Early Payroll Deductions Demystified
June 20, 2017
With NY's Paid Family Leave rates out and July 1 approaching rapidly, questions about early payroll deductions have been heating up – along with the common misperception that deductions are mandatory. Read our top questions here for the full scoop to help you prepare:
Do I have to start deductions from my employees starting July?
- No, you don’t have to start July 1, this is just the earliest date you’re allowed to start.
- Just note that if you start later than January 1, 2018, you can’t retroactively collect payroll deductions for Paid Family Leave (for example, if you miss implementing withholdings for January 2018, you can’t take a catch-up contribution in February)
Do I have to take deductions?
While Paid Family Leave is frequently referred to as an employee-funded benefit in the law, it doesn’t require you to withhold (ie., you may choose to fund the Paid Family Leave premium directly from employer funds). If you decide to take deductions from your employees the deduction can’t exceed each employee’s maximum contribution (if you do, you will have to return the excess amount to your employees)
How much can I withhold?
The 2018 weekly maximum contribution for Paid Family Leave is 0.126% of an employee’s weekly wage capped at NY’s current average weekly wage of $1,305.92*.
This translates into a maximum contribution of $1.65/week (averaged over the year) for employees earning NY’s AWW or above.
*NY Department of Labor releases the updated statewide AWW every March 31.
What if I start early deductions and an employee leaves my company before January – do I have to refund the PFL deductions taken out from their paycheck between July and their last day?
What about new hires, or employees starting in 2018, will my company begin deducting PFL contributions from time of hire or once they become eligible?
Paid Family Leave premium applies from time of hire. If you plan on deducting contributions, you may want to start those at time of hire to line up with when that new employee would be counted for premium purposes.
What’s a possible upside of withholding early?
Paid Family Leave premiums need to be paid together with DBL premiums. DBL contracts are often paid annually in advance, which means employers will pay for both benefits upfront and only recoup the Paid Family Leave portion gradually through payroll deduction over the course of the year. Collecting PFL premium from payroll early alleviates some of the upfront financial burden if you pay your bill annually in advance.
DBL is a simple rate per employee, but PFL is a percent of salary with a cap – managing the extra complexity around deductions is an unexpected burden for our company, especially given the fairly nominal rate. Can we just skip deductions?
Since taking payroll deductions for Paid Family Leave is optional, this is up to you and depends on what’s best for your company’s situation. Reach out to your payroll vendor – or start looking into solutions that may help you minimize the added burden.
Now that the rate is set, we've also been getting a lot of questions regarding how PFL will be billed. While those details are still yet to be determined, we want to assure all our Policyholders that we at ShelterPoint Life understand the added administration burden this new state mandate has generated. We remain committed to making this as easy for you as we can. Make sure you're subscribed here so you don't miss any of the details coming soon.
This material is for informational purposes only and is not intended to provide legal counsel. Please consult with an appropriate professional for legal and compliance advice. Any PFL information as of June 2, 2017, is based on the applicable statutes and may change when Paid Family Leave regulations are issued by the State of New York. Got more questions? Email us at firstname.lastname@example.org