Payroll Tax Goes Into Effect January 1, 2021

Beginning January 1, 2021, Connecticut employees will notice another deduction in their paycheck; the result of a new payroll tax created by the passage of Connecticut’s Paid Family and Medical Leave Act. The Act, passed by Democrats in 2019, will be funded by up to a half-percent payroll tax on all Connecticut employees for benefits that will be available beginning January 1, 2022.

The rate will be set by the Paid Family and Medical Leave Insurance Authority.

The Act covers all private employers with at least one employee, and provides up to 12 weeks of paid leave during a 12-month period, whether related to their own health or that of a family member (spouse, child, parent, sibling, grandparent, or any individual close to the employee). Employees may also use the time for the birth of a child, donating an organ or bone morrow, reasons related to family violence, or if it is related to military service.

This Act, while well-intended, has the potential to cause major disruptions to small businesses across the state, and could force some employers to significantly modify their workforce to abide by staffing regulations. Concerns have also been raised regarding the viability of the funding source once the program is implemented, whether the tax will be raised and to what level.

More information on the program can be found at: https://ctpaidleave.org/s/?language=en_US