While not as weighty or existential of a question as the one Prince Hamlet posed, the question of seeking tax credits related to the Hiring Incentives to Restore Employment (HIRE) Act or the Work Opportunity Tax Credit (WOTC) is especially relevant for professionals and companies in the staffing industry.

You Can’t Do Both for an Employee

Employers cannot take advantage of both tax credits for an employee; you have to choose.  You can have some employees qualify for HIRE Act savings and other employees for WOTC, but you cannot benefit from both credits for one employee. 

The Greater the Risk, the Greater the Reward

Like most things in life, the option that is harder to qualify for, the WOTC, can yield greater tax credits for your staffing company.  However, the HIRE Act can save an employer over $6,000/year for an employee, which in certain circumstances is a greater savings than what you’d get with the WOTC.   

Sample HIRE Act Savings for Staffing Firms

The Maximum potential HIRE Act savings for an employee is $6,621.60 – 6.2% of the max social security taxable income of $106,800.  

 As you probably concluded, this is an unlikely scenario because you would have had to pay one of your qualified temporary employees enough to hit the social security cap of $106,800 between March 19, 2010 and December 31, 2010. 

 Here’s a more realistic scenario:

 You hire a qualified temporary employee making $500 per week, and save $1271 for the year.  6.2% of $500 is $31 in employer social security tax that you don’t have to pay.  Multiply the $31 by the 41 weeks you don’t have to pay social security tax for a qualified employee, and you get $1271. 

 If you keep that person on your payroll for 52 consecutive weeks, you could get an additional tax credit of $1000. 

 Therefore, through the HIRE Act you could save between $1271 and $2271 for that qualified employee. 

Potential WOTC Savings Per Employee for the Staffing Industry

Employers hiring employees that fit into such targeted groups as veterans, ex-felons, food stamp recipients, and summer youth employees, can reap WOTC savings of: 

• $2,400 for each new adult hire.
• $1,200 for each new summer youth hire.
• $4,800 for each new disabled veteran hire.
• $9,000 for each new long-term family assistance recipient hired over a two-year period.

Click here for a full list of the types of new hires that can qualify for WOTC.
For qualifying new hires, the savings under the WOTC are most likely higher than under the HIRE Act.  However it is more difficult for an employee to qualify because a state agency must certify that the employee is in one of the WOTC targeted groups.  

Making Your Decision

• First, decide if you are even going to go for WOTC, which entails:
  • Familiarizing yourself with the process, which includes taking potential qualifying employees through the screening process and sending the appropriate forms into your State Workforce/State Employment Security Agency’s WOTC coordinator.  
  • Or, talk with a company that offers WOTC processing services (e.g. Talx).
• Consider the industry you supply labor to.  If you are staffing the defense industry, then your employees could qualify for substantial WOTC tax credits if many are WOTC qualifying veterans.
• Be sure to consider the costs:
  • Of using an outside agency for either/both of the processing of WOTC and HIRE Act credits.
  • Of the administrative burden of the HIRE Act, which requires the employer to keep a signed copy of the affidavit; or the WOTC, which comes with a more lengthy approval process. 
• You may conclude that you want to keep it simple and just worry about the HIRE Act.
• If you are going for both WOTC and HIRE Act credits:
• Know the WOTC targeted groups and potential savings for each.
• Only go for the WOTC if the potential savings for the employee is significantly greater than the HIRE Act, and you feel confident that the person will qualify for that targeted group.
• Otherwise, if you know the employee qualifies for the HIRE Act, stick with that.
• Either way, make sure your new hire process is locked down tight!

WOTC and HIRE Act Resources for the Staffing Industry:

• IRS HIRE Act FAQ Website.
• State instructions on how to apply for the WOTC.
• Potential WOTC Savings and List of Targeted Groups.
• Linkedin Answers to the Question, “How Are Payroll Professionals Determining Whether the HIRE Act or WOTC is Better for Their Employee Population?”

 

I hope this helps you saving a great deal of money!  Let me know if you think there are any other factors that staffing executives and professionals should be considering when deciding to go for savings related to the WOTC or HIRE Act. 

 Also, contact us to discuss other ways we can help your staffing firm save money by combining automation through our staffing software and best practices from over 25 years of serving the staffing industry. 

 Special thanks to Kathleen Bodnar, Controller of Staffing Solutions Enterprises, Inc. who provided some valuable feedback on the decision-making processing staffing companies should go through regarding WOTC and HIRE Act tax credits. 

• Linkedin: http://www.linkedin.com/in/everettreiss
• Twitter: http://twitter.com/everettreiss

There is a time when forces align that permit glacial changes to take place – in our culture, in politics and in the marketplace. 

Look at Arlen Specter who spent the last 30 years occupying what he thought was a secure seat in the Senate, and was soundly defeated this week in the Pennsylvania primaries.  His opponent relentlessly attacked Mr. Specter’s brand, and is now celebrating after convincing a pained and suffering electorate that it was time for fresh wind and fire.

Here is a hint on what staffing companies can learn and do to unseat their competitors (especially the nationals) and gain market share:

First and foremost, innovation is key. 

In many ways, the nationals dictate what the rest of the temporary staffing industry does, which often involves competing on price and speed.  And like Specter, the nationals act to protect their position towards the top of the food chain.  While there are degrees of difference in execution and quality, many staffing companies fall into line dancing to the staffing buyers preferred song of “commoditization”  that the nationals are built to move to.  Most small to mid-size staffing companies are working from the same business model and as a result are not highly differentiated.

The good news is that it does not take a lot to stand out when everyone is grinding to the same beat. 

The following are two ways your staffing business can create and move to some new music:

1. Do the hard work to learn the economics of your clients’ businesses and the impact workforce strategies can have on their bottom line.  Find out the performance characteristics of the types of positions that they use contingency labor for and the impact that deviations have on the production and quality of their products and services.  As you target companies in your marketplace, move up the value chain and develop expertise in those areas to the extent that you can identify and potentially even develop those types of skilled workers for a select group of clients.
2. Use your expertise to develop information sharing partnerships with your select clients so you can manage your contingency workforce effectively and economically for yourself and the clientele.  There are significant economic advantages to both the provider and user of contract labor when information is shared and used tactically and strategically.  We have recently designed an operating model for staffing firms and their clients that facilitates a high quality cabal of workers for the client at highly competitive costs when the Total Return On Investment (TROI) is understood.  

The current economy has actually raised the value and importance of contingency workers in many sectors.  There is no better climate for staffing companies to understand the needs and vulnerabilities of companies as they try and navigate through hiring strategies in the face of what is still considered a fragile economy.

Through a combination of automation and best practices within our fully integrated front and back office staffing software, AST’s been helping staffing firms bring about these innovative and differentiated workforce solutions to their staffing markets.

Contact us to start re-thinking your business model and differentiating your business.

Dave Reiss
Founder and CEO
Applied Systems Technology
845-534-7100 X1102
dave@astusa.com
Connect with me on:

• Linkedin: http://www.linkedin.com/pub/dave-reiss/4/37b/218
• Twitter: http://twitter.com/dave_ast

In this video Everett talks about how to use HelpAReport.com’s (HARO) daily emails to either find free PR for your own staffing firm and personal brand, or to share these requests for expertise with your candidates, clients, and prospects.

As you can see, sharing HARO expertise requests with clients, candidates, and prospects is a great way to stay in touch with important relationships in your network and stay top of mind.  Check out Everett’s recent post There’s Such a Thing as Free PR! on The Old School Internet Marketing Blog for Small Business for more info on how to fully leverage HARO as a social media tool in the staffing industry.

Get more information and register to join Everett and many other expert speakers and professionals in the staffing industry at NYSA’s Super Seminar Day on May 18, 2010 by visiting http://www.nystaffing.org/Super_Seminar_Day.html. Feel free to email Everett at ev@astusa.com or Jennifer Kelley at jennifer@nystaffing.org if you have any further questions.

Also, if you think Everett’s social media content is helpful, contact AST to see how we can help you in the area of your staffing software and technology beyond the web 2.0.

• Linkedin: http://www.linkedin.com/in/everettreiss
• Twitter: http://twitter.com/everettreiss