The Work Opportunity Tax Credit (WOTC) is a federal tax credit incentivizing employers to hire job seekers who face consistent employment barriers for a variety of reasons. It was introduced with the aim to help these individuals achieve economic independence and to reward employers for providing them with the chance to work and earn.
Since establishment in 1996, the program has served to the benefit of both employers and employees. It helped break the vicious cycle for many individuals belonging to certain groups, effectively subsidizing the cost of hiring and employing them, and providing tax relief to companies by approximately $1 billion every year.
Despite obvious benefits, employers are sometimes hesitant to get involved in the program and end up missing significant savings. As businesses of all sizes can take advantage of this program, including those with tax-exempt status, we provided an overview of steps employers could take to optimize their WOTC process to encourage them to take steps necessary to make the WOTC work for their business instead of leaving the tax savings on the table.
Step 1: Understand the WOTC Program
Before starting your next hiring process, which for larger companies may occur on a daily basis, learn the basic principles behind the program. It is useful to comprehend the aim of this federal incentive and see how you fit in as a socially responsible business. Note that the program extension through 2025 signals its certainty and importance to the government, and the credit you can secure can range from $2,400 up to $9,600 per eligible hire.
Step 2: Get to Know the WOTC Target Groups
Your pool of applicants for every job you post is bound to have at least 25% of those who belong to WOTC-eligible groups. For various reasons which are sometimes out of their control, these applicants tend to be overlooked and find it harder to get a job than the others. That is precisely what this incentive is all about. It aims to help diversify the workforce and enhance employability for those who are not necessarily going to be your first pick for a job but are perfectly capable of getting that job done.
Step 3: Reach Out to State Workforce Agency
In an effort to better understand the specifics of the workforce available in a community, it is wise to explore the information available at any of the State Workforce Agencies (SWA) where your business is located. These are ultimately the authorities with which you are going to be working on the certification of the eligible employees and ensure that your new hires get the necessary paperwork, allowing you to proceed with applying to WOTC, and capturing those valuable credits.
Step 4: Get to Know the WOTC Forms
The entire WOTC process is pretty straightforward but has strict deadlines and eligibility criteria which you should be aware of. Not later than the first day of employment, you must fill out two forms: the IRS Form 8850 and the Department of Labor ETA Form 9601 or ETA Form 9602. You have a 28-day deadline to submit both forms to SWA. Learn what to expect from the process and how to navigate it together with your job candidate, to eliminate unexpected surprises and hurdles along the way.
Step 5: Adapt to Applicant Needs and Habits
Evidence shows significant changes the modern-day job market faces. Job seekers expect easy access to job application forms, and want to use mobile devices to fill them out. For employers, this is a challenge they need to respond to by meeting these expectations as much as possible. Your pre-screening needs to appear as a simple, short, user-friendly survey a job applicant is sure to fill out. This is especially important in light of difficulties some applicants report when filling out the required forms, due to the bureaucratic nature of the language that is not always easy to comprehend and provide unequivocal answers to.
What you want to achieve is to provide a quick and reliable way of determining whether the applicant for the job you just posted might be a member of any of the 10 target groups, ie. eligible for WOTC.
Step 6: Integrate WOTC Questionnaire Into All Job Applications
Another step forward to optimize the WOTC process is in making the WOTC-related questions part of the company policy and integrating them into all job applications. You cannot afford to miss the opportunity for savings wherever possible and the savings that could become possible with the WOTC are by no means neglectable.
By integrating WOTC into the hiring process with no exception you also increase the chances of getting the answers you need. It becomes a subtle and considerate inquiry rather than an intrusion some people may be uncomfortable with and find discriminatory.
Step 7: Train Your HR Staff
Your Human Resource team is at the forefront of hiring and it is crucial for each person involved to be well-versed in handling the WOTC process faultlessly. As you want to incorporate the WOTC process into your hiring process and make it a routine, make sure there is a thorough understanding of the requirements the program lays out for both the employer and the employee.
Optimize Your WOTC Process to Optimize Benefits
All the steps outlined above are just initial parts of the process that will enable your company to make full use of the WOTC. If it sounds complicated, time-consuming, and taxing, you are not alone in perceiving it as such. Many employers find the overall process — the screening, certification of potential employees, and other requirements in the process of claiming the WOTC credit — very demanding. An obvious answer and a solution to possible difficulties is by utilizing a trusted partner. Outsourcing the WOTC management will take away the burden of research, administration, and compliance processes and help reap the benefits of the program in the most effective manner.
