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The Massachusetts ‘Grand Bargain’ creates new payroll tax, boosts minimum wage

Jul 10, 2018

The so-called “Grand Bargain” legislation recently signed by Gov. Charlie Baker, in an effort to stave off several ballot measures opposed by business interests, will impact all employers in Massachusetts – most notably with the creation of a new payroll tax to support Paid Family and Medical Leave.   

Below is a brief summary of the legislation’s provisions. We will explore the legislation in more depth – particularly the Paid Family and Medical Leave provisions – in the September issue of The Reilly Business Advisor.

In the meantime, please contact us if you have any questions about how your business may be impacted.

Paid Family and Medical Leave

The bill provides up to 12 weeks of paid leave for workers to care for newborn, adopted or foster children; up to 20 weeks of paid leave to deal with the employee’s own medical issues; and up to 26 weeks of paid leave to tend to any qualifying need related to a family member being on active duty in the armed forces.

Under the law, qualifying employees may receive up to half of their weekly wages while on leave, up to a weekly cap of $850. Benefits will be administered by a new state agency, and will be funded by a 0.63 percent payroll tax, of which 60 percent will be paid by employers and the rest deducted from workers’ paychecks.

Employers with 25 or more employees must start deducting the payroll tax as of July 1, 2019, and the first benefits will be payable to employees as of January 1, 2021.

State minimum wage of $15 per hour

The law also calls for boosting the Massachusetts minimum hourly wage to $15, in incremental steps phased over the next five years. Similarly, the tipped minimum wage will rise from the current $3.75 per hour to $6.75 per hour in gradual increments over five years.

Sunday and holiday time-and-a-half pay phased out

The current requirement for employers to pay time-and-a-half to workers for Sunday and holiday hours will be phased out over five years, with no premium for Sunday and holiday work as of January 1, 2023.

Sales tax-free weekend

The law requires the legislature to select a weekend in August each year when sales taxes on most "tangible personal property" goods up to $2,500 in value will be suspended.

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