 60 percent off their medical contributions.

Companies could, however, decide to pay for more of the contribution or the whole amount for employees. Some employers are debating whether taking the financial hit to spare employees the cost is worth the morale boost, while others aren't sure how they're going to come up with the minimum payment.

"Employees are sick of being nickel and dimed — it's just one more thing," said Randy Porter, executive director of PTPN in Pittsfield, who is considering how much to cover for employees.

On an individual scale, the cost of the act is relatively small compared to what employees will pay.

Starting July 1, qualifying employees will begin contributing to the statewide fund. The contribution is 0.63 percent of an employees gross wages and is made up of 0.52 for medical and 0.11 for family leave.

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"I don't think there's going to be a lot of tension around this," Steffans said. "I think people are going to realize they're paying for something that's paid leave, that's good for them."

An individual employee earning an annual salary of $50,000 at a company with more than 25 employees will be required to pay $315 into the fund each year. The employer's share of the contribution will be at least $156 while the employee would cover the remaining $159, according to a PFML calculator provided on the Massachusetts state website.

But hundreds of dollars per employee could easily stack up to a new multithousand-dollar bill for an individual company.

A company with 50 employees — 25 using W2 tax forms and 25 using the 1099-MISC tax form for contractors — and an annual payroll of about $1.88 million would be assessed an $11,812 contribution to the program for the year. At least $5,850 of the total would be paid by the employer and $5,962 would be covered by staff.

"I definitely have more questions," Porter said following the meeting. "I feel bad for the payroll companies; they're going to have to deal with this."

While Massachusetts people will begin contributing to the new paid medical leave fund in July, the benefit won't be available until Jan. 1, 2021. Covered individuals — people who live and work in Massachusetts — will be entitled to take up to 12 weeks of paid family leave in a year related to birth, adoption or foster care placement; up to 20 weeks of medical leave to recover from a serious health condition and up to 26 weeks to care for an ill family member.

Weekly benefits will be determined by a person's earnings, but won't exceed $850 per week.

To be eligible for paid leave an employee must have about 15 weeks or more of earnings and have earned at least $4,700 in the 12-month period.

One of the most persistent questions asked during Monday's presentation was: How do contractors fit into the new act?

Employers will have to collect contributions from individual contractors who are not affiliated with another company if they make up 50 percent or more of a business's total workforce.

The number of employees a company has will be determined by deducing the business's average monthly employment. This calculation is expected to help firms that hire seasonal, or otherwise have staffing fluctuations, to arrive at a total employment tally. All employees are counted: part-time, full-time, contracted, seasonal, unionized, etc.

Steffans said business owners should keep tabs on development of the act over the next several years as the state is likely to tweak regulations.

"It's a lot of leave," Steffans said. "It's capped at 26 weeks in a calendar year. The state is writing regulations and it's being revised, but I don't think the core [of the act] will be changed."

Kristin Palpini can be reached at kpalpini@berkshireeagle.com, @kristinpalpini.


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