Family Care Act draws support of small business; others cite tax increase

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More than 100 small business owners signed a letter of support this week for a statewide family leave program that passed the House Labor and Industry Committee Tuesday. 

The letter spearheaded by Children First to Gov. Josh Shapiro and legislative leaders in support of The Family Care Act cites paid leave as a critical tool to helping end workforce shortages. 

HB 181 narrowly passed the committee by a vote of 11 to 10 and will move to the House floor. 

“At a time when businesses across the country are struggling to recruit and retain employees, Pennsylvania’s labor force participation rate is lagging behind the average rate across states with existing paid leave programs, as well as women labor force participation,” the letter reads. “Access to paid leave would be a critical tool in helping to solve current and future workforce challenges.” 

Pa. Chamber 

The Pennsylvania Chamber of Business and Industry disagrees. 

“This proposal would assess a new payroll tax on Pennsylvania workers – equivalent to a roughly 33% increase in the Personal Income Tax – to pay wage benefits for as much as 20 weeks per individual, per year. The bill allows for automatic annual tax increases that would not require legislative input or approval,” the Chamber wrote in its weekly publication, The Sentinel. 

A statewide PFL program benefits both employers and employees and has wide bipartisan support among PA voters, as evidenced by Children First research and polling, the organization said. 

House Republican Leader Bryan Cutler, R-Lancaster, said “Things need to be called out for what they are, and House Bill 181 is an unfair working-class tax increase that massively expands the size and scope of one of the most unreliable departments in Pennsylvania’s bureaucracy.” 

Cutler is referring to the state Department of Labor and Industry, which he said “failed working Pennsylvanians seeking unemployment compensation benefits during the pandemic.” 

The bill would increase taxes on every working Pennsylvanians through an increase in the payroll tax that would fund the paid leave program in the legislation, Cutler said. 

Research 

Research by Vanderbilt University concluded that HB181 “more than pays for itself with a [maximum] 1% payroll premium shared equally between employers and employees.”  

The new analysis uses research on PFL outcomes to estimate the bill’s potential benefits to beneficiaries, employers, and the Commonwealth, according to Children First. 

The Vanderbilt analysis finds that HB 181 would be budget neutral and that employees would receive double – or more – a return on their investment by contributing to the PFL program. Children First, in its letter, said in addition, PFL would result in an annual net benefit of $379 million to families, employers, and the Commonwealth, outweighing costs by 18 to one. 

“Paid family leave is not only a profamily policy but is also a probusiness policy. It’s important that my employees come to work healthy and focused on the job at hand,” said Megan Watson, partner of BKW Family Law. “Having a statewide paid leave program would make it easier for small business owners like me to ensure that our employees, and their families, are taken care of.” 

This legislation would require employers of all sizes to adopt a one-size-fits-all mandatory policy related to time off, regardless of the company’s size or industry, and prohibit employers from developing customized leave policies that benefit their employees while still accommodating their own unique staffing requirements, the Chamber wrote. 

Approximately 90,000 of Pennsylvania’s private employers offer some level of paid family and medical leave benefits to their workforce, but nearly ¾ of Pennsylvania’s employers, mostly small businesses, currently don’t offer paid leave benefits to their employees, often citing cost as a barrier, Children First wrote. That leaves 3.5 million Pennsylvania workers without access to coverage to care for their families. 

Nationally, 13 states and Washington, DC have paid leave programs, including four of six of Pennsylvania’s neighbors (New Jersey, New York, Maryland, and Delaware.) 

 In 2023, Pennsylvania lawmakers introduced HB 181, offering up to 20 weeks of leave to care for a new baby or elderly family member, or a medical emergency. The legislation is sponsored by a bipartisan group of 54 lawmakers in the House. A similar bipartisan bill, SB 580, is expected to be introduced in the Pennsylvania Senate this week.