Video: Counting your workforce for PFML
Determining your total workforce
As a Massachusetts employer, your responsibility for making contributions under the Paid Family and Medical Leave (PFML) law (M.G.L. c. 175M) depends on the makeup of your workforce. To make sure you're correctly assessed for contributions, it's important that you properly report the size and makeup of your Massachusetts workforce to the Department of Family and Medical Leave.
To determine your responsibilities as an employer for 2020, you will need to count your 2018 workforce. Starting in 2021, you will count your workforce from the previous year.
Your total 2018 workforce includes:
Massachusetts W-2 employees (full-time, part-time, or seasonal). Generally, DFML follows the same eligibility criteria as the unemployment insurance program in Massachusetts. If you are required to report a W-2 employee’s wages to the Department of Unemployment Assistance (DUA), those employees should be counted. These employees don't need to reside in Massachusetts to be covered.
Massachusetts 1099-MISC contractors. Generally, an MA 1099-MISC contractor is an individual or sole proprietor who resided and performed services in Massachusetts for whom you reported payment for services on IRS Form 1099-MISC. These individuals must have performed services in your trade or business or were regularly engaged to perform services for you.
If you own a business and pay yourself through a W-2, you are an employee of that business and will be considered part of your covered workforce under PFML.
Counting MA 1099-MISC contractors as covered individuals
In order for a 1099-MISC contractor to be considered part of your 2018 MA workforce count, the 1099-MISC contractor MUST have:
Performed services as an individual entity
Lived in Massachusetts
Performed services in Massachusetts
The 1099-MISC contractor MUST NOT have:
Been an independent contractor as defined by the Massachusetts unemployment statute, (M.G.L. c.151A), which is a guiding authority for the PFML program in many respects.
The Massachusetts unemployment statute defines independent contractors as contractors who meet this three-part test.
If a contractor met the criteria to be considered part of your 2018 MA workforce and you have determined that the individual entity was not an independent contractor under the three-part test, then you should count them as a member of your 2018 Massachusetts workforce.
Massachusetts 1099-MISC contractors only count toward your total number of covered individuals for purposes of contributions and reporting only if they make up more than 50% of your total 2018 Massachusetts workforce (MA W-2 employees and MA 1099-MISC contractors combined). Otherwise, you are not required to contribute or report on 1099-MISC contractors.
Note that only services provided that would otherwise require the issuance of a 1099-MISC are subject to contributions. For a full description of when a 1099-MISC is required, please refer to the IRS guidance on reporting payments to independent contractors.
For the purposes of counting your workforce, professional corporations (PCs), Limited Liability Companies (LLCs), Sole Member LLCs, partnerships, and corporations are not individuals and should not be included in your count, even if you make payments to them by 1099-MISC. Those types of business entities should not have withholdings taken by an employer.
Remitting employee contributions on behalf of covered individuals
Each quarter, you’re required to remit the required employee contributions for all covered individuals in your MA workforce. If your MA workforce had fewer than 25 covered individuals, you are not responsible for paying the employer's contribution.
Employees paid using a W-2 are always considered covered individuals. You can determine if your 1099-MISC employees are covered individuals using the rules above.
You may deduct all or part of the required employee contribution from wages.
For help calculating your workforce and contributions, use our contributions calculator.
Any worker you pay through a 1099-NEC form is not considered a covered individual, and you do not have to remit contributions on their behalf even if they used to be paid using a 1099-MISC form.
If you made contributions on behalf of individuals whose compensation is reported on a 1099-NEC form, you should now file amendments to the original returns reporting those contributions. Please see the guidance from the Department of Revenue on how to file an amendment.
Counting visa program employees as covered individuals
Foreign worker program visas
H-2A visa holders (seasonal agricultural employees) are exempt from making PFML contributions and are not considered covered individuals. Therefore, you’re not required to withhold or remit PFML contributions from your H-2A visa holders.
All other temporary foreign worker visa programs (e.g. H-1B, H-2B, O-1, O-2, etc.) are considered covered individuals (assuming they meet all other criteria above) and you’re required to withhold and remit PFML contributions on their behalf.
International student and foreign exchange program visas
International student and foreign exchange program visa holders (e.g. F-1, OPT, J-1, and J-2) are considered covered individuals (assuming they meet all other criteria above) and you’re required to withhold and remit PFML contributions on their behalf when these employees are permitted to work in the United States.
Counting your workforce for Professional Employment Organizations (PEOs)
Professional Employment Organizations (PEOs) typically file a single consolidated return when reporting Massachusetts withholding taxes on behalf their clients.
Since the business is considered the employer for PFML purposes the business must file a return that includes its entire covered workforce which would include the employees paid by the PEO. If the PEO filed a single consolidated return for all of its clients then all the employees of the various clients would be grouped together. By lumping all of these employees together the workforce count would always be greater than 25. The workforce count and the employer contribution rate should be determined on a client by client basis. Therefore, a PEO should never submit a consolidated return on behalf of their clients. Rather PEOs should submit individual filings for each client. PEOs should use the Department’s bulk filing method so all of their clients’ returns are transmitted in a single transmission.
Read more about MassTaxConnect’s bulk filing specifications.
Excluded employers and employment types are automatically excluded from PFML, and do not need to apply for an exemption.
The same types of employment that are excluded under section 6 of the unemployment statute are also excluded from the PFML law, including:
- Services performed for a son, daughter, or spouse
- If under 18, services performed for one’s father or mother
- Services performed by inmates of penal institutions
- Independent contractors as defined by this three-part test
- Employment in the railroad industry
- Services provided by real estate brokers/salespeople and insurance agents/solicitors in commission only jobs
- Newspaper sales and delivery by persons under 18
- Employment by churches and certain religious organizations
- Services of work-study students, student nurses and interns, work trainee programs administered by non-profit or public institutions
Please review Section 6 of MGL c. 151A for a complete list of excluded employment.
Opting-in Requirements for Excluded Employment
If you are an employer whose workforce is excluded in whole or in part under the unemployment insurance statute, M.G.L. c. 151A, you as an employer may opt-in to PFML coverage if you submit a notarized letter from an officer confirming that the employer’s governing body has elected PFML contributions. If an employer chooses to opt-in, it must do so for all of its employees. An employer cannot selectively choose certain individuals for purposes of opting-in. To opt-in, the employer should register for Paid Family and Medical Leave contributions with their MassTaxConnect account and attatch the notarized letter to the request.
Municipalities, districts, political subdivisions, and other agencies are excluded from PFML law unless they choose to opt-in by vote in their legislative or governing body, such as a city council or town meeting. City and town departments, such as school departments or departments of public works, are considered part of the municipality they serve. If your department, district, political subdivision, or organization is separate from the municipality it serves, it will have a different tax identification number.
Housing authorities, regional school districts, and regional planning commissions are excluded from PFML law but may choose to opt-in through a vote of their board members or governing committees, in accordance with Section 10 of M.G.L. 175M.
Charter schools are not considered a part of a municipality and are not excluded from PFML law, except for Horace Mann Charter School. Horace Mann Charter School employees are considered municipality employees for the purposes of collective bargaining and are subject to municipality decision.
The DFML will individually evaluate requests to provide further guidance to any municipality, district, political subdivision, or authority that is not covered by the guidance above. Use this form to contact the DFML with any questions.
Business Owners and Family Businesses
Anyone who has any ownership stake in the business and is paid through W-2 is subject to PFML Law and considered part of their covered workforce, unless the business is co-owned by family members.
The DFML follows the Unemployment Insurance (UI) statute about the employment of family members. Any spouse, minor child (under 18), or parent of a business owner who is employed by their family member’s business will have their wages from that employer excluded from PFML, because their services are not considered "employment" in the statute.
In the case of businesses that are co-owned by family members, it doesn't matter what the percentage of the ownership stake is. So, in the cases of husband-wife or parent-child owned businesses, even if each is paid through W-2, both wages would be excluded. View some specific examples below.
A wife owns the business 100% and pays herself and her husband through W-2.
- Only the husband is employed by their spouse. The wife's wages are subject to PFML, but her husband's wages are excluded.
A husband and wife co-own the business and they are both paid through W-2.
- Both husband and wife are employed by their spouse, and their wages are excluded from PFML. It does not matter if the ownership is a 50/50 split, or if one spouse owns more of the business than the other.
A parent owns the business 100%. She pays herself on a profit-loss statement and her child (under 18) through W-2.
- The parent is self-employed and not subject to PFML. Their child's wages are excluded from PFML, because he is employed by his parent.
Husband and wife co-own the business and they are paid on a profit-loss statement.
- Both husband and wife are self-employed and not subject to PFML.