Recently, I had the pleasure of partnering with Edgar Ndjatou of Officium for a webinar all about the Paid Family and Medical Leave tax credit for employers—an often-missed opportunity that can save small businesses money and improve employee satisfaction.

If you’ve ever wondered how the PFML tax credit works, who qualifies, or how to claim it for your business, this post breaks down everything you need to know in plain English.

FMLA vs. PFML: What’s the Difference?

Most employers are familiar with the Family and Medical Leave Act (FMLA), a federal law that allows eligible employees up to 12 weeks of job-protected, but generally unpaid, leave for specific medical or family reasons.

Paid Family and Medical Leave (PFML), on the other hand, provides paid time off for similar reasons. It’s typically funded through a payroll tax—employers contribute to a state or local insurance program that helps employees receive income while they’re on leave.

The key takeaway?
✅ PFML and FMLA don’t conflict—employees can use both.

What’s New with the PFML Tax Credit

Thanks to recent updates under the “One Big Beautiful Bill,” the PFML tax credit has been expanded and made permanent.

Here’s what that means for your business:

• • Employers can now claim a 12.5% tax credit on wages paid for PFML.
    
  • The credit now includes insurance premiums (for example, short-term disability policies).
    
  • It’s available to employers in mandatory PFML jurisdictions—like DC, California, Massachusetts, and several others—that were previously excluded.

If your business is in one of the states or cities with PFML requirements, this change could significantly offset your payroll costs.

How to Qualify for the Tax Credit

To take advantage of the PFML tax credit, employers must:

1. 1. Have a formal written PFML policy in their employee handbook—even if local law already mandates PFML.

   2. Offer more paid leave than required in states with mandatory PFML.
      • For example: if your state law requires 6 weeks, you’d need to offer 8 weeks to qualify.

   3. Track PFML wages and insurance premiums accurately through payroll.

   4. Keep clear documentation—including employee handbook acknowledgments, leave records, and insurance payment details.

It’s also smart to monitor local law changes and communicate clearly with employees about what PFML benefits are available.

Who Can Benefit

This tax credit isn’t just for large employers.
Even small businesses and self-employed individuals who pay themselves through payroll may be eligible to benefit from PFML.

For small businesses, offering paid family and medical leave is not only good compliance—it’s a retention tool. In today’s competitive job market, benefits like PFML can help attract and retain quality employees while keeping your business financially stable.

Why Professionals Should Be Involved

One of the most important takeaways from our discussion was this:  your CPA or HR consultant should be the one helping you evaluate whether PFML makes financial sense for your business.

As Edgar and I discussed, understanding how this credit impacts your payroll and tax strategy can lead to meaningful cost savings—and ensure your policies are both compliant and beneficial.

Final Thoughts

Paid Family & Medical Leave isn’t just a policy—it’s a strategy.  By structuring it correctly and taking advantage of the tax credit, you can:

✅ Lower your tax bill
✅ Support your employees
✅ Improve retention and morale
✅ Strengthen your reputation as an employer of choice

If you’re curious about how this tax credit might apply to your business, reach out to your tax and/or HR professional.

Edgar Ndjatou is the Principal of Officium, LLC, a Washington, D.C.–based consulting firm that helps organizations navigate complex HR, employment law, and policy challenges. A Brandeis University alumnus and former employment attorney, Edgar brings more than a decade of experience advising businesses across public, private, and nonprofit sectors. He focuses on helping companies build strategic, compliant, and fair workplace policies that support both growth and culture.

Want to connect with Edgar? Visit officiumdc.com or connect on LinkedIn.