Can Businesses Claim the ERTC for Temporary Employees?

September 21, 2023
Dayes Law Firm

The Employee Retention Credit (ERC), also known as the Employee Retention Tax Credit (ERTC), is a refundable tax credit from the height of the pandemic. Employers can file an amended tax return to claim the credit. Some employers might wonder about the ERTC for remote or temporary workers and whether they can claim wages paid for such employees. Are their wages eligible to claim?

How Does the ERTC Work?

The ERTC is a refundable tax credit that allows employers to receive a refund of up to $5,000 per employee (50% of $10,000 in qualified wages or health plan contributions) for the 2020 tax year. In 2021, the program was extended to allow a refund of 70% per employee per quarter of $10,000 in qualified wages or health plan contributions. That’s $21,000 per employee for the first three quarters of 2021.

Recovery startup businesses may be able to claim up to $50,000 for Q3 and Q4 of 2021 for a total of $100,000. Recovery startup businesses are those that opened on or after February 15, 2020, and have at least one regular W-2 employee who isn’t the owner or a family member of the owner, as well as less than $1 million in revenue.

Qualifying for the ERTC

To qualify for the ERTC, your company must have experienced a significant decline in gross receipts or been required to shut down as part of a full or partial suspension by a government-ordered mandate. Eligible employers include those who:

  • Were required to shut down by a federal, state, or local government mandate or restrict services to adhere to travel, operational, or occupancy limitations, OR
  • Experienced a significant decline in gross receipts of 50% or more in 2020 when you compare to the same calendar quarter in 2019, OR
  • Experienced a significant decline in gross receipts of 20% or more in 2021 for the first three quarters when you compare to the same calendar quarter in 2019, OR
  • Opened on or after February 15, 2020, and meet the criteria to be a recovery startup business

If your business qualifies to claim the ERTC, you may do so for remote workers, temporary workers, full-time employees, and full-time equivalent employees.

However, you may only claim the credits on the first $10,000 of qualified wages and health plan expenses paid to each eligible employee. Part-time and temporary employees may not meet the cap, and you cannot claim more than the employee was paid during the eligibility period for the credit.

What Counts as Qualified Wages for Eligible Employers?

Qualified wages are those that include normal wages, tips, health plan costs, and other wages subject to FICA taxes.

You must determine whether you can claim the credit as a small or large employer. A business with over 100 employees in 2020 would have been a large employer, while the threshold was raised to 500 employees in 2021.

Small employers can claim the ERTC for any employee paid during the eligible period, regardless of whether they provided services. Large employers may only claim the ERTC for employees who did not provide services.

So, if you’re a large employer and you sent half your employees home during a shutdown, and the employees did not work during said shutdown, you can only claim wages paid to those employees. Those who remained at work or switched to remote work are ineligible for your ERTC claim.

Contact Dayes Law Firm for More Information About Your ERTC Eligibility

Determining whether you can claim the ERTC for remote workers or other part-time or temporary employees can be challenging. Call us at the Dayes Law Firm at (866) 567-4510 or contact us online to schedule a free consultation with an experienced ERTC attorney.