Price Tag For New Paid Family and Medical Leave Program Higher Than Expected

(KNSI) – The state’s new Paid Family and Medical Leave Act program will be significantly more expensive than first estimated.

The law required an estimate from an independent actuary regarding its cost to administer and what is needed to fund it. National Federation of Business Minnesota State Director John Reynolds says higher expenses mean higher tax rates to fund it properly.

“In the first year of the program, the Walz Administration told us the total cost of the program would be about $1.2 billion, but the Milliman study found that it’s actually going to be $1.4 billion. And that trend continues on and worsens as the years go by.”

The study predicts a payroll tax rate between 0.78% and 0.92%. That’s above the figure floated by the Walz Administration of 0.7%. The program allows a worker to take off up to five months per year for their medical health issues or to care for others.

Reynolds says smaller companies like those he represents get pinched in other ways as well. “They have to get by with just the number of employees that they need. So, that’s really the daunting challenge that this program presents for the smallest businesses is ‘We have ten employees. What do we do if one or two of them is out for 12, 14, 20 weeks a year?'”

Reynolds says small businesses can only afford to hire what is necessary to operate. Best Buy, Target, or other corporations may be able to build in some redundancy to cover future absences, but your local hardware store can’t.

He also adds that in a time defined by an overall labor shortage, even if businesses were motivated to beef up their payrolls, they might not be able to.

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