Offering paid family and medical leave (PFML) is a powerful way to support your team, boost retention, and build a resilient workplace culture. While many small businesses believe this benefit is too costly, recent legislative updates have made it more affordable than ever.
The enhanced and permanent Paid Family and Medical Leave (PFML) Tax Credit offers a significant financial incentive, allowing you to stand out as a top employer while being rewarded for investing in your people.
Key Takeaways
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A Powerful Incentive: The PFML Tax Credit allows employers to receive a federal tax credit for up to 25% of the costs associated with providing paid leave.
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Credit > Deduction: A tax credit is a dollar-for-dollar reduction of your tax bill, making it significantly more valuable than a tax deduction, which only lowers your taxable income.
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New & Improved: Recent legislative changes have made the credit more accessible and valuable, especially for small businesses.
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Competitive Edge: Offering PFML is a benefit that most large companies provide but is still rare among small businesses, giving you a major advantage in attracting and retaining talent.
What’s New? Key Enhancements to the PFML Tax Credit
Recent updates have introduced four game-changing provisions for businesses:
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Premium-Based Credit Option You can now claim the credit based on the cost of PFML insurance premiums, even if your employees don’t take leave during the year. This provides a predictable way to get rewarded for simply having the coverage in place. H|BC can help you find plans that combine Short Term Disability with a PFML rider to qualify.
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Expanded Employee Eligibility The service requirement for employee eligibility has been reduced from one year to just 6 months of employment. This allows you to cover more of your workforce while still qualifying for the credit.
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Flexibility on Written Policies While a formal written policy is best practice, the IRS now allows exceptions for businesses that have a legitimate reason for not having one. Purchasing an insured PFML product also helps satisfy this by providing established processes and procedures.
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Works with State Mandates If your business is in a state with a mandatory PFML program, you can still claim the federal credit for any benefits you offer that go above and beyond the state’s minimum requirements.
How to Get Started in 3 Simple Steps
Offering PFML is now a strategic business decision that is more affordable than ever. Here’s how to begin:
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Explore Your Options: Talk to H|BC about PFML insurance plans that are designed to qualify for the tax credit.
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Consult Your Tax Advisor: Discuss the credit with your tax professional to ensure your business is set up to claim it properly.
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Implement the Benefit: Roll out this powerful new benefit to show your team you care and to gain a competitive edge in the market.
Paid leave isn’t just good for your employees—it’s good for your business. With the enhanced PFML Tax Credit, now is the perfect time to invest in your team and get rewarded for it.
