WOTC Has a Broad Range of Benefits…So What are They?
Leveraging WOTC Screening for State Tax Credits
Many states offer their own tax credits based on hiring employees in specific target groups, similar to WOTC. In fact, some states use some of the same target groups as the WOTC program allowing employers to capture both the federal WOTC credit and the state credit simultaneously to increase their tax savings. These piggyback credits reduce state income tax liabilities for companies that hire WOTC-eligible workers.
WOTC’s Positive Impact on Turnover
By hiring employees who are less likely to leave their job in their first year, organizations could reduce their turnover rate. A lower turnover rate has a significant impact on a company’s bottom line, both from the actual cost of replacing an employee to the even harder to quantify costs to the organization, such as losing the knowledge and experience of a trained employee to the effects on overall employee morale.
Industry research shows that employers will need to spend the equivalent of six to nine months of an employee’s salary in order to find and train their replacement. And some studies show this cost could actually be even higher.
In additiona, new research from Equifax shows WOTC-eligible employees:
- Stay in their jobs for the same amount of time or longer than non-WOTC hires
- Are less likely to leave their job in the first year than their cohorts
- Progress through the ranks at the same pace
- Earn as much over time as their peers
WOTC’s Effect on the Workforce
Research from Equifax shows WOTC is good for participating companies, but does the federal program actually achieve its primary goal of putting unemployed people in jobs? Here, too, the news is positive.
Additional research by the Wharton School professor and economic researcher Peter Cappelli indicates that targeted “wage subsidies” like WOTC appears to be among the most effective labor market policy strategies for addressing unemployment among the disadvantaged. His study, “Assessing the Effect of the Work Opportunity Tax Credit”, and follow-up study, “A Detailed Assessment of the Value of WOTC” reasons that such incentives work because they tap private funds and because — unlike broader education and training programs — they address the heart of the problem of getting people into jobs.
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