Massachusetts Delays and Increases New Payroll Tax

A new payroll tax passed by Massachusetts effective 1 October 2019 will fund paid family or medical leave in 2021.

A new Massachusetts payroll tax to fund paid family or medical leave, originally scheduled to be implemented 1 July, 2019 will now commence on 1 October, 2019, based on legislation signed 13 June, 2019, by the governor.  However, to account for the loss of funds occasioned by the delay, the tax will now be 0.75% instead of 0.63%.

The 2018 law providing for the tax is intended to fund paid leave to employees who miss work due to family parental or medical issues.  Such benefit payments are to commence in January of 2021.  The law applies to employers with more than 25 employees, and allows for up to 26 weeks of leave, including job protection.  Qualifying reasons for leave include care of a covered individual’s or family member’s serious health condition, or to bond with a child during the first 12 months after the child’s birth or adoption.  An employee may receive up to $850 per week under the program, as well as any additional benefits available under the employer’s own benefit programs.

This delay of the implementation date was sought in order to give employers more time to prepare and to educate taxpayers about the tax.

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How This Will Impact Mobility

Worldwide ERC® employers with employees in Massachusetts will need to program payroll systems in order to comply with the additional tax, and those who gross up for payroll taxes will see an increase in gross-up costs.