BOSTON – Employers have been granted a temporary reprieve from the state's new paid family and medical leave law, but it will end up costing them.

Last week Beacon Hill's top three leaders – Gov. Charlie Baker, Senate President Karen Spilka, and House Speaker Robert DeLeo – agreed to a three-month delay of the required contributions under the Paid Family and Medical Leave Act, "to ensure businesses have adequate time to implement" the program. The law had been set to go into effect July 1.

Pro-business groups praised the agreement, saying it gives businesses and their employees more time to adjust to the program's requirements and comply with them.

But a three-month delay reduces contributions to the program, and state officials say the payroll tax needs to be increased to ensure the fund remains solvent.

That means when the law goes into effect Oct. 1, the contribution rate will increase to .75%  from .63% of an employee's qualifying earnings, according to the state Department of Revenue.

"This adjustment will ensure that full funding will be in place for the commencement of benefit payments in January 2021," the agency said.

Chris Carlozzi, Massachusetts director of the National Federation of Independent Business, said the delay is helpful but the law will still be a major burden.

"Even with the three-month delay there's still going to be issues for business owners when this law goes into effect," he said. "There's a lot of confusion and anxiety out there."

He said fines for employers who fail or refuse to make contributions to the fund, which were tacked on as part of the delay agreement, means companies cannot afford errors.

"The price of making a mistake will be very costly," Carlozzi said. "There's a lot of punitive actions that can be taken against employers."

Under the law, full-time Massachusetts workers are eligible for up to 12 weeks of paid leave to care for a family member, or up to 20 weeks of paid leave due to illness. Workers who qualify for paid leave are eligible to earn up to 80 percent of their wages, with a cap at 50 percent of the state's average weekly wage.

Employees and employers will share the cost of the program through a new payroll deduction that is funneled into a pool -- similar to the way unemployment insurance is handled.

Employers with fewer than 25 employees are not required to contribute. Companies that already offer paid leave to their workers can apply for an exemption, provided that their plans offer the same or greater benefits.

The leave program was created as part of the so-called "grand bargain" among state leaders, a coalition of unions, faith and social justice groups, and the business community.

In addition to creating paid leave, the deal hikes the minimum and sub-minimum wages in exchange for requiring an annual two-day sales tax holiday, and it phases out a law requiring retailers to pay workers time-and-a-half on Sundays and holidays.

The deal was a concession to groups that were gearing up to put the questions on the November 2018 ballot.

Business leaders welcome the delay but say the paid leave law will add to the mounting burden on small companies that's driving some out of business.

"The costs for small business owners are continuing to increase, which is a real concern, " said Joe Bevilacqua, president & CEO of the Merrimack Valley Chamber of Commerce. "We've seen plenty of businesses get up and leave, especially with the New Hampshire border so close to the region."

Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at