Employee Retention Tax Credit: How to Keep Them Happy?

An employer is entitled to a fully refundable tax credit equal to 50 percent of their employees' qualified wages under Employee Retention Tax Credit. Read more.

Employee retention is a constant challenge for businesses of all sizes. Employee turnover comes with a price tag, including hiring costs, training expenses, and lost productivity while the position is vacant. It’s critical to your organization’s success that you do everything you can to keep your staff engaged and happy in their jobs. That’s where employee perks come in. From flexible scheduling to paid vacation time, these benefits can make your company a more attractive place to work. In doing so, they also improve employee retention. According to the Society of Human Resources Management, the average employee tenure across all industries is currently just 1.7 years. That means your employees are likely to stay with you for just one and a half years on average. If you’re lucky, they’ll stay even longer than that—but that’s no guarantee. The sad reality is that 45% of employees leave their jobs within the first year and over 66% leave within the first three years. Employee retention can be costly for small businesses, which is why many choose not to hire or invest in current staff members until they find more financing options available. If you’re an employer looking for financial assistance in this area, keep reading to learn about some of the most common employee retention tax credits and how they might help your business grow.

What Is an Employee Retention Tax Credit?

An employee retention tax credit is a credit that a business can receive from the government after implementing specific strategies and tactics to retain current employees. This is different from hiring new employees, which is also important, but a business will receive a tax credit for keeping its current employees happy and productive. This will save your business money because you won’t have to pay as much for hiring, training, and losing employees. After all, they left because they weren’t happy. Plus, you’ll get a nice credit from the government. This credit is available to businesses of all sizes and can be used to lower your taxes or contribute to funding your hiring efforts. An employee retention tax credit can be applied to a wide range of things. It can help you fund employee training, provide incentives for longevity and even help you compensate employees who stay with you through challenging times. There are several different types of employee retention tax credits available to all companies, large and small.

Tax Breaks for Employee Retention

Employee retention tax credits can help you fund employee training, provide incentives for longevity and even help you compensate employees who stay with you through challenging times. One of the most common employee retention tax breaks is the employment and training tax credit. This can be used to fund paid training for staff members, including courses related to health and safety. The employment and training tax credit is also sometimes referred to as the WOTC, or Work Opportunity Tax Credit. This applies to organizations hiring individuals from certain target groups, including ex-offenders, the long-term unemployed, veterans, individuals with disabilities and single parents. This tax credit lasts for one year and can be applied towards the cost of wages, salaries and benefits paid to employees during that time.

Orphan Worker Retention Tax Credit

Another popular employee retention tax credit is the orphan worker retention tax credit. This tax credit applies to businesses that hire and retain employees who are either single parents or who have a disabled spouse or child. The company must have a minimum number of employees for this credit to apply, and the employee must have worked for the company for at least 90 days. The hiring of a single parent does not need to be specifically noted. This tax credit applies to businesses that hire and retain employees who are either single parents or who have a disabled spouse or child. The purpose of this tax credit is to help cover the increased costs of retaining and hiring single parents and individuals with dependents who would otherwise face extreme financial hardship. For example, say you’re a small business with a small office in your home. To save money, you don’t have your office space set up to accommodate single parents. This tax credit can help you cover the added costs of setting up a space or finding childcare arrangements for single parents. Orphan workers are also sometimes referred to as “dependent care employees”.

Wage Equity Employee Retention Tax Credit

The Wage Equity Employee Retention Tax Credit can help you fund your hiring efforts and assist with employee retention. This tax credit is available to businesses that hire and retain workers who are paid less than the threshold set by the government. The amount of the tax credit is determined by how much the employee is paid, compared to the government threshold. The amount of the tax credit can range from a few hundred dollars to thousands of dollars per employee hired. These credits are available to businesses of all sizes and can be claimed against the company’s profits tax or incurred as an expense against non-profit organizations’ profits tax. It can provide a tax credit to businesses hiring women or minorities who have historically been underpaid compared to their white male counterparts. This tax credit can help you fund your hiring efforts by contributing up to 50% of the salary of a new hire in the targeted demographic. This tax credit can also help you fund your employee retention efforts. It can provide up to 25% of the wages you pay to current employees in the targeted demographic.

Conclusion

Employee retention is a critical business issue that can determine the success of a company. In order to retain employees and keep them happy, you need to offer them perks that set your business apart from the competition. While employee benefits don’t automatically mean a superior experience at work, they can definitely provide a boost to employee retention rates. Like any perk, the effectiveness of an employee benefit depends on how it’s implemented and managed within your company culture. So how can you use employee benefits to improve the retention rate of your staff? Here are some tips to help you get started.