Ready to grow your business? The government may be able to help
It’s an exciting and daunting moment when your small business is ready to grow. New staff can be expensive to hire and it can be tempting to keep things status quo, remain a lean-and-mean operation, and take on more than your current staff can reasonably handle in order to avoid increased HR costs.
But there is another way. The government offers a variety of subsidies for small businesses looking to hire. Here are some factors to keep in mind when considering these programs.
Set your priorities
Ask yourself some basic questions. What does your company truly need right now? What type of funding will best help you meet those goals? A lump sum reimbursement for training? A straight-up grant? A tax credit? Each option takes you down a different path, not all of which may be right for your company.
Read and understand the program guidelines. Some job creation grants are structured based on the number of employees you plan to hire, their salaries, and health benefits. Retailers and restaurants, for example, don’t qualify for this type of assistance.
Clearly define your long-term goals. How will your new employees best serve them? This will help determine if all the red tape and time spent on the application process ultimately generate a viable return on investment.
Know the programs
There are many types of government subsidies available for hiring, each with its own benefits and requirements. The list below is by no means inclusive, but these are worth your consideration.
- Work Opportunity Credit.If you hire workers who have what is known as a “barrier to employment,” you can claim a tax credit of $1,200 to $9,600 for a portion of their wages, which reduces your out-of-pocket costs. Groups that qualify include veterans, former prisoners, food stamp recipients, and summer youth employees.
- Empowerment Zone Credit.Empowerment zones are urban and rural areas designated by the government as being economically distressed. If your business is located within such a zone, you can claim a tax credit of 20 percent of wages paid to a new full-time or part-time employee up to $15,000. The employee must also live within the empowerment zone.
- Indian Employment Credit.Despite its dated name (elected officials have yet to change it to “Native American Employment Credit” or “Native Peoples Employment Credit”), this program provides a tax credit for companies that conduct business on a Native American reservation and who hire members of a tribe that live on or near the reservation.
- Payroll Tax Deduction for R&D Expenses.Research is expensive. But your start-up may rely on it. This program allows you to use up to $250,000 of the Research Tax Credits you generate against your portion of payroll taxes.
- State Income Tax Credits.Your state may have tax breaks worth considering. Examples include California’s work opportunity credit and empowerment zone credit; New York’s Empire Zone credit, employee training incentive program credit, employment of persons with disabilities credit, and qualified emerging technology employment credit; and Texas’s Workforce Commission, which offers up to $500,000 to train workers at local colleges.
- The U.S. Department of Veterans Special Employer Incentive (SEI).This program reimburses small businesses up to 50 percent of a veteran’s salary while completing their training. The money goes to such expenses as supplies, equipment, and other costs of instruction.
- The HIRE Act.If your company hires workers who are unemployed or working part-time for at least two months, this program could be a good fit. You can claim a tax exemption for the 6.2 percent payroll tax per qualified worker and claim an additional $1,000 credit for each qualified worker you’ve employed for at least a year.
Keep in mind that many of these programs require extensive training for workers. New York State’s Department of Labor, for instance, offers a grant that covers up to 90 percent of job training expenses for companies who hire dislocated workers.
Do good for others
Programs like the ones mentioned above have been shown to benefit employers by lowering the cost of hiring new employees and increasing productivity, financial stability, and customer retention. Plus, you get quality, long-term staff.
Further, subsidizing wages in this manner supports those who might not otherwise be working due to barriers to employment.
And programs like these won’t just lower your business costs, they can increase demand. The wages you pay to these new workers are often immediately spent in local communities. This, in turn, increases local demand for groceries, restaurants, auto mechanics, and a host of other services.
Good for you, good for your staff, and good for the community. Used strategically and with careful research, government subsidies can make the process of growing your company that much easier – and more profitable.
Profit Point Consulting’s mission is to accelerate the growth of small and medium-sized companies through sound, strategic advice and proactive financial management. If you need a trusted advisor to help develop and execute your vision, call us at (973) 659-1430 or fill out our contact form.