TRACKING CORONAVIRUS COSTS
Steven Cesare, Ph.D.
A company Controller from Colorado called me the other day to discuss what else? Coronavirus. During our discussion surrounding accountability and the human resources elements (e.g., sick leave, layoffs, tele-work), related to this issue, he asked to share his proposed approach regarding accountability for tracking Coronavirus-related costs that he was planning to have in place before the April 1st enactment date. Always curious, I naturally responded, “sure.”
His cost accounting approach is as follows. First, in the same way, a company initiates any new job (e.g., Stevens residence, Paige Lakes HOA, Carruthers Business Park), he suggests simply creating a new customer job called “Coronavirus” in the company accounting system (e.g., LMN, QuickBooks, BOSS).
With that new job now established, he recommends three cost codes be specified according to the Qualifying Reasons found on the FFCRA Employee Rights Notice (https://www.dol.gov/sites/dolgov/files/WHD/posters/FFCRA_Poster_WH1422_Federal.pdf):
- Paid Sick Leave-Self (Corresponds to Qualifying Reasons 1, 2, and 3 on Employee Rights Notice),
- Paid Sick Leave-Other (Corresponds to Qualifying Reasons 4 and 6 on Employee Rights Notice),
- FMLA-Expanded (Corresponds to Qualifying Reason 5 on Employee Rights Notice).
Paid Sick Leave-Self
The Paid Sick Leave-Self cost code is the location of all employee costs related to those direct instances when an employee, himself/herself, is personally subject to: (1) Federal state, or local quarantine or isolation related to Coronavirus, (2) self-quarantine due to the Coronavirus as recommended by a health care provider, and/or (3) experiencing the Coronavirus symptoms and is seeking medical diagnosis. These costs represent the portion of the 80 hours of paid sick leave that employees must be granted by their employer, that they use for their own health condition; representing 100% of the employee’s regular rate of pay, up to a daily maximum of $511, with an aggregate total of $5,110.
Paid Sick Leave-Other
The Paid Sick Leave-Other cost code is the place for all employee costs related to those instances when an employee is: (1) caring for an individual subject to a Federal state, or local quarantine or isolation related to Coronavirus, or a self-quarantine due to the Coronavirus as recommended by a health care provider, and/or (2) is experiencing any other substantially-similar condition specified by the U.S. Department of Health and Human Services. These costs represent the portion of the 80 hours of paid sick leave that employees must be granted by their employer, that they use for caring for another person’s health condition; representing 2/3s of the employee’s regular rate of pay, up to a daily maximum of $200, with an aggregate total of $2,000.
The FMLA-Expanded cost code is the repository for all employee costs related to those instances when an employee invokes the newly-expanded FMLA legislation to care for his/her child whose school or place of care is closed (or child care provider is unavailable) due to Coronavirus. This cost code addresses those expenses for the 10 weeks in which the employee is paid 2/3s of his/her regular rate of pay, up to a daily maximum of $200, with an aggregate total of $10,000. This cost code can only be used after 80 hours or 2 weeks average hours (up to 80 hours) have been used in the cost codes outlined above.
In terms of accountability, with this partitioned structure in place, business owners will be able to: (1) isolate all of the Coronavirus-related costs, across the three cost sources mandated by law, from other business expenses on their Profit & Loss statement, (2) produce quarterly and/or annual reports necessary to assist in determining tax credit reimbursements as well as help to provide information to satisfy any audits conducted by an external accountant or government agency, and (3) minimize the degree to which these costs could otherwise distort the 2021 budget development forecasting process had they been left indirectly distributed throughout the Profit & Loss statement.
If you have any questions or comments about this topic or anything else related to human resources, simply call me at (760) 685-3800.
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