The WOTC – Cooking Up Staff and Chopping Taxes for Restaurants

Written by Corporate Tax Incentives. Updated May 29, 2019.

WOTC_ChopChances are, you or someone you know has at some point in their lives worked in a restaurant, bar, or coffee shop. Maybe you washed dishes at the local dinner after school to save up for that car; maybe your college roommate served up rich espressos between classes to pay for books; or perhaps your family member waited tables in a tavern to cover the bills.

Restaurants and other dining establishments have long been a go-to for the transitory worker, serving up quick cash for those looking to make ends meet, profit extra money for something special, or save up for coming expenses. Though the service industry can be physically and mentally taxing, no secondary education or technical skills are required to put on an apron and bust your hump for tips.

The Two Faces of Easy

This temporary, easy in-easy out nature presents a sort of Jekyll and Hyde façade. On the sanguine side, you have a welcoming industry where most people, regardless of educational background, can quickly find work when they need it most.

But high turnover is the alter ego. Those seeking only momentary succor occupy most positions – thus, many establishments frequently find themselves with ‘Help Wanted’ signs and new employees to train. Again.

‘WHO WHO’ are My WOTC Qualified Workers?

The U.S. Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey (JOLTS) revealed a restaurant report stating a 73% staff turnover rate for 2016.1

And high turnover means elevated hiring and training costs.

Tallying the Turnover

Recently Investopedia revealed that employees spent an average of 47.6 hours in training, costing companies an annual median of $1,886 per laborer. It also noted that total turnover cost per worker can go as high as $3,500.2

Further hindering this turn-style staffing condition, we find a labor shortage. According to Upserve Restaurant Insider, “four in 10 restaurant employees are aged 16-24,” but the volume of that age group is dwindling – they’re no longer seeking work in the service industry.3

As the sector loses its prime age group, businesses must get creative and widen their hiring pool. But how?

With the federal Work Opportunity Tax Credit (WOTC), that’s how!

The WOTC on Rye, Hold the Pickle

The WOTC can help restaurants get out of this personnel pickle with a double-decker solution: presenting businesses with potentially untapped hiring pools and awarding them tax credits for employing individuals within those pools.

Here’s how it works: When a restaurant brings aboard a worker from one of the 14 qualifying target groups, the government awards it $1,200 to $9,600 in tax credits, depending on the group and hours worked. The authorized categories include veterans, SNAP (food stamp) recipients, and the long-term unemployed.

So rather than futilely drawing from the industry’s evaporating 16 to 24-year-old labor force, the restaurants can pull from a menu of people who desire employment, but often encounter impediments. In return, the business receives tax credits that can offset their federal income tax liability, which in turn can help fund staff payroll and training.

Additionally, some states offer tax incentives that “piggyback” off the WOTC, meaning there is overlapping qualifying criteria that is applied similarly as the WOTC.  The restaurant can then generate credits for both the federal and state programs.

Expanding the Menu

The high turnover rate, together with a diminishing inventory of traditional personnel, could be a recipe for trouble in restaurants. But if they look to the new dishes of staffing opportunities that the WOTC offers,  businesses can reduce their costs, fill vacant positions, fund training, and help needful individuals back to work.

And the best way to ensure an establishment captures their maximum credit allotment is to partner with a tax professional who possesses expertise in the WOTC and other employment-based tax credits.



Elevate Your Tax Savings with WOTC

1. Let’s 86 the 73% Annual Restaurant Staff Turnover Rate, Toast, 2018
2. The Cost of Hiring a New Employee, Investopedia, 2019
3. Restaurant Turnover and Other Challenges are Still Trends That are Here to Stay, Upserve Restaurant Insider, 2018

Topics: Employment Incentives, WOTC

Corporate Tax Incentives

Written by Corporate Tax Incentives

CTI is a tax incentives specialty firm that secures greater tax credits for businesses with our proven project methodology and unparalleled personalized service. For almost 20 years, our elite tax professionals have proactively engaged clients to deliver unmatched value with transparency and efficiency thorough secure in-house software, comprehensive audit-ready deliverables, and 24x7 access to real-time dashboards. We are tax consultancy experts passionate about maximizing credits and incentives for powering the success of your business.