BOSTON — Massachusetts workers are seeing their take-home pay shrink as deductions take effect to fund the state’s new paid family and medical leave program.

Under the new law, workers will be 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 with a family member in the military who has a serious medical condition can get up to 26 weeks.

While those benefits aren’t available until January 2021, payroll taxes and deductions kick in as of Tuesday of this week. The money will be funneled into a pool that is used to pay benefits, similar to the way unemployment insurance is handled.

Workers will see deductions of up to 38 cents for every $100 they earn, depending upon how much their employers cover. Businesses face an equivalent payroll tax but may decide to cover all or some of their workers’ share.

Benefits paid to workers on leave will be based on earnings but capped at $850 per week.

Chris Carlozzi, Massachusetts director of the National Federation of Independent Business, said many small business owners are braced for the law’s impact.

"There's still a lot of confusion and anxiety among small business owners about this new policy," he said. "This wasn't their choice. It was mandated by the state."

He said the deductions will add to the rising financial burden on Massachusetts residents, from skyrocketing health care premiums and energy prices to highest-in-the-nation housing costs.

Bob Luz, president of the Massachusetts Restaurant Association, said the food service industry also expects to take a hit.

"It's another chip away at restaurants' bottom lines," he said. "Ninety-five cents of every dollar that walks into a restaurant goes to cover costs. There's not much left after that."

Restaurants are in a unique quandary. Some may be forced to pay a greater portion of their workers’ share since tipped employees may not make enough to withdraw the new tax.

"We're not to be able to collect from them, but the employer will still be liable for that payment," he said.

Companies with 25 employees or fewer are exempt. Businesses already offering a paid leave benefit can apply for an exemption as long as the plans offer the same or greater benefits.

As of Sept. 29, at least 608 companies that sought waivers from the new law have been granted them or have their applications under review, according to the Executive Office of Labor and Workforce Development.

About 830 companies have applied to date, the agency said.

The paid leave program is mandated under the so-called "grand bargain" agreement signed by Gov. Charlie Baker last year. In addition to creating paid leave, the deal hiked the minimum and sub-minimum wages, required an annual two-day sales tax holiday, and phased out a law requiring retailers to pay workers time-and-a-half on Sundays and holidays.

The deal was a concession to groups gearing up to put referendums for paid leave and a sales tax reduction on the November 2018 ballot.

Raise Up Massachusetts, a coalition a labor unions, social justice groups and faith organizations that pushed for the paid leave law, heralded its implementation this week.

"Massachusetts now has the most comprehensive, worker-friendly paid leave program in the nation, which is something to celebrate," said Deb Fastino, executive director of the Coalition for Social Justice and Raise Up's co-chairwoman, in a statement.

"No working person should have to choose between the job they need and caring for the family they love,” she said.

Eight states and the District of Columbia have paid family leave programs. Only four, including Massachusetts, have implemented them, according to the National Conference of State Legislatures.

Several are tied up in legal challenges.

The federal Family and Medical Leave Act allows workers up to 12 weeks of unpaid leave for the birth of a child or serious health condition. But companies with fewer than 50 employees don’t have to offer the benefit.

In Massachusetts, the federal program covers about 40% of private workers.

Carlozzi said employees who weren't aware of the new law are will be in for a surprise when they look at their next pay stub.

"You're going to see a lot of shock from workers," he said. "They're going to get hit with a reduction in their paycheck every week that they may not want, or may never use."

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

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