Helping companies address workforce supply and demand challenges
Offset hiring costs with state and local hiring incentives
By Joshua J. Malancuk, CPA
May 20, 2024
The
second article in this series examined state relocation incentives as strategies for attracting remote worker residency and attracting workforce from other states to help bolster local economic growth.
In this third and final installment, we will help you and your clients understand how available employer hiring incentives are being offered as strategies to offset some of the rising labor costs for hiring workers.
Employer hiring incentives
It’s getting increasingly expensive to hire and retain employees, especially with unskilled or lower skill positions.
So, how can prudent employers offset increasing labor costs?
The answers can be found by investigating and pursuing labor incentives, typically at the federal and state levels, ahead of future hiring. Careful planning ideally includes an experienced navigator who can connect the dots with a company’s human resource, accounting and facility development functions to help build a compelling business case that accurately reflects the company’s future growth.
The bulk of workforce hiring incentive programs are government funded, both at the federal and state levels. These programs are intended for employers more than for workers.
On a federal level, government incentives sometimes reward employers for hiring from specific groups, including welfare recipients. For instance, the Work Opportunity Tax Credit (WOTC) pays employers a federal tax credit of up to $9,600 for hiring employees who have been on welfare. This is in addition to other federal and state programs that the employer may be eligible for when helping a new hire move from welfare to a job.
On a state level, there are economic development initiatives designed to grow jobs and workforce skills by offering incentives such as job training grants, partnerships with educational institutions, along with tax credits for hiring and training local workers.
To that end, several states have implemented workforce development programs to support businesses in creating skilled workers to improve their labor force. These programs often include grants or training funds to assist with recruitment, job training and workforce retention initiatives.
A closer look at several state examples
Indiana offers the EDGE Tax Credit to employers who create jobs and make capital investments in the state. The refundable corporate income tax credit is calculated as a percentage of the additional state income tax withholdings from the new jobs — the credit term is up to 10 years.
The Ohio Job Creation Tax Credit is a refundable and performance-based tax credit calculated as a percentage of the payroll created and applied toward the company’s commercial activity tax liability. Companies creating at least 10 jobs (within three years) with a minimum annual payroll of $660,000 and that pay at least 150% of the federal minimum wage are eligible for the credit.
In Iowa, small businesses that hire individuals with disabilities receive a tax credit of 65% of wages for the first year of employment. To be considered a small business, the company must have 20 or fewer full-time employees.
It should be noted that careful planning and consideration should be made when making future hiring decisions, especially when qualifying a company for job creation incentives.
Depending upon the number of jobs, these incentives can offset hundreds of thousands to millions of dollars in labor costs. This savings adds to the bottom line and mitigates some of today’s rising labor costs. Planning at least six to nine months ahead of the future hiring dates is highly recommended.
The importance of planning
Obtaining corporate growth incentives isn’t straightforward. It requires months of significant research, negotiations, and planning. All too often, companies start the planning process too late and miss out on the highest-level benefit.
Make sure you and your clients always have a skilled and experienced advocate at your side. Your company cannot afford to miss out on major opportunities to offset rising hiring and labor costs and improve the bottom-line performance of your growing operation.
Their pocketbook will thank you in the end!
Josh Malancuk, CPA, CMI is President of JM Tax Advocates (www.jmtaxadvocates.com), a service organization who advocates for property tax reductions and maximum level incentives for leading U.S. manufacturers and commercial property owners. He brings 28 years of specialized knowledge and experience to his clients. Josh can be contacted directly at joshua@jmtaxadvocates.com or at 317.674.8390x100.
