Most large healthcare employers, such as skilled nursing facilities, faced numerous pandemic-related challenges during 2020 and 2021. Restrictions to admissions, census dropping, limits on regional travel and more restricted business operations and the ability for certain employees to work. Employers who experienced restrictions on their business may be eligible for the Employee Retention Credit (ERC) regardless of their size. The key to qualifying is by first determining which employees are eligible for ERC.
Many employers mistakenly believe that there are two ERC programs, one for large employers and one for small. This overview will correct this misunderstanding while also describing the pathway for eligibility.
Large or Small Employer
The ERC was created through the CARES Act, providing a refundable tax credit to businesses affected by government orders or shutdowns related to the COVID-19 pandemic. When the credit was originally enacted, Congress included different treatments for large and small eligible employers.
The amount of credit available to a large eligible employer is based on a percentage of qualified wages paid to employees for time not providing services. Small employers can include all taxable wages for all employees during the period in which the employer is considered eligible when calculating the credit.
Determining whether an employer is large or small depends on the year. In 2020, an employer is considered large if they averaged more than 100 full-time employees during 2019. In 2021, an employer is considered large if they averaged more than 500 full-time employees during 2019.
This distinction is important to understand for employers who may believe there is a small employer ERC and a large employer ERC. In reality, there is only one ERC program but with different applications of qualified wages depending on the number of full-time employees in 2019.
Qualifying as a Large Healthcare Employer
Eligibility for the ERC is the same for any industry, but circumstances can be different depending on the service a business provides. For example, skilled nursing facility employees may have been working around the clock to care for patients during the pandemic. This has led many nursing home operators to believe they don’t have any qualified wages paid to employees for which to claim the ERC, as some employees were working triple overtime to maintain their facility.
Furthermore, changes to Medicare compensation meant facilities may have seen a profit during the pandemic, even if it did not feel like it. However, these circumstances do not disqualify healthcare employers from the credit. So, how can a healthcare employer qualify if employees were working overtime and they made a profit?
Which Employees are Eligible for ERC?
While some employees were working overtime, others couldn’t work at all. Think of it as separating the employee base between clinical employees and administrative employees. Administrative employees, including marketers, were unable to perform their normal job responsibilities during the pandemic. Admissions coordinators were put on hold due to the restriction of admissions. Regional managers were unable to travel from facility to facility freely.
These are some of the wages the Experian Employer Services team has been able to identify for our large employers in the healthcare world. Although the ROI may not be as good as a smaller employer, there is definitely money being left on the table by large healthcare employers.
Applying for the ERC
The ERC can be a complicated credit to claim, and misconceptions make it even harder. Large employers may believe they are too big to be eligible or are disqualified because they made a profit. Healthcare businesses with employees who worked overtime may assume they do not have any qualified wages to apply to the credit. For these reasons and more it’s important to speak with a trusted provider. Experian Employer Services has tax professionals with decades of experience helping employers apply for and claim various tax credits.
If you would like to explore eligibility for the ERC, email daniel.heyman@experian.com or visit Experian Employer Services today to start the process.
