The COVID-19 pandemic led to a significant amount of economic hardship. Many businesses may struggle to keep their employees on staff, even without pandemic restrictions.
The Employee Retention Tax Credit (ERTC) offers financial aid to businesses affected by the pandemic. While you can use your ERTC benefits for a range of needs, many companies may decide to use them to avoid potential layoffs.
What Is the ERTC and How Does It Work?
The ERTC, also called the Employee Retention Credit (ERC), aims to support businesses affected by the COVID-19 pandemic. The government introduced this payroll tax credit to encourage employers to retain their employees rather than laying them off. To qualify, a business must have either experienced a full or partial suspension of operations due to governmental orders during the pandemic, or experienced a decline in gross receipts during 2020 and 2021.
An eligible employer can claim up to 50% of qualified wages (in 2020) or 70% of qualified wages (in the first three quarters of 2021) for any part-time or full-time employees. This includes both wages paid to the employee and qualified health plan expenses.
Using the ERTC to Keep Employees On Staff
While claiming this tax credit offers many advantages, one of the primary ERTC benefits is that it allows you to avoid laying off employees. While the initial goal was to help employers retain staff during the pandemic, these benefits can help you avoid layoffs far into the future.
Reduce the Need for Hiring New Employees
Layoffs may feel necessary when you don’t have enough money to retain staff. If your company grows, however, you may need to hire new employees — and not all of your former staff members may be available. This means you’ll need to go through a stressful hiring process, train new employees, and face other challenges.
Retaining your employees decreases these issues. By using the ERTC to avoid layoffs, you can potentially circumvent the hiring process in the future. In the event you do need to hire new employees, you’ll already have qualified staff who can help train them, making their transition easier.
Improve Trust
During the COVID-19 pandemic, many people worried about their job security. In an increasingly shaky economy, that fear has only grown, even now that the immediate concerns surrounding the pandemic have died down. Many employees still fear finding themselves jobless — and that fear increases if your company plans to downsize.
Using your ERTC benefits to retain employees can reduce stress and increase trust. Because of this, employees may work harder and stick with the company for longer. In addition, it can boost your overall reputation as an employer, which can attract more staff or customers.
Increase Productivity
Downsizing may seem more affordable in the short term, but it often means that your company becomes less productive. Using your ERTC refund to retain staff can help you continue business operations with fewer interruptions — which, in turn, means more revenue overall.
Dayes Law Firm Can Help You Claim Your ERTC Refund
Retaining employees offers extensive benefits for your business, from increased productivity to less employee stress. ERTC funds can help you avoid layoffs — but first, you need to claim them.
At Dayes Law Firm, we understand how confusing the ERTC may seem. That’s why we help clients understand ERTC benefits, learn more about eligibility, and guide them through the filing process. Trust us to help with your business; if you’d like to speak to an attorney, call 800-503-2000. Request a free consultation today.