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Whatever your industry or type of business, every company should strive to establish a more diverse workforce. When you bring people from different backgrounds, life experiences, and viewpoints together, you create an inclusive job environment where everyone can benefit.
Since 1996, the Work Opportunity Tax Credit (WOTC) has awarded countless business owners and hiring managers tax credits for hiring workers from groups who have consistently faced barriers to employment.
If you have yet to take advantage of the WOTC program, it’s not too late. In fact, You may already employ workers who qualify and not know it. Let’s take a deeper look at WOTC and how employers can get rewarded for building a more diverse workforce.
What is WOTC?
The Work Opportunity Tax Credit is a Federal tax credit available for employers who hire and retain individuals from certain target groups who routinely face significant employment barriers (like veterans, SNAP recipients, refugees, or people with a criminal justice background).
Depending on which targeted group, employers can claim up to $9,600 per new employee in tax credits from the WOTC program—usually during the first year of an employee’s qualified wages. And there is no limit to the number of employees an employer can claim. This also means there’s no limit to the number of tax credits employers can earn under the WOTC program.
Investing in communities
Participating in the WOTC program does more than provide employers with a financial incentive through tax credits. It also encourages them to access often underappreciated populations to fill their applicant pool.
Without the Work Opportunity Tax Credit program, some hiring managers might never hire a former convict. But those who do are often pleasantly surprised. 82% of managers think that employees with criminal records perform as well or better than workers with clean records. There are several other advantages for businesses that hire employees with criminal backgrounds—like lower-than-average employee turnover and more applicants to choose from.
Military veterans, another population that qualifies for the WOTC program, can bring new operational knowledge to your workplace. Quite often, they’re also quick learners familiar with rigorous training programs, following instructions, and managing responsibility.
And when members of other disadvantaged groups, like people who receive Supplemental Nutrition Assistance Program (SNAP) benefits or Supplemental Security Income (SSI) payments, can improve their financial prospects through better employment, entire communities can benefit.
Although those who qualify for WOTC don’t receive monetary rewards directly from the program itself, WOTC eligibility can make them more attractive job applicants for prospective employers.
Yet, despite facts like 20% of new hires potentially qualify for WOTC or that businesses can see up to 40% cash-flow improvement, why aren’t more employers routinely using WOTC?
Why don’t more businesses take advantage of WOTC?
There are several factors, obstacles, and reasons why more businesses aren’t making the most of WOTC. Typically, an organization's lack of participation can be attributed to at least one of the following:
Lack of WOTC awareness
Business owners and hiring managers are often too busy (or overwhelmed) with other aspects of day-to-day operations to do the research and learn how to make WOTC work for them. It’s not just that employers fail to conduct WOTC screening or fail to identify candidates who qualify for the program—they might not know that WOTC exists.
Tip: If you manage multiple locations, overcommunicate what you know about WOTC and its benefits to all your locations. For a fresh perspective on how you can win at WOTC, check out our insightful webinar with Amy Parman, Director of Training and Recruiting at Taziki’s Cafe.
Concerns about WOTC sourcing
Many think that sourcing qualified applicants will be too challenging or think they don’t naturally hire enough qualified employees. This is wrong! As we revealed earlier, 20% of new hires qualify for WOTC, but it’s not always obvious and, therefore, easy to overlook.
You might discover that an applicant qualifies for WOTC simply because of where they live (being in the Designated Community Resident target group) or because of a family member.
Tip: If you’re concerned about your ability to effectively source applicants who qualify for WOTC, partner with a staffing agency that works specifically with underrepresented groups (e.g. Honest Jobs for those affected by the criminal justice system) or look to existing employees for referrals.
No time to dedicate to WOTC
Like many government programs, applying for the Work Opportunity Tax Credit can be very tedious—especially the first time around. Some business owners put off thinking about WOTC until it's time to file taxes. Which unfortunately happens to coincide with other priorities.
To become efficient at claiming WOTC for employees who qualify and really reap the benefits of the program, businesses need a way to automate the process and solicit help from tax experts.
Tip: Invest in tools and technologies that turn applying for credits on autopilot for your business. Bonus points if it integrates with your applicant tracking system (or ATS). For example, WOTC.com will provide you with all the appropriate tax reports for the total amount of tax credits you’ve earned for the appropriate tax year.
Only think WOTC is for adults
Many business owners and hiring managers are surprised to discover that their seasonal youth employees may qualify for the Work Opportunity Tax Credit program. Only 211 youth employees were hired with WOTC certification in 2020 (.01% of the total), making it the smallest certified category and further demonstrating the missed opportunity.
To qualify, summer youth employees must be at least 16 years old, but under 18 on their hire date or May 1, whichever is later. They must also be employed between May 1 and September 15 (not before May 1.)
Tip: Residing in an Empowerment Zone (EZ), enterprise community, or renewal community is another qualification for summer youth employees. Use this interactive map to see if a location near your business meets this criterion. The maximum credit for a summer youth employee is $1,200.
Strengthen your workforce with diverse hiring
Most businesses in the restaurant, hospitality, transportation, or construction industries are likely to qualify for a Work Opportunity Tax Credit. In many situations, those businesses could receive WOTC today just by taking a closer look at their existing employees to see if they fit the criteria.
Veterans and people with criminal records usually make up most of your WOTC-qualified target applicant and employee audience, along with SNAP recipients and refugees, depending on your business location. But it will take effort on your behalf to receive a Work Opportunity Tax Credit.
The integration between Workstream and WOTC.com now makes vetting new hires for WOTC a seamless, behind-the-scenes part of the application process—with the required WOTC eligibility forms being forwarded automatically within 28 days of the hire. Check out our full list of integrations to see how you can streamline your tech stack and make your hiring process even easier.
