Employee Retention credits can often be helpful in retaining a certain percentage of a business’ staff, so it is not uncommon for employers to seek to obtain them from the state in which they do business. This can provide some economic relief to businesses in their current fiscal situation, but can also help businesses in the future when positions are being vacated. That said, this type of benefit has no rules for how it can be used, and when an employer loses that benefit, they will not be in a position to maintain employees or work towards expanding the business.
Employee Retention Credits
Employee retention credits are a mechanism through which a state or local government can provide additional tax incentives to employers who have the foresight to hire and retain qualified employees. These tax incentives are created by allowing employees to exclude the amount of their employee retention credit from their taxable income, up to a set cap each year. This cap essentially eliminates the credit from having any real financial benefit.
The credit is paid at a certain rate, set by the state, and is one of the few credits a business has at its disposal, when compared to the actual payroll taxes that may be deducted. The loss of employee retention credit is also managed by the state, who can stop or increase the eligibility for employees to take the credit in any given year. These credits can be quite helpful to businesses, and more often than not, businesses are able to comply with the residency requirement. That said, there are several ways an employer can deal with the loss of an employee retention credit:
- If the company cannot afford to pay the employee retention credit, then it is the responsibility of the employer to change the nature of the work being performed by the employee and reduce the employee’s current work load. They must also apply to the state of the business in question to update the amount of the employee retention credit that is eligible to be taken.
- The reduction of work load does not affect the ability of the employee to receive a wage in their current role, although it is considered normal for the company to take a certain amount of unpaid time off until the replacement for the employee is found. In this instance, an employer may elect to do this for a limited time period to find a replacement, so that there is an understanding that an employee will not work beyond their availability.
- If an employee’s status is updated to a brand new position, then the employee’s current credit will not be enough to meet the total amount they are allowed to take, therefore the employee will be given an appropriate cash amount for their wages to reflect their reduced role.
- If the replacement is a lower salary employee, then the employer may elect to have the tax credit waived by the state to allow them to hire a more qualified replacement and pay a lesser salary.
- Once the employee is hired, it is the responsibility of the employer to ensure that they document the new role of the employee and document the change in payroll deduction.
Ways to Handle The Loss of Employee Retention Credit
So, as you can see, there are many ways that employers can handle the loss of their employee retention credit, either to expand their business in a positive way or to keep in-house individuals in the business, as needed. It is the nature of the beast, when an employer loses the ability to utilize their employee retention credit, and they will most likely not be without a replacement until they can find a qualified and available employee to fill their slot. Here are few other ways of handling loss of employee retention credit:
- Hire a seasonal worker and keep the work load as low as possible. This will create the most work for your new hire.
Hiring a seasonal employee is the perfect way to go about mitigating the loss of the employee retention credit. This temporary position can be an extra way to make some money without negatively affecting a business’s bottom line. It is also a great way to go about hiring new talent, and will provide a great introduction to the office. In all likelihood, the new employee will receive the minimum wage during their time of employment, and will work out an additional hours system based on how much the employee wants to be compensated.
- Hire a new employee and keep the role as small as possible. This allows the hiring business to keep their employee’s full contribution without them having to work too hard.
Hiring a new employee is always going to be more expensive than a mid-level employee that knows the ropes and knows the tasks expected of them. The new hire will require additional training and oversight, which will increase your business’s expenses. However, by doing this, you are able to keep the most high-level employees on your payroll.
- Hire a new employee that will have an impact on the business, but that employee will take a higher-paid job, once he or she is qualified and certified.
This is an excellent way of handling the loss of an employee retention credit. If you can find a highly qualified employee that will be capable of doing the work that you are loathe to do, you can hire that person, hire their spouse, or their family member in order to continue to have a high level of staff that provides quality customer service.
As with any business, there is always a need to upgrade and upgrade quickly, whether in a local environment or a national corporate office. To do this in a way that does not compromise the bottom line in a negative way is paramount in terms of not losing an employee retention credit.
- Hire two employees. One will do the work for the business while the other is working on their own skills. The employee that has been working on their own will stay in the lower paying job, while the higher paid employee will be able to learn the ropes of the business.
This plan allows for a new employee to come on board and have full pay, while simultaneously allowing the business to develop the other employee. The plan will allow the business to hire a qualified individual, while at the same time be able to gain experience with an individual who is more skilled. By developing the two individuals in this manner, the business is able to enhance their skill set, but it does not compromise the business’s bottom line. The bottom line of what to do when your business loses its employee retention credit is not an easy one.
It is important to maintain a good work-life balance with the employees that you have. The healthy work-life balance is key in the success of a business. When businesses fail to build and maintain a solid work-life balance, employees are unable to provide their best efforts and productivity. A business that thrives from its employees has a robust work culture. However, a lack of work-life balance breeds stress within the business and can eventually lead to a loss of retention credit.
- Hire one new employee and hire a new part-time worker.
If you hire someone new, you can often add another part-time employee to the payroll. The part-time worker may work full-time while the new employee works part-time. This is a way to increase the business’s profits, while maintaining the same profit in the short-term. By adding part-time staff, the business has the ability to have a work force for long-term, while adding additional staff to increase productivity. A key to success of a business that has an employee retention credit, is to not necessarily double the staff that was originally hired, but rather add a part-time employee and put in some kind of training program. The plan will allow for new hires to attain the proper skill set to do the work that they were hired to do.
- Hire a new employee and make them an employee of the business.
If the new employee was previously employed by another company and worked there for a period of time, it is possible that they may qualify for the employee retention credit. The employee will then come into the business on a full-time basis. At the same time, the new employee will continue to work part-time, with the new employee keeping their former position, while the part-time employee works full-time for the business. This allows for a full-time employee to receive a pay increase.
This plan allows the business to offer the new employee a full-time position, while at the same time maintaining the previous employee’s position as part-time. By retaining an employee, the business gains an additional employee, which could translate into a pay increase, which in turn will make it easier to continue to offer new pay increases.
- Hire a new employee who will become an employee of the business, even if the employee did not work there for a period of time.
Sometimes an employee does not work for a company for long enough to qualify for the employee retention credit. If that is the case, the employee can come in on a part-time basis and work for a period of time and qualify. This is where the new employee still maintains his or her current job, but the part-time position is dedicated to the business.
This plan allows the business to add an employee who did not work for them in the past. This employee is given a full-time position with benefits. This is especially advantageous if a new employee came in on a part-time basis. If the part-time employee were a full-time employee, it would be extremely difficult for the new employee to maintain their position as full-time.
- Hire new employees who are offered additional pay.
In some cases, it may be difficult for a new employee to receive the full-time salary they were expecting. This can be remedied if the business hires an employee on a contract basis. The company must be willing to pay an employee a minimum of $15 an hour, in addition to any benefits that the employee is eligible for. A $15 minimum pay is considered the going rate, but the company has to be willing to pay an employee the agreed-upon amount.
The new employee will work for the company and receive a minimum pay. If the company is not willing to pay more, or does not have sufficient funds to pay the employee, the company must pay that employee for the amount that the business is paying, or for the amount the employee is receiving, up to $30 an hour. If the company does not have sufficient funds to pay the employee for the agreed-upon amount, the company must terminate the employment agreement with the employee, and then work out a plan to pay the employee the amount owed.
- Hire an existing employee who is a non-exempt employee.
A non-exempt employee is an employee who is exempt under a different union contract. Under that union contract, the company may pay a non-exempt employee a higher salary, as the federal law allows a non-exempt employee to earn more than an exempt employee. In most cases, it is beneficial for a non-exempt employee to be hired by the company, as they will receive a pay raise.
If the non-exempt employee is already on the company’s payroll, that would mean the company had to start paying the employee at the $15 minimum. An employee who is already on the payroll will receive a higher pay if they are hired as a non-exempt employee.
In some situations, the company would have to raise the minimum wage for all of the employees, but some would still not be satisfied with their pay. An option would be to change the exempt status of the non-exempt employee, which would allow the company to continue paying them the exempt salary.
- Hire an existing employee who was already paid the exempt salary.
In some situations, an existing employee will be hired as a non-exempt employee. In those cases, the new employee will still be paid at the exempt salary, but the new employee will also receive the raise the employee would have received if the employee had been hired as a full-time employee.
Other methods to take advantage of the apprenticeship and turnover wage laws include as follows:
- Using a placement agency to hire employees
- Employing independent contractors
- Part-time employees that are hired with help from a placement agency
Businesses wishing to hire a new employee are advised to contact an attorney to see if they are in compliance with the law. ERC Law Group has a large network of attorneys with vast experience in business and employment law. The attorneys specialize in helping businesses navigate employment laws and labor regulations.
- Don’t pay employees too much.
This may sound strange, but employers should be careful not to pay employees too much. The same laws that exempt workers from the minimum wage also exempt employers from paying an employee over $9 an hour, which is the going rate in most places for a part-time employee. But if an employee is working full-time and receiving benefits, they should probably earn at least $10 an hour. And if an employee is performing a highly-skilled task and should be paid a premium, it’s likely that they should be receiving $15 an hour.
- Pay employees a week’s worth of pay for a single work shift.
Some workers may have received a raise from their company, but there may be weeks or months of back pay owed to those workers. The same wage laws that exempt workers from the minimum wage also exempt employers from paying over a week’s worth of wages for a single work shift. This means that a company who fired an employee after that employee had worked for the company for a month, would be required to pay that employee back pay for that month. That amount would depend on how long that employee worked for the company, but it could be thousands of dollars. The time limit for reimbursement is 30 days, but once the company has paid back the employee in full, the employer is not required to ever send the worker their next paycheck.
- The company is not obligated to pay out bonus’s.
An employer does not have to offer bonuses to employees if they are exempt from paying the minimum wage. If bonuses are available, the minimum wage doesn’t apply. Some workers could ask their employer for a performance bonus, and if it is given, it’s not guaranteed that it will be paid out. If the employee asks for a bonus, the employer is required to ask the employee if they have income from another source or if they have dependents.
If the employee says yes to either of those questions, the bonus can not be paid. Bonus’s are usually offered to those employees who are making a significant amount of money, and the company is trying to keep that worker for the long term. For example, if an employee is hired, and makes $10 an hour, and asks for a $3,000 bonus, the company is legally allowed to pay the employee that bonus, but they cannot give the employee a raise to compensate for the bonus.
- The company may be responsible for back wages.
For businesses that pay their employees a wage that is higher than the minimum wage, the company is required to pay the employees that are under the minimum wage back pay. This means that if the worker is an employee who is receiving an hourly wage, and is exempt from the minimum wage, the company must pay that employee back pay for the months they were not paid the minimum wage.
- Employers are not required to provide holiday pay.
Unlike employees, employers are not required to pay their employees for holidays. There is a federal law which exempts businesses from paying their employees for Holidays that fall on Saturday and Sunday. However, there are some circumstances where an employer could be found responsible for paying their employees for those holidays.
For example, if the company is a hotel, and a worker is working, and they are called in to work the Saturday of Memorial Day weekend. Even though the company is exempt from paying their employees for that holiday, and they are not allowed to pay the workers for any holiday, if the hotel employee finds out that they are not receiving the pay for that holiday, that employee could sue the hotel and receive back pay.
Loss of income for employees can also be a factor in bringing a claim. If the employee has less income for a certain period of time, that could be a reason to sue. EMC has resources for workers if they feel like they have a claim. It will help workers file complaints, gather information, and report potential violations of the law. If EMC believes that you have a claim, they can try to file a claim on your behalf. If the claim is found to be valid, you may receive back pay for that lost income, but it’s important to note that legal processes can take a long time.
Conclusion
So, these are few ways that employees could get paid less, or less at all. If you feel that you are being discriminated against, let EMC know. They can help your employees get paid better. They also have a variety of resources, like a company hotline for employee complaints, and even a research center, to help find companies that are paying their employees the minimum wage and follow all of the regulations.
EMC can help you get the best deal on buying EMC products, and they are always happy to answer your questions. To get in touch, call 1-800-882-9997 or visit www.emc.com/x-spat. This article is intended to provide general, non-specific legal information. It is not intended to provide legal advice on any specific matter.