As part of the Coronavirus Aid, Relief, and Economic Security Act (CARES), the Employee Retention Tax Credit provides relief for small businesses impacted by the pandemic. Employers who are eligible can get an influx of cash in the form of a tax credit that can allow them to be more financially stable.
The ERTC doesn’t just help employers, however. These funds are also a big boon to employees. Here are a few communication strategies to help employers share how these tax incentives benefit their staff.
How the ERTC Helps Employees
Before communicating employee benefits, it’s crucial to understand them. In a nutshell, a business benefits from ERTC funds by receiving a tax credit. The funds can put a company in a better financial position by increasing liquidity and alleviating tax burdens. Having more cash helps to keep employees on staff, pay benefits, increase wages, or provide other perks.
As long as an employer meets the eligibility requirements of having the specified reduction in gross revenues in 2020 and 2021 or a partial or total suspension of operations resulting from the various government mandates, a percentage of qualified wages will be refunded as a tax credit.
ERTC Communication Strategies for Employers
While the benefits to businesses are clear, understanding the employee benefits requires using logic and more forward thinking. An employer might think it’s obvious that more funds mean more stability and cash. From a worker’s perspective, however, those funds might not “trickle down.”
Discuss the Benefits From the Employees’ Perspectives
No matter how little or how much your company is eligible to receive from the Employee Retention Tax Credit, your employees will likely be curious about how those funds will help them. They might assume that the funds don’t help them at all.
An all-hands or town hall meeting where the company’s owner or members of the leadership team discuss the implications of ERC benefits can go a long way toward creating trust and bringing employees together.
Here are a few ways you can translate business benefits to employee benefits:
- Increased cash flow: Because the ERTC is a tax refund that doesn’t have to be repaid, it works almost like a cash bonus that can get a company out of a tight spot. This can be communicated to employees by sharing that the business can afford to keep people on, invest in infrastructure that improves conditions, or can be applied to wage increases in the coming quarters.
- Reduce tax burdens: As a tax refund or credit, ERC benefits can be claimed retroactively. This allows a company that was previously in a tight spot to get some relief going forward. Less financial pressure breeds more job security and better morale.
- Additional funding: Employers can also explain that the additional funding from ERC benefits frees up funds for other purposes. Businesses can survey their workers to find out what they recommend doing with a portion of the discretionary funds. This encourages buy-in and cooperation.
Depending on your company culture, you may choose to be transparent about the funding or keep the exact numbers close to the vest. There’s no right answer about whether to share the amount of the tax credit with staff.
If you share this figure, be aware that employees may be more watchful of how the funds are spent. On the other hand, if your company is close-knit, sharing this data can bolster trust.
Contact an Experienced Tax Attorney to Discuss the ERTC
Recent reports of the IRS cracking down on fraudulent Employee Retention Credit claims and issuing a number of ERC-related audits may make some business owners who’ve been considering claiming the credit nervous. Getting assistance from a tax attorney with your ERC application can help employers be more confident that their application will be approved without issue
At Dayes Law Firm, we have helped businesses file for over $250 million in ERC tax credits. To discuss your eligibility, contact us at 866-567-4510 for a free consultation.