Tax Incentives Blog

How Employment-Based Incentives Serve Up Savings to the Hospitality Industry

Written by Stephanie Cornejo Banuelos. Updated Apr 26, 2019.

EI-HospitalityImagine: You pull up to the grand hotel. An eager valet slips into your car seat as the bellhop secures your luggage. You stroll to the front desk where a smiling attendant checks you in. Out of the elevator, you open the door to your temporary palace. A whiff of freshly laundered towels still lingering in the air tells you housekeeping has just recently finished.

A grumble in your stomach tells you food is your next order of business. Room service is off for the night, but the bar and kitchen are open a bit longer. Down to the main lobby to slide onto a stool and place your order with the waiting bartender. A bit later, your gourmet burger and fries arrive to accompany your refreshing night cap.

The valet and bellhop. The attendant, housekeeper, bartender, and cook: just a side-dish sampling of the copious personnel required to fulfill the hospitality industry’s services. But with ballooning operating costs, such as the escalating minimum wage across the country, many businesses in the sector struggle to remain profitable.

The Downside of Downsizing

Traditionally, to offset operating costs, companies downsize staff, raise product and service rates, or eliminate certain services. But drawbacks and challenges shadow all these methods: downsizing leaves areas and services understaffed, straining employees and potentially affecting the customer experience; raising prices rarely improves customer satisfaction nor does cutting services.

Employment Incentives: Achieving Goals with an Outsourced Tax Expert

Hospitality companies’ challenge is to employ a sufficient number of staff to function effectively while simultaneously meeting consumer needs – all without surrendering services, quality, or passing the rising costs onto their consumers.

Order Up

This is where employment-based tax incentives can serve up a smorgasbord of money-saving tax liability relief with no strings attached. Most companies can take advantage of employment tax credits on the federal and state levels. Some of the programs are geared towards new-job creation, and some incentivize employers to hire persons within designated target groups, such as veterans or long-term unemployed individuals.

Have It Your Way

Knowing they will recover a portion of wage expenses through employment tax credits, hospitality businesses can step away from reducing staff and services. They can feel more at ease to hire the appropriate amount of staff, retain services, quality, and not forward rising costs to customers. 

A Serving of Savings and Incentives

One of the most popular employment-based tax credits is the federal Work Opportunity Tax Credit (WOTC). The WOTC awards a company with a $1,200 to $9,600 tax credit when it hires an employee from one of 14 target groups. The exact amount allocated is contingent upon each employee’s target group, a percentage of wages, and the hours worked – with the contingency that the employee works at least 120 hours in the first year of employment.

With every incentive-based hire, a disadvantaged citizen gets a job and the business gets money back. It’s a win-win kind of credit. And not only can the WOTC credit offset the employer’s income tax liability, it may also counteract the company’s Alternative Minimum Tax (AMT). Additionally, the IRS permits businesses to carry forward unused credits for up to 20 years and carry them back for one year.

As the hospitality industry endures mounting operational cost control challenges, they can look to employment tax credits to increase cash flow and help maintain a high standard of operation and service without sacrifice.

 

 

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Topics: WOTC

Stephanie Cornejo Banuelos

Written by Stephanie Cornejo Banuelos

Stephanie Banuelos leads CTI’s Credits & Incentives Practice with primary oversight of operations and overall practice development. She is focused on identifying, and maximizing federal, state and local tax credits that drive job creation, job training, capital investment and new business development.

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