Do Employees Benefit From WOTC?
The Work Opportunity Tax Credit (WOTC) has a reputation for saving employers money on their tax bills, but it also benefits the employees and potential employees of a company in a multitude of ways. Employers are not required to hire based on WOTC, rather they are cleared to do so and it is an accepted practice. Some of the most popular industries for WOTC include those who offer entry-level positions with high turnover such as call centers, restaurants/food chains, retail, staffing, franchises, distribution centers, casinos, convenience stores, health care, manufacturing and hospitality.
WOTC has specific target groups which it uses to incentivize employers in these industries to help get historically underemployed populations back to work. These groups have faced significant barriers to employment and are eager for the opportunity to rejoin the workforce and contribute to their communities and families. Those target groups are:
- Temporary Assistance to Needy Families recipients (TANF)
- Veterans/disabled veterans — There are currently six different vet groups
- Designated Community Residents (DCR) residing in an Empowerment Zone (EZ), Enterprise Community (EC), Renewal Community (RC) or Rural Renewal County (RRC) — Employee must live and work within the designated federal zone
- Vocational rehabilitation agency referrals
- Summer Youth
- Food stamp recipients (SNAP)
- Supplemental Security Income recipients (SSI)
- Long-Term Family Assistance Recipients (LTFAR)
- Long-term unemployment — Unemployed 27 consecutive weeks or more
SNAP recipients continue to be the largest group to benefit from WOTC, with 66 percent of those who qualify falling under this target group.
For veterans and ex-felons who may be struggling to re-assimilate into the civilian workforce, these incentives can help employers give more members of these groups a chance to get back to work and to contribute to the economy and their community. Many states have additional incentives for veterans specifically as they believe in providing opportunities for those who have served the country honorably. Veterans bring unique skills to the table and are exceptionally strong in leadership, teamwork and composure. Congress and the states believe in providing veterans with every opportunity available to help them reintegrate into society. Additionally, getting ex-felons back to work can help states by reducing the rates of reincarceration as well as gaining from their impact to the economy.
Those who fall into the TANF, LFTAR or LTU groups value the opportunity to get back to work. For these employees, the opportunity to get off public assistance is an incentive to perform exceptionally well in their position, and employers find they tend to stay with the company long-term because of the relationship they have built through the opportunity.
Additionally, WOTC has resulted in significant savings for the government and taxpayers by getting more people off of public assistance and reducing the federal benefits that would be paid. Studies by Dr. Peter Cappelli of The Wharton School at the University of Pennsylvania show and Department of Labor (DOL) statistics show that for the TANF and long-term TANF target groups, approximately 1.8 million certifications were issued between 2002–2013 (approximately 20 percent of certifications), resulting in $130.9 billion in federal savings. For the newest group, SSI, Dr. Cappelli estimates federal savings from benefits that would not need to be paid are close to $28,000 per individual.
While not all target groups have similar estimates available, it is estimated that total federal savings adds up to close to half a trillion dollars since its inception in 1996. These savings to the government and to businesses translate into savings for taxpayers and the employees who can benefit from WOTC.
Overall, WOTC works for employees by giving them a voice and reminding employers that these populations are struggling but they are ready and willing to work, if given the right opportunities. Each of these populations brings underutilized skill sets to the workforce and can help fill the labor shortage some industries and states are facing. Over time, policy surrounding WOTC will continue to change and different segments of the population will see the impact of these changes.