In today’s tight labor market, small businesses — including restaurants, delivery services, retail stores and manufacturers — are struggling to attract and retain top-quality staff. The conditions are likely to worsen in many sectors as demand ramps up during the summer months. To be competitive with other employers, you’ll need to be proactive in identifying candidates with the right fit at a reasonable cost.
Tax Credit for New Hires
The Work Opportunity Tax Credit (WOTC) is available to employers that hire workers from certain disadvantaged target groups. This tax credit was recently extended through 2025.
Generally, the credit equals 40% of the first $6,000 of the employee’s first-year wages, for a maximum credit of $2,400 per worker. However, for a veteran with a service-connected disability, the credit can be claimed on the first $24,000 of wages, for a maximum of $9,600 per worker.
Further, your business may qualify for a special summertime credit for hiring youths aged 16 or 17 who reside in an empowerment zone or enterprise community. This credit is 40% for the first $3,000 of wages paid between May 1 and September 15, up to a maximum of $1,200 per qualified worker.
Beware: The WOTC credit requires a complex certification process. For assistance, contact your tax pro.
Here are seven tips on how to find the help you need before the summer rush begins.
1. Seek referrals from within your organization. You may already have a valuable resource for new hires right under your nose without realizing it. Ask your current employees for references and recommendations. You might even offer bonuses for doing so. Of course, this strategy could backfire if your employees recommend friends or family members with checkered work histories. So, make sure that all candidates are properly vetted before they’re hired.
2. Provide training to your existing workers. You may be able to upskill some of your current employees by investing in their education. For federal tax purposes, companies can generally deduct the cost of courses or seminars that employees attend to maintain professional or job-related skills. The write-off isn’t limited to tuition. It also covers items such as books, supplies and certain travel costs. (There are some limits for company owners on deducting the cost of education that’s not related to the job, however.)
In addition, some employers provide tuition reimbursement programs for work-related education expenses. Typically, these reimbursements are a tax-free fringe benefit to employees (no income or employment taxes on the value), and the employer can deduct the costs as business expenses. Alternatively, if a company maintains a written educational assistance plan, an employee may be able to receive up to $5,250 in annual tax-free education benefits. For this purpose, the courses don’t have to improve or maintain job‑related skills. They can lead to a new job, help the worker meet minimum requirements or just be educational in nature.
3. Partner with local schools. If you decide to look for external job candidates, you don’t have to do it alone. Consider partnering with educational institutions, such as public high schools, vocational and trade schools, community colleges, and four-year colleges and universities. They can provide a large labor pool to draw from, allowing your company to advertise part- and full-time job openings and other learning opportunities, such as internship, co-op and apprenticeship programs.
4. Participate in economic development programs. Some communities and local not-for-profit organizations offer programs to foster economic and career development by linking the needs of local workers and local employers. Typically, community-based providers work with nearby businesses to give training to individuals enrolled in the program. This enables workers to match up with your company’s needs.
5. Join industry groups. It can’t hurt to meet with other employers who are in the same boat as you are. You can share ideas and methods for finding workers that have proven to be successful. In addition, your job postings may be extended to a wider audience through these types of networks.
6. Expand your reach with technology. If you want to get the word out that you’re hiring, you must be visible on the websites where job applicants are likely to visit. It’s also important to facilitate applications online and through social media. For example, you might target social media platforms, such as Instagram and Snapchat, to attract young part-timers. But LinkedIn might be more appropriate for higher level, full-time positions. Also consider posting open positions on college job recruitment sites, such as AfterCollege, CollegeGrad and Handshake.
7. Create internship programs. Internships and co-ops provide a creative way to bring talent into the fold. They give students and new graduates opportunities to gain work experience in a professional setting. Generally, a mentor will be designated to supervise interns for a set period of time (for instance, 12 weeks in the summer). Although interns generally receive no guarantees of future employment, participation in these programs could lead to a job or some other connection down the road.
Important: Internship and co-op programs may raise questions relating to compensation. Interns may not receive the same level of pay as other part-time workers — or they may not even be paid at all. (See “Interns vs. Part-Timers” below.)
Ready, Set, Hire
Expect that finding summer help for your business will be difficult this year, so you may have to think outside the box. You can take a more aggressive approach than usual as long as you continue to comply with all the governmental requirements. Your professional business advisors can provide guidance.
Interns vs. Part-Timers
The Department of Labor (DOL) draws an important distinction between part-time employees and interns. Under the Fair Labor Standards Act (FLSA), employees are entitled to the current minimum wage standards set by the government. In contrast, there’s no FLSA minimum wage requirement for interns.
Recently, the DOL updated its primary beneficiary test, which emphasizes certain “economic realities,” to include these seven factors when an intern does not receive the minimum wage:
No single factor on its own will determine the outcome. The decision to treat a worker as an employee or intern is based on the circumstances.