If you want to get more from the Work Opportunity Tax Credit, these incentives work
The Work Opportunity Tax Credit (WOTC) rewards employers who hire certain disadvantaged job-seekers with valuable tax credits. To be eligible for WOTC, employees must certifiably belong to one of ten federally-designated target groups, including certain veterans, certain individuals with disabilities, certain recipients of government assistance, certain ex-felons, and more.
Maximum credit limits exist for each certified WOTC employee, but the amount of total credit an organization can claim is unlimited. For that reason, smart employers seek to maximize their WOTC benefits by deploying strategic initiatives. Offering bonuses for WOTC-boosting behavior is one of these strategies.
Check out the four WOTC bonus ideas in this blog, then contact us for more strategies. We specialize in maximizing the WOTC for businesses of all sizes.
1. Targeted hiring
In order to earn WOTC credit, you need certifiable WOTC employees. For that reason, some employers issue hiring bonuses to members of WOTC target groups as a recruiting tool. For instance, a sign-on bonus for veterans, or residents of Empowerment Zones.
2. Retention
WOTC rewards employers not only for hiring eligible employees, but also for retaining them. For that reason, employers earn higher rates of credit once their WOTC-certified employees work certain amounts of hours. As a result, some employers issue bonuses to their WOTC employees once they hit those crucial milestones.
3. Screening compliance
One of the best ways to make more money with WOTC is to ensure you screen as many new applicants as possible for WOTC eligibility. The reason for this is because you must determine WOTC eligibility for employees before or on the day on which you make a job offer. Consequently, training your hiring and recruiting team to aim for 100% screening rates helps optimize your WOTC profits. Bonuses for this performance metric can motivate employees to treat screening with critical importance.
4. WOTC profit share
Some employers structure a bonus that shares a percentage of their total WOTC credit with their employees. This strategy is elegantly simple, and can incentive your whole team to value WOTC compliance highly.
WOTC is a best practice
Whatever your strategy for getting the most from WOTC, it is a win-win-win program. The three WOTC winners are:
- Employers, who fill open positions and are rewarded with tax breaks for doing so
- Job-seekers, who secure employment that is built to last
- The government, who reduces costs spent on various benefit programs when WOTC employees enter the workforce
What’s more is that research has shown that WOTC workers:
- Perform better than or equal to their peers
- Stay in their job as long or longer than non-WOTC employees
- Are less likely to leave their job in the first year than their peers
- Earn as much over time as their peers
- Progress through career ranks at the same pace as non-WOTC employees
- Are just as likely as non-WOTC employees to move to another job following their WOTC-eligible job (rather than unemployment)
Finally, WOTC workers tend to come from diverse backgrounds, and bring diverse experiences to workforces. As a result, adding WOTC employees to any workforce can benefit DEI initiatives, and improve workplace cultures in a myriad of ways–including driving innovation and growth, according to Harvard Business Review.
Arvo makes it simple
As you begin or seek to optimize WOTC at your organization, be sure to consult with tax professionals like us to ensure compliance and maximize the benefits for your organization. Over the past decade, we’ve helped hundreds of businesses of all sizes claim over $650 million in the employment tax credits they deserve, including WOTC.
Contact us today.