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Employee Retention Tax Credits

Friday, July 30, 2021 7:40 AM | Denise Downing (Administrator)

Submitted by Two River Benefits Consultants, LLC

A complicated payroll tax credit meant to reward companies which kept working during the pandemic.

ERTC Credit Amount: Unlike the ACA and PPP loans, the ERTC credit does not include full time equivalents. The payroll tax credit is based on Full-Time employees who have worked at least 130 hrs/month. The credit is based on 2019 quarterly revenues (form 941) versus 2020 and 2021.

The ERTC is reimbursable from the IRS as a check!

2020 ERTC: if the quarterly revenue decreased 50% or more between the respective quarters in 2020 versus 2019, the company is eligible for credits.

Small Employer < 100, can receive up to $5,000 on $10,000 of employee wages for 2020. A large employer >500, will receive a lesser amount but the case of large numbers may still result in a significant credit amount.

2021 ERTC: For 2021, the definition of a small company has been increased to <500 full-time employees. Instead of an annual credit, the credit is now based on a quarters total gross receipts versus the respective 2019 quarter. Instead of the 50% decrease, for 2021 a decrease in TGR of >20% will now qualify for ERTC’s.

Two Ways To Qualify

  • Total Gross Receipts- as outlined above, however for many staffing companies the total gross receipts actually increased, so companies are qualifying under the second option: Operational.
  • Government Orders: refers to a “partial business suspension:”, activities /changes made to your business due to Covid. These can include the impact to your clients, impact to the hiring process/recruiting, the impact to business development/sales.

If companies do not qualify under Total Gross Receipts, they generally will qualify under Operational.

Operational Considerations:

Light Industrial – Impact to clients
Most experienced shut downs early on in the pandemic

  • Many have experienced outbreaks & had to close to sanitize
  • OSHA/CDC mandates require restrictions on occupancy & distancing – this can lead to a reduction in how many people can be working at one – cannot be shoulder to shoulder on a production line any more. This can create additional shifts and even a reduction to their reliance on temp talent
  • These jobs cannot be done from home and most are considered to be essential
  • Supply Chain issues impacting clients has impact to staffing

Light Industrial – Impact to the Hiring process/Recruiting

  • Most blue collar workers apply in person at a branch. This is referred to as “walk-in” business or foot traffic. Many branch locations would see 20-30 applicants PER DAY in a branch. They would apply, be interviewed, and go through background checks, etc all on location.
  • Due to mandates this had to be totally modified. Most branch locations were shut for a period of time, once reopened they had to comply with restricted occupancy and that would not allow for the same foot traffic. Had to go to appointment only model in many locations. This reduced the application rates.
  • On sites have been affected the same way and many have been shut down.
  • This industry is typically very involved in Job Fairs/Career Fairs & Hiring Events- all suspended.
  • Blue collar workers are not generally as virtually adept, and this makes virtual interviews/hiring more problematic.
  • Higher rate of “no call, no show” with virtual interviews.
  • Increased cost in marketing and investment in technology
  • “Cost to Hire” has been 4-6 times higher
  • Once a temp has been placed at a job there has also been very poor retention rates. Many never come back a second day. This often due to fear of the virus. This has led to many clients offering “Retention Bonus” or “Attendance Bonus” to incentivize people to work during hazardous conditions.
  • Very common in this industry is increase base rates/overtime – Hero Pay, Hazard Pay, Crisis Pay, Combat pay. Well known example is Amazon paying extra $2/hour for warehouse workers. Also American Eagle, Kroger, etc.
  • OSHA requires scheduled “Safety Walk throughs” . They help identify hazards, unsafe conditions and keep a regular check for better safety at work. ... It also helps to establish work practices and ongoing practices and procedures by identifying the safety gaps. These have not been allowed due to COVID.
  • Biggest challenge right now is finding people who want to work for blue collar wages. Between unemployment/stimulus checks, tax refunds and fear… it is extremely difficult to fill orders. This has caused the increase in base rates/bonuses/etc to try and incentivize people to work.
  • Can’t “walk the halls”

Impact to Business Development/Sales – all industries

  • Staffing is a relationship business- it is built in person – face to face! Overall COVID has restricted in person interaction and that is the primary way staffing companies grow their business, meet to clients, build brand awareness and recruit new temps.
  • There are so many staffing companies out there and online platforms – the way a staffing company provides value is the little touch points that have all been suspended.
  • Trade shows, conferences, industry events and association meetings are all VERY popular and common in staffing – all suspended.
  • Business Development/Sales heavily relies on networking, in-person meetings, referrals, dropping off donuts/business card, etc to bring new logos into the company. All suspended.
  • All interviews have gone remote and that has been a tough transition – they like to “lay eyes” on the candidate to make sure they are the right fit.
  • Most direct hire business dried up – no one was wanting to take on new permanent employees.
  • Lack of child care has made it VERY hard to hire while schools have been remote.
  • Remote Internal employees are hard to manage and don’t allow for the collaboration and cross selling that is so important to the industry. Has hurt the culture and efficiency.
  • On sites were a way to constantly look for new opportunities at a large client and a way to ensure great services and manage the contingent workforce… most have been forced to WFH.
  • The combination of a lack of people wanting to work, the suspension of all hiring events, cancellation of industry meetings and in ability to service their contracts in the same way did create a huge suspension in the way staffing companies are used to doing business. These are the services and processes that set them apart from indeed.com.

Staffing is a “people” business, the above are general suggestions as to ways Covid-19 and the restrictions may have impacted your staffing company business. If your company has been affected by many of these reasons, you will qualify for the retention tax credit.

Contact NJSA

New Jersey Staffing Alliance
P. O. Box 518
Mount Laurel, NJ 08054
Tel: 973-283-0072
Fax: 856-727-9504

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