Background

Beginning October 1, 2019, the State of Massachusetts will require employers and employees to pay premiums for a Paid Family and Medical Leave plan. Depending on how many employees are in the company this can either be paid for through either an employee deduction or an employee deduction and an employer expense.

If you offer a qualifying Private Plan to your workforce with benefits greater than or equal to the benefits provided by the PFML law, you can apply for exemption. Self-insured employers must provide a bond even if granted an exemption.

When preparing a W2 the amounts paid towards Paid Family & Medical Leave should go in box 14.

You can find more information about Massachusetts’s Paid Family and Medical Leave at the following website: https://www.mass.gov/orgs/department-of-family-and-medical-leave.

How to Create a Payroll Category

Massachusetts Paid Family & Medical Leave will require creating new payroll categories.

1. From the Payroll Command Center, click Payroll Categories.
   
2. Here you will see the Payroll Categories List. For Massachusetts Paid Family & Medical Leave you will need to use the Deductions tab and potentially the Expenses tab.
   
3. To create new Payroll Category click the New button at the bottom.
4. Enter details into your new payroll category:
   25 or Less Employees
   25 or More Employees
   Private Plan
5. Once you are done entering the details on the new payroll category make sure to click the Employee button at the bottom and assign it to your employees.

If you process payroll for less than 25 Employees

Employers with fewer than 25 employees (average number of covered individuals from the last calendar year) are not required to pay an employer portion. As of January 1, 2023 employers with less than 25 employees can withhold up to .344% of Gross Wages from an employees paycheck as deductions, and it will be broken up into .224% for Medical Leave and .12% for Family Leave of Gross Wages up to $160,200 per year.

To accomplish this, you would need to create two payroll deductions.

Example 1
Employee is paying the full amounts for Family and Medical Leave

Medical Leave Deduction for .224% of gross wages up to $160,200 per year: 

Family Leave Deduction for .12% of gross wages up to $160,200 per year: 

Example 2
An employer may choose to pay more or all of the employee’s portion. In this case, you would could set up employer expenses for the amounts you wish to cover for the employee. In this example, an employer is covering half of the amounts for Family and Medical Leave. In this case you would set up two payroll deductions and two employer expenses.

Medical Leave Deduction for .112% of gross wages up to $160,200 per year: 

Family Leave Deduction for .06% of gross wages up to $160,200 per year: 

Medical Leave Employer Expense for .112% of gross wages up to $160,200 per year: 

Family Leave Employer Expense for .06% of gross wages up to $160,200 per year: 

If you process payroll from more than 25 employees

As of January 1, 2023 the initial premium will be .68% of an employee’s gross wages up to $160,200 broken down to .56% to Medical Leave and .12% to Family Leave. Employers with 25 or more employees (average number of covered individuals from the last calendar year) MUST pay out a portion of this premium themselves from gross wages (up to $160,200).

Of the .68% premium, .56% is applied to medical leave and .12% to family leave. Of these amounts, for Medical Leave, the employer may withhold up to 40% of the .56% from the employee’s wages. For Family Leave, the employer may withhold up to 100% of the .12% from the employee’s wages.

To accomplish this, you would need to create new payroll deductions and two payroll expenses. In this example below, the business is withholding the maximum amounts allowed from employees pay.

Medical Leave Deduction for .224% (40% x .56%) of gross wages up to $160,200 per year: 

Family Leave Deduction for .12% (100% x .12%) of gross wages up to $160,200 per year: 

Medical Leave Employer Expense for .336% (60% x .56%) of gross wages up to $160,200 per year: 

Your company may also decide to pay the full amount of the premium on behalf of the employees. In this case two employer expenses would be created. One for Medical Leave equating to .56% of gross wages up to $160,200. Another Employer Expense would be created for Family Leave equating to .12% of gross wages up to $160,200.

Private Plan

If you offer a qualifying Private Plan to your workforce with benefits greater than or equal to the benefits provided by the PFML law, you can apply for exemption. Self-insured employers must provide a bond even if granted an exemption. In this case you would set up your employer expense/employee deduction as long as the employee deduction is not more than the State plan allows.

Please speak to your accountant about the approach that works best for your business.