Become a WOTC Wiz: How Your Restaurant can benefit from Work Opportunity Tax Credits

For many individuals, life’s  unexpected challenges can bring forth obstacles to finding  quality jobs and making a living. Certain job seekers in particular,  including veterans, residents of low-income areas, recipients of TANF aid and ex-felons, face difficulty  securing gainful employment. Furthermore, studies have found that these segments of the population experience prejudice when applying for jobs. One example is that a whopping 27.3% of ex-felons are unable to find work, approximately five times the rate of the general public.

In an effort to minimize and reverse this trend, the federal government has created a program called the Work Opportunity Tax Credit (WOTC), which incentivizes employers to hire disadvantaged workers in exchange for a sizeable tax credit.

What is “WOTC”?

The WOTC program was founded in 1996 by the Small Business Protection Job Act and has since helped businesses claim over $1 billion in tax savings each year. The government utilizes the WOTC program to reduce the federal tax liability of employers who hire from “targeted groups” that commonly face significant obstacles to employment. Through this program, qualifying employers can earn a tax credit equal to 25-40% of the eligible employee’s first-year wages, reducing  the total amount of money owed to the IRS.

How much can employers earn?

The amount of your credit is based on which category group your eligible employee falls under, the amount of qualified wages earned, and the number of hours the employee works.

The maximum tax credit per new hire is $9,600, which applies to a disabled veteran who has been unemployed for six months. On the lower end of the spectrum, an employer may claim 25% of a new hire’s first year’s wages for a credit of as much as $1,500.

A reasonable expectation is that 12-15% of a restaurant’s workforce would be WOTC eligible. So, as an example, if you hire 50 new employees in a calendar year, you could receive up to $16,800 in tax credit that can then be re-allocated to other aspects of your business, or used to improve your bottom line.

In addition to the tax credit, other potential benefits of the WOTC program are increased retention rates and higher workforce engagement. For example, let’s say Greg, a 29-year-old disabled veteran, is looking for work. He has been unemployed for several months and has been living off of government assistance. When he gets a job as a fry cook, he is once again able to be self-sufficient and support his family. Greg is grateful to the restaurant for giving him a chance, and remains with the company longer as a result.

Further, hiring WOTC-eligible employees can diversify your workforce, improve company morale, and lower the cost associated with frequent turnover. One study found that 91% of workers with disabilities rated average or better, and performed on par with their peers without disability.

How do employers participate?

There are many programs available that offer WOTC screenings to determine employee eligibility through a series of questions. The programs will work directly with the government and generate reports on a quarterly basis that outline total tax credits received.

How can StratEx help?

StratEx can help you navigate WOTC to save money, without compromising your time. We have partnered with Hiretech to make WOTC screenings as seamless as possible, by preventing the administrative burden from falling on you and your managers. The employee screening questionnaire is integrated with our New Hire module, and prompts the employee to answer a series of questions to determine their WOTC eligibility.

Once they have completed the questionnaire, their information displays on the dashboard for managers or HR users to review. If your employee fits the WOTC criteria, our system sends the information to Hiretech who works directly with the WOTC state agency to get you your tax credit.

For more details on WOTC, or to setup the WOTC Integration, reach out to your StratEx Representative! Or Request a Demo

Sources:
http://www.ncsl.org/documents/Task_forces/Assessing_The_Work_Opportunity_Tax_Credit.pdf
https://www.bizjournals.com/atlanta/news/2018/05/01/how-hiring-people-with-disabilities-boosts-your.html
https://www.ctillc.com/blog/why-employment-based-tax-credits-are-a-win-for-you-and-your-employees
https://www.hkpayroll.com/everything-you-need-to-know-about-the-work-opportunity-tax-credit/
http://www.cmswotc.com/calculate-your-wotc-savings/
https://www.efficienthire.com/wotc-screening-can-affect-bottom-line/
https://www.irs.gov/businesses/small-businesses-self-employed/work-opportunity-tax-credit#targeted
https://www.mencap.org.uk/sites/default/files/2017-06/2017.061%20Benefits%20of%20employing%20PWLD%255b1%255d%20%281%29.pdf