Massachusetts increases minimum wage, enacts family leave

Massachusetts has enacted legislation relative to minimum wage, paid family medical leave and the sales tax holiday, also known as the Grand Bargain. The compromise legislation will create a permanent sales tax holiday, increase the minimum wage over the next five years and create a new paid family and medical leave program in Massachusetts.

The bill will also gradually raise the Commonwealth’s minimum wage to $15/hour over five years, with an initial increase taking effect in January 2019 with the following increases:

  • $12.00 in 2019;
  • $12.75 in 2020;
  • $13.50 in 2021;
  • $14.25 in 2022; and
  • $15.00 in 2023.

Coupled with that increase will be a raise to the minimum base wage rate for tipped workers, up to $6.75, that will also phase in over a 5-year period commencing in January of 2019. Wage policies for Sunday and Holiday pay are also reformed and brought in line with most other states across the country.

The law also introduces a new Paid Family and Medical Leave program for Massachusetts employers and employees. The new program will provide employees who contribute to the program the ability to take paid leave for up to 12 weeks a year care for a family member or bond with a new child, 20 weeks a year to deal with a personal medical issue, and up to 26 weeks to deal with an emergency related to deployment of a family member for military service. Weekly benefit amounts will be calculated as a percentage of the employee’s average weekly wage, with a maximum weekly benefit of $850. Self-employed persons may opt into the program. For the law to apply to municipal employees, the city or town involved must vote to accept participation in the program.

The law creates a new payroll income tax on employers for the family and medical leave program. The payroll tax would apply to most Massachusetts employers, including state and municipal government agencies. The tax would also apply to:

  • self-employed individuals who elect to receive benefits; and
  • businesses that employ independent contractors and must report payments for services on federal Form 1099-MISC.

The tax would not apply to employers with less than 25 employees in Massachusetts. The threshold would apply to businesses with a workforce that includes more than 50% of individuals who are independent contractors.

How much will employers pay? Employers will pay the tax at the initial rate of .63%. The treasurer and receiver for the new Family and Employment Security Trust Fund would set employer contribution rates each year. Employers could not deduct more than 40% of the contributions from an employee’s wages for medical leave. However, employers could deduct to up to 100% of the contributions from an employee’s wages for family leave.

When does the payroll tax take effect? The payroll tax takes effect beginning July 1, 2019. The Massachusetts Department of Family and Medical Leave will begin to pay benefits on January 1, 2021. (Chapter No. 121-2018, H.B. 4640, laws 2018, approved June 28, 2018, and effective as noted above.)

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