Offset hiring costs with incentives

A variety of tax credits and other programs are available nationwide to encourage employers to hire and train.

By Joshua J. Malancuk, CPA, CMI

In the fall 2024 issue of Disclosures, we investigated relocation incentives being adopted across the country to attract workers and promote workforce growth. Below, learn how you and your clients can use available employer hiring incentives as strategies to offset some of the rising labor costs for hiring workers. 

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 HR, 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. They are intended for employers more so than workers. On a federal level, government incentives sometimes reward employers for hiring from specific groups, including welfare recipients. 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 the employer may be eligible for when helping a new hire move from welfare to a job. (For more information on the WOTC in Virginia, check out the Virginia WOTC Online System.)

On a state level, there are economic development initiatives that aim to grow jobs and workforce skills by offering incentives such as job training grants, partnerships with educational institutions, and 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.

For instance, 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 percent 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. 

Virginia has a few incentives to encourage workforce development:

1. Virginia Jobs Investment Program: A discretionary incentive that provides funding and services to qualified companies to support new job creation or upskilling in conjunction with new or expanding operations.
2. Working Training Tax Credit: For taxable years beginning on and after Jan. 1, 2019, but before July 1, 2025, Virginia allows a tax credit equal to 35% of all classroom training costs for eligible workers. Eligible worker training includes credit or noncredit courses that results in the employee receiving a workforce credential, or instruction or training that is part of an apprenticeship.

A variety of other programs and grants are available, such as the Virginia Talent Accelerator Program. 

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. These savings add to the bottom line and mitigate some of today’s rising labor costs. Planning at least six to nine months ahead of future hiring dates is highly recommended.

Conclusion

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.

Your pocketbook will thank you in the end!

Josh Malancuk, CPA, CMI, is president of JM Tax Advocates, a service organization that advocates for property tax reductions and maximum level incentives for leading U.S. manufacturers and commercial property owners. He brings 30 years of specialized knowledge and experience to his clients. Contact him via email or at (317) 674-8390 x100.