Today, many organizations understand the importance of establishing Diversity, Equity, and Inclusion (DEI) in their operational structure. As a result, it isn’t easy to find companies that do not have a DEI plan in place. Still, how well they are executing those initiatives is another matter.
Some companies lack education on how to make DEI initiatives practical tasks. Others may feel that implementing DEI initiatives are too time-consuming and take attention away from other profit-driving activities.
Organizational leaders with these beliefs may be well-meaning, but they do not yet understand that implementing and following through on DEI goals have proven to have multiple benefits for organizations, including an increase in profits. If that’s not enough motivation, companies can also qualify for a significant tax credit when hiring more diverse employees.
Since 1996, our federal government has been offering the Work Opportunity Tax Credit (WOTC) to provide an incentive for companies to hire target groups associated with high unemployment rates.
What Is the Work Opportunity Tax Credit (WOTC)?
The WOTC “is a federal tax credit available to employers for hiring individuals from certain targeted groups who have consistently faced significant barriers to employment,” according to the Internal Revenue Service (IRS) website.
These targeted groups include qualified IV-A recipients, who are people receiving assistance from a state-approved plan, such as TANF, qualified veterans, ex-felons, designated community residents, physically or mentally disabled people who have a vocational rehabilitation referral, qualified summer youth employees, Supplemental Nutrition Assistance Program (SNAP) recipients, Supplemental Security Income (SSI) recipients, long-term family assistance recipients, and qualified long-term unemployment recipients.
When employers hire someone from any of these targeted groups and certify through IRS form 8850, that this person is indeed a member of one of these groups, the company can earn the tax credit. The credit can total up to $9,600 for each qualified new hire.
This amount varies based on the target group of the new hire, how much he or she has earned, and whether he or she has worked at least 120 hours with the current employer.
The WOTC can reduce the amount that an organization owes the IRS at tax time. Using the WOTC in conjunction with your DEI plan, your organization can increase diversity and get a substantial tax break.
Using the WOTC To Establish a More Diverse Workplace
The assistance programs that qualify people as a targeted group generally draw a diverse group of people in need. These targeted groups include unemployed people, veterans, young workers, senior citizens, the disabled, and a variety of races and ethnicities. Many of these individuals need jobs, and because of limited opportunities, hiring them could mean increased loyalty to your company.
However, these are also individuals with other possible known and unknown barriers to employment. For example, they might not have extensive job history or any previous experience. Your organization may also have to change hiring processes or provide unique accommodation for employees to make sure your workplace is a fair and accessible space for all.
Still, DEI research, in general, backs the idea that the gains of hiring diverse staff members will outweigh the costs. Plus, the WOTC targeted groups align closely with DEI policy targeted employee groups, including age-based, disability, gender, religion, pregnancy, race, sex, and sexual orientation considerations. Organizations can refine and satisfy DEI plans and goals by hiring targeted group employees, who help your company qualify for the WOTC.
In addition to the tax credit, your organization will be helping the government provide jobs for people whose employment can benefit taxpayers. If your organization is considering hiring employees based on the WOTC and DEI principles, learn these essential practices for your business:
Important Points About DEI Hiring and Initiatives
- DEI hiring practices are about hiring the best candidate for the job. They ensure that companies have a larger pool of talent from which to choose, instead of limited talent.
- DEI hiring practices remove bias from your normal HR hiring process.
- DEI practices make your hiring process and employee experience more efficient, which allows you to save time and money.
- DEI initiatives give employees a greater sense of belonging, increasing their loyalty to your organization.
- DEI practices create more opportunities for your organization to hire diverse people.
- DEI initiatives boost the morale of culturally diverse employees.
- DEI initiatives lead to happier employees who produce more. This increase in productivity increases company profits.
- DEI initiatives help to retain employees.
- DEI initiatives encourage diversity in all aspects of running your organization, such as in the choice of graphic images used on websites or marketing materials.
- DEI initiatives increase employee engagement.
In summary, the landscape of our modern workplace is becoming increasingly multicultural. This change challenges organizations to remain culturally competent regarding their employees’ values and needs, promoting organizational growth, and more profitability.
The WOTC process can help your company in multiple ways, including supporting diversity initiatives and reducing income tax liability. Hiring people from these WOTC targeted groups is something that every company should investigate to see how hiring people who have had trouble finding employment can help your business and promote ongoing workplace diversity.
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