The spread of COVID-19 across the globe is having a significant humanitarian impact and causing major economic disruptions, from eroding stock market prices to disturbing global supply chains. As governments move rapidly to contain the spread of the virus, global employers are also working to address how to manage employees in affected areas while continuing business operations. Employers are often eager to provide much-needed benefits and aid to their employees, but are unsure of the most effective ways to help or are unaware of the ways benefit and leave plans can be leveraged in support.
During these difficult times, it is imperative that organizations make informed decisions before changing their total rewards structure, as there can be compensation, benefits and payroll tax implications. Organizations should also evaluate the impact of state and local income tax and labor requirements, state payroll tax registrations and workers compensation policies.
As you consider various alternatives and approaches that may work best for your organization and employees, you may have questions regarding tax, accounting, regulatory and human capital issues. Below are some ways organizations can address current challenges and support their affected employees.
Provide direct financial assistance to employees
Expand leave of absence, compensation and benefits programs
- Provide financial support, ongoing or reduced pay, or leave of absence pay to affected employees unable to work due to a temporary reduction or elimination in work hours, school or childcare facility closures and quarantine requirements. If considering bonuses, gift cards, employee discounts or supplemental pay, be aware of payroll requirements as well as all federal and state tax implications of these programs.
- Make cash payments or loans to affected employees and their affected family members for personal expenses incurred because of the virus, such as medical treatment, childcare alternatives, quarantine or medical supplies and meals for school-aged children who receive free or reduced meals. Organizations with affiliated not-for-profit vehicles may be able to utilize those entities in their COVID-19 support efforts. The rules in this area are very complex and constricting. Even organizations without their own affiliated not-for-profit entity may have some charitable options. Please contact a member of Grant Thornton’s Not-for-profit Tax Services group for more information.
- In lieu of or in addition to cash, organizations can provide meals, non-perishable food, supplies or other essentials to affected employees and their affected family members.
Facilitate ways for employees to help fellow employees
- Provide employees additional paid time off to recover from the virus or to care for family members affected by the virus. Employers with fewer than 500 employees are subject to new, recently enacted paid family leave and sick pay requirements. See our story, “Tax credits paired with paid leave requirements” for more information.
- Offer employees and covered dependents a telehealth benefit as part of their medical plan. Telehealth programs offer members the ability to meet with a physician, therapist or healthcare professional virtually, instead of an in-person office visit.
- Expand services and employee communication under the employee assistance program (EAP). Employers can communicate on the specific ways in which the plan can provide assistance in recovering from the virus, dealing with stress or anxiety related to the virus and researching and locating alternative childcare or elder care services.
- Provide information on recovery or leave of absence options available through the organization’s employee assistance or benefit programs, such as those offered through the organization’s medical and disability plans, federal leave programs and procedures and governmental and nongovernmental sources for assistance.
- Communicate plan eligibility and program requirements to employees for loan and hardship distributions from the organization’s retirement plan. Organizations can consider setting up or expanding loan and hardship distribution programs under their current retirement plan.
- Allow employees to telecommute for a specified period of time to ease their concerns and recovery.
- Prepare and send communications to employees in appropriate forms such as texts, emails and letters reminding them of mental health benefits available under the organization’s medical plan and employee assistance program that can assist with conditions such as stress, anxiety and post-traumatic stress disorder.
- Explore whether the organization’s medical plans can waive co-pays or reduce deductibles for virus-related medical and prescription drug treatment.
- Implement or expand the mail-order prescription drug program through the organization’s prescription drug vendor. This allows employees to receive prescriptions through the mail instead of physically visiting a pharmacy.
Think outside the box, identify needs proactively
- Create a leave-sharing plan for employees to surrender accrued leave, with the surrendered leave contributed to a leave bank for use by other employees who may need time off in excess of their accrued leave as a result of the virus.
- Ask employees if they need assistance with various tasks, such as grocery shopping, child care or prescription pick-up, and whether they would like assistance from other employees or community organizations.
- Develop a communications tool to allow employees to share information and resources with each other.
- Evaluate potential needs of employees affected by the virus, such as finding daycare for employees with young children when schools will be closed for a prolonged period of time. Consider providing subsidized or customized daycare services through donations or other sources.
- Contract with a national home visit or house call provider, local physicians or healthcare providers to provide home visits for employees and family members. Most physicians and providers will file claims with the insurance provider on the employee and employer’s behalf.
- Provide discounted or free web-based educational tools and programs for children who are affected by school closures.
- Establish a supplemental unemployment benefit plan, which supplements a laid-off employee’s state unemployment benefits.
There are also a number of ways organizations can support charities that are active in assisting individuals affected by the virus.
- Make cash contributions to selected charitable organizations, private foundations or donor-advised funds that support pandemic-relief efforts, such as providing meals to those in need, childcare and elder care support and subsidized income for individuals with lost wages as a result of the virus.
- Create a leave-based donation program where an employee can elect to forgo vacation, sick or personal leave in exchange for cash payments by the employer to a charitable organization.
- Encourage employees not affected by the virus to support organizations involved in the recovery by donating their time and money.
- Establish a corporate foundation or a disaster or pandemic relief fund to facilitate the solicitation and collection of employee gifts for future unforeseeable disasters and events.
Many of these alternatives require consideration of the tax treatment of them, as well as other factors. For example, certain types of financial assistance to employees may be tax-free if structured in the appropriate manner. The IRS also provides relief in the form of special treatment for things like hardship waivers for early distributions from retirement plans and donations of leave. Please contact any Grant Thornton professional with any questions.
For more information contacts:
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Human Capital Services
+1 704 277 3353
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Not-for-Profit and Higher Education Practices
+1 215 656 3060
Human Capital Services
+1 212 542 9671
Washington National Tax Office
+1 202 521 1526
Not-for-Profit Tax Practice
+1 414 277 1536
Human Capital Services
+1 704 632 6972
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