Optimized WOTC programs can earn >500% more than “good” programs
If your business or non-profit participates or is planning to participate in the Work Opportunity Tax Credit (WOTC) program, you may have heard promises of big tax breaks and, as a result, increased cash flow.
Many resources exist (such as our WOTC calculator) to help estimate how much you could make with WOTC, but answers are few when it comes to a slightly different question–”How much should I make?” Or, in other words, “How much do top WOTC claimants make?”
In this blog, we’ll answer this question by sharing information about our WOTC optimization program–the process by which we help our clients get the most from WOTC.
It may be helpful to imagine a WOTC program as a reservoir, with the water representing earnings. Following this metaphor, the following three components–screening, certification, and employee retention–can be thought of as essential parts of the dam holding back your reservoir. The stronger each component grows, the more water the reservoir can hold.
Translation: maximize these three parts of your WOTC program to make more money.
Maximize screening
You can’t make anything with WOTC if you don’t screen job applicants for eligibility. We’ve found that organizations with good WOTC programs screen about 50% of applicants, and organizations with the best WOTC programs screen upwards of 95% of applicants.
It is required by law to screen applicants on or before the day on which a job is offered, and screening practices must be compliant with non-discrimination laws and fair hiring practices. Through auditing hundreds of WOTC programs across many states and industries, we’ve learned that organizations almost always have employees on their payroll who could have been certified for WOTC, but were not screened.
Organizations can achieve optimized screening rates no matter their size or the nature of their hiring practices thanks to continuously-improving tech tools such as our WOTC survey.
Maximize certification
After new hires have been screened as eligible for the WOTC, you must certify them as such with the state workforce agency in your state or territory. The rate at which you gain certification has a direct impact on how much you make with WOTC.
In 2023, the total certification rate across all US state and territory workforce agencies was 25%. This means that 7,939,913 requests were made for WOTC certification, and 1,982,858 certifications were issued. Given this, it may be fair to say that a good WOTC program gains certification at a 30% rate.
Certification rates vary according to an organization’s state or territory, industry, recruiting practices, and other factors. That being said, Arvo clients in certain states achieve certification rates above 50%. Improving your WOTC certification rate to this level has the potential to multiply your WOTC earnings.
In order to maximize your WOTC certification rate, focus on your communication practices with your state workforce agency. Understanding and meeting all requirements, deadlines, and follow-up requests is critical. Arvo Tech provides a dedicated state workforce team to handle our clients’ SWA communications, and achieves industry-leading certification rates thanks to the positive relationships we’ve built with these agencies.
Maximize retention
WOTC is designed to encourage not only the hiring of disadvantaged job-seekers, but also the retention of those individuals. For that reason, employers earn more when their WOTC employees work more. Specifically, WOTC employees must work certain volumes of hours in order for their employers to qualify for WOTC at certain rates.
For this reason, you make more when you retain your WOTC employees. We’ve found that organizations with good WOTC programs maximize credits through retention at rates of about 40%, and organizations with optimized programs do so at rates of about 75%.
That being said, many organizations we work with are at first unaware of the importance of retaining employees, or have no tools in place to efficiently track the hours their WOTC employees have worked. This is one actionable metric that Arvo reports to our clients.
Optimized WOTC profits
Organizations who screen all new job applicants at rates above 95%, gain WOTC certification for eligible employees at rates above 50%, and retain those employees at rates above 75% can earn upwards of 500% more profit from WOTC compared to organizations with so-called “good” WOTC programs.
As an example, consider that a staffing firm made $907,500 last year thanks to a 50% screening rate, a 40% retention rate, and a 30% certification rate. If that staffing firm hired at the same volume this year, and achieved the optimized rate described above, their WOTC profits would soar to $5,584,100. Imagine what they could achieve with $4,676,600 added to their bottom line!
To discuss a custom strategy for optimizing your WOTC profits, contact Arvo Tech today.