Select Page

family leave payroll taxes

The commonwealth of Massachusetts announced the employer and employee contribution rates that will apply beginning on July 1, 2019, to finance the state’s paid family leave law. The law requires up to 12 weeks of paid family leave, up to 20 weeks of paid medical leave for an employee with a serious health condition and up to 26 weeks to care for a covered service member. The fund will start paying some benefits Jan. 1, 2021, and full implementation of the new benefits will be in effect by July 1, 2021. We discussed the nuts and bolts of the law in our Alert.

New payroll tax

Beginning July 2019, a new payroll tax will go into effect. It’s a shared tax between the employee and employer equivalent to .63 percent of the employee’s wages, up to the Social Security wage base of $132,900 (2019). Employers with 25 or more employees in Massachusetts may deduct the entire amount of the payroll tax from an employee’s wages for family leave and up to 40 percent of the payroll tax for medical leave.

The total contribution of .63 percent of payroll is split between the medical leave contribution (.52 percent of payroll) and the family leave contribution (.11 percent of payroll). The state’s website contains the following schematic illustrating the tax and payroll deductions. The illustration below applies to employers with 25 or more employees.

Massachusetts payroll tax deduction chart

Lockton comment: Employers with fewer than 25 employees are excused from paying the 60 percent share of the medical leave contribution, but they are required to deduct from employees’ wages the remaining 40 percent of the medical leave contributions and 100 percent of the family leave contribution.

What’s next?

Proposed regulations issued earlier this year indicate that employers will need to file quarterly reports with the state’s tax authority from which the state will assess the tax (to be paid 30 days after the end of the quarter), although the rules do not address when the filing requirement begins. The state intends to issue final regulations by April 1.

Although employers must start remitting the payroll tax on July 1, 2019, benefits will not be available until January 2021. Employers with Massachusetts workers will want to stay tuned for further developments.