The Work Opportunity Tax Credit (WOTC) program provides an incredible opportunity for businesses to not only expand their workforce but also earn valuable tax credits. While WOTC is known for its potential financial benefits, there’s a lesser-known strategy that can amplify those benefits even further: leveraging employee bonuses. Today, we’ll explore how offering bonuses to eligible employees can increase your WOTC credits as well as incentivizing your team to be a better executor of the program which will create a win-win scenario for both employers and employees.
Understanding WOTC and Its Benefits
The Work Opportunity Tax Credit (WOTC) is a federal program designed to incentivize employers to hire individuals from specific target groups that face barriers to employment. These groups include veterans, individuals with disabilities, recipients of government assistance, ex-felons, and more. The tax credit amount varies based on the target group and the number of hours worked by the employee.
While the financial benefits of WOTC are attractive on their own, there’s a way to maximize these benefits by integrating employee bonuses into your hiring strategy.
Leveraging Employee Bonuses for WOTC
Employee bonuses are a common practice to reward outstanding performance, encourage productivity, and boost employee morale. However, they can also be strategically used to enhance your WOTC credits and here’s how:
Targeted Hiring Approach: Align your bonus structure with the specific target groups identified under WOTC. For instance, if you’re targeting veterans, offer sign-on bonuses for veteran hires.
Retention Incentive: Structure bonuses to reward employees who remain with your company for a certain period (remember the 120-hour and 400-hour marks are key to WOTC credits). This not only increases the value of the tax credit but also fosters employee loyalty.
WOTC Execution Employee Bonuses
Understanding that a crucial key to having an optimized WOTC program is efficiency in your WOTC process is critical for your employees. One of the fastest ways to anchor in the importance is tie bonuses to either certain elements of your WOTC program or to the entire program performance. Here are some ideas:
Screening Compliance: Provide bonuses for your team if your screening compliance hits a certain mark such as 100% of your candidates completed the WOTC survey for the month or quarter.
WOTC Credit Share: Structure a bonus that shares a percentage of your WOTC credit with employees which incentivizes them to ensure that each part of your WOTC program is as efficient as possible.
Benefits of Combining WOTC and Bonuses
Increased Tax Credit Value: Offering bonuses can enhance the overall value of the WOTC tax credit, potentially leading to substantial savings for your business.
Talent Acquisition: Bonuses can attract qualified individuals from target groups, making your hiring strategy even more effective.
Employee Engagement: Bonuses contribute to employee satisfaction and motivation, which can lead to improved productivity and retention.
Optimal Program Performance: Align your bonus strategy with the elements of your WOTC program increases the likelihood that it will be executed optimally thus increasing your WOTC credit totals.
FINAL THOUGHT
The combination of the WOTC program and employee bonuses presents a strategic approach to not only gain valuable tax credits but also build a diverse and engaged workforce. By tailoring your bonus program to align with WOTC target groups and incentivizing employees to execute your WOTC program optimally, you can create a win-win situation where your business thrives and your employees are rewarded. As you implement this integrated strategy, be sure to consult with tax professionals to ensure compliance and maximize the benefits for your organization.