Paid Leave Tax Credit for COVID-19 Vaccination

On April 21, 2021, President Biden re-emphasized the paid leave tax credit for businesses with fewer than 500 employees to encourage employees to get their COVID-19 vaccination. This tax credit (originally made available through the American Rescue Plan Act, or ARPA) will allow employers to fully offset the cost of paid leave for employees to get vaccinated and recover from any after-effects.

Is my company eligible for the paid leave tax credit?

Businesses and nonprofits with fewer than 500 employees are considered eligible for the paid leave tax credit. This includes governmental employers (other than the federal government) and self-employed individuals.

While large employers with more than 500 employees don’t qualify for the tax credit, they are strongly encouraged to offer comparable paid leave for employees who choose to get vaccinated.

How much leave will be compensated under the paid leave tax credit?

With this tax credit, employees may receive up to two weeks (or 80 work hours) of paid leave, capped at $511 per day. Leave must be taken between April 1 and September 30, 2021 and used to receive (and recover from, where necessary) a COVID-19 vaccination.

Per the IRS guidance, paid leave is only available to employees who are unable “to work or telework due to reasons related to COVID-19, including leave taken to receive COVID–19 vaccinations or to recover from any injury, disability, illness or condition related to the vaccinations.” The credit will be funded by the recently passed ARPA.

Should I require my employees to get vaccinated?

While a mandatory vaccination policy may be legal to implement at your workplace, you may find less employee pushback with a voluntary policy that includes incentives. Start with educating employees about the vaccination from credible sources and then consider offering some of these cost-effective vaccination incentives.

What can I do to encourage my customers to get vaccinated?

We may soon see a list of promotions available only to vaccinated individuals, as President Biden has asked businesses to step up and use their resources to promote the vaccination effort. This may include deeply discounted goods, tickets to theme parks, trips, movie tickets, hotel nights, airline points, priority restaurant reservations, and so on for those who are vaccinated.

Employers can report their discounts, giveaways, rewards, promotions, and other incentives for vaccinated customers on this IRS form, which then may be showcased (after employer approval) regarding your company’s benefit to the community. Companies who haven’t done much to encourage vaccinations may want to consider joining this effort, as it has potential to create an impressive return on investment with widespread public recognition and brand awareness for your company — depending on how the White House decides to showcase your business.

What should I do to take advantage of the paid leave tax credit?

Clients of Stratus.hr should continue reporting emergency paid sick leave through the Stratus.hr System for employees who use paid leave for vaccination and recovery (where applicable). Companies that have not partnered with Stratus.hr can reference this IRS Fact Sheet for claiming the credits on their quarterly federal tax return.

paid leave tax credit

Your company may qualify for full reimbursement of paid leave offered to employees to receive (and recover from) the COVID-19 vaccination.

Stacey Gibson, Director of Human Resources

Author Stacey Gibson, Director of Human Resources

Stacey is a certified Professional in HR (PHR) and the reason her clients would never consider leaving Stratus.hr. When not at work, you can hear her at one of her children’s sporting events -- she’s the one whistling louder than the refs.

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