Leveraging the Work Opportunity Tax Credit to Bolster Holiday Season Hiring
If you've spent any time at a major retailer recently you know the holiday season is rapidly approaching. Retailers all over the United States are preparing for what's typically their busiest time of the year. However, this year, retailers are finding it difficult to find qualified employees to fill their seasonal hiring needs due to the continued labor shortage. One of the ways retailers can address this challenge is via the federal Work Opportunity Tax Credit (WOTC). In this article, I'll explore how the WOTC program can benefit retailers in their pursuit to fill their seasonal hiring needs.
What is the Work Opportunity Tax Credit
The Work Opportunity Tax Credit is a federal tax incentive program designed to encourage employers to hire individuals from certain targeted groups who often face barriers to employment. These target groups include veterans, individuals with disabilities, people living within a certain geographic area, and individuals receiving government assistance, among others. By hiring employees from these groups, retailers can earn up to $9,600 for each qualified employee, thereby offsetting, dollar-for-dollar, their federal income tax liability.
How the WOTC Program Can Help Retailers Find Employees
- Offset Overhead Expenses: Retailers can generate a tax credit between $1,200 to $9,600 per eligible employee. The amount of credit generated depends on the targeted category, hours worked, and wages earned. By generating tax credits, a company can lower the overhead expense of their Human Resources function, thus reducing the costs associated with hiring and training new employees.
- More Diverse Applicant Pool: By leveraging the WOTC program, retailers can broaden the pool of potential employees they can select from. By engaging in targeted hiring practices, retailers may uncover a talented and dedicated workforce they might have otherwise missed. Veterans are a great example. They often possess valuable leadership skills and strong work ethics that can be a real advantage for retailers during their busiest season.
- Competitive Advantage: Companies that are engaged in targeted hiring practices, such as the WOTC program, can often obtain “preferred employer” status in the states they operate in. Preferred employers typically receive a greater amount of job applicants as state workforce agencies often prioritize those job postings. Likewise, candidates are more likely to apply to companies with the designation as they're seen as a good place to work compared to those without the designation.
Addressing the Current Labor Shortage
The ongoing labor shortage has presented significant challenges, especially for retailers. Therefore, leveraging a program like WOTC is critical to meet seasonal and long-term staffing needs. There are three ways creating a WOTC program can help address these issues:
- Hiring Flexibility: By installing a WOTC program, retailers can target and hire individuals who are otherwise being overlooked in the employment marketplace. The hiring flexibility this provides can be the difference between being fully staffed this holiday season or having to trim operation hours to adjust for a lack of employees.
- Cost-Effective Hiring: Hiring and training new employees can be expensive. Utilizing this tax credit can help offset the costs of hiring and training new employees. By doing so, it becomes more fiscally viable to staff up for seasonal hiring.
- Retaining Staff: The last thing retailers need during the busiest shopping season of the year is unreliable employees. Due to the employment challenges these targeted groups face, they're often more loyal, more dedicated, and harder working than their peers. This can improve staff morale and help reduce employee turnover, which can be especially problematic during the holiday rush.
The WOTC program can be a critical tool to help retailers identify and hire the talent they need for the busy holiday season, even during a significant labor shortage. By providing financial incentives for employers and identifying a more diverse candidate pool, WOTC helps to create a more inclusive and diverse workforce while helping retailers thrive in a tight labor market. As retailers plan for the holiday season, now is the time to implement a WOTC program. Doing so will assist companies in addressing the challenges of a tight labor market and finding and retaining seasonal employees.
Andrew Sloss is a senior director with Alvarez & Marsal Tax in Washington, D.C.
Andrew Sloss is a Senior Director with Alvarez & Marsal Tax in Washington, D.C. He brings more than 17 years of experience in site selection and tax credits and incentives. Andrew has worked with clients across a range of industries, including healthcare, retail/products services, financial services, manufacturing, telecommunications, oil and gas and renewable energy. He has over 15 years of experience navigating and advising clients on the Work Opportunity Tax Credit. He may be reached at ASloss@alvarezandmarsal.com.