Avoid the Great Resignation and Save on Taxes With Employee Retention Strategies

In today’s employment market, it is more of a challenge than ever for employers to hang on to their employees. Beginning with the start of the COVID-19 pandemic, the turnover of employees in the labor market has reached epic proportions. Often, one key employee resigns, putting strain on other employees that leads to a domino effect of resignations.

Thankfully, there are some strategies that were designed to help keep employees that will be even more beneficial during this ‘great resignation’. Congress even offered some employee retention tax credits to try and help businesses by encouraging employers to keep their employees on payroll even in hard times.

What is Employee Retention?

Employee retention refers to a business’s ability to retain its employees. Ultimately, it boils down to the efforts put forth by employers to retain their employees for a long period of time. These efforts turn into strategies that attract and incentivize employees to remain with a company over the long haul. The goal is to keep current employees in order to minimize staff turnover.

Finding, hiring, and training new employees to replace former employees takes a lot of time and money. This is time and money that could have been spent on more productive areas of your business such as sales, services, customers, and revenue. Hanging on to your best employees makes you more competitive in this volatile and unpredictable market.

How Does Diversity Impact Employee Retention?

Diversity improves employee retention in the workplace. Diversity fosters individuality and a feeling that every employee belongs. Every peer brings something unique to the workplace which also fosters a mutual respect for differences. If an employee feels encouraged, appreciated, accepted, unique and valued, they are more likely to stick around.

What are the 5 Main Drivers of Employee Retention?

There are many reasons why employees leave their jobs, including personal life changes that are beyond the control of the business and business owner. On the other hand, there are things a company can do that will entice an employee to stay. These can be narrowed down to five main drivers of retention:

1. A good work/life balance with flexibility
2. An attractive benefits package
3. Opportunities to grow
4. A healthy and positive employee/manager relationship
5. Recognition for business contributions

What is the Opposite of Employee Retention?

The opposite of employee retention is employee turnover. Employee retention is the process of ensuring that employees feel valued and remain in their positions for a long period of time. Employee turnover is where employees are constantly leaving the company for various reasons and need to be replaced. Obviously, the goal is to increase employee retention and decrease employee turnover.

How to Decrease Turnover and Increase Employee Retention?

No matter what approach you take, the key is to keep the five drivers of employee retention in mind and remain proactive. The following are some tax and non-tax employee retention strategies to keep in mind when doing your business tax planning for the year that can help employers retain employees during the ‘great resignation’.

Work Opportunity Tax Credit

Both the employee and employer benefit from the Work Opportunity Tax Credit. This credit serves two purposes. One, it promotes the hiring of individuals who fall into a target group that have consistently faced barriers when it comes to being hired. Second, it provides a federal tax credit to employers who hire and invest in these individuals. This is a permanent credit.

Employee Retention Credit

The Employee Retention Tax Credit was a refundable tax credit that was an incentive to encourage employers to keep employees on their payroll. The amount of credit for 2020 was 50% of up to $10,000 paid in wages to an employee where the business was suspended due to Covid-19 or whose gross receipts declined more than 50%. For 2021, the credit increased to 70% of the first $10,000 paid in wages per employer per quarter, for the first three quarters of 2021. Gross receipts needed to have declined by more than 20% to qualify in 2021. This credit has expired, but can be claimed retroactively.

Employee Achievement Award Program

The Employee Achievement Award Program is developed by companies to recognize employees for their contributions that have made the business a success. This special program attracts and retains top talent by making them feel motivated, appreciated, and valued. An employee can receive an award of up to ,600 in a calendar year if certain requirements are met.

Fringe Benefits Deduction

Fringe benefits are any non-wage compensation that is offered to employees as an incentive and can be a way to reduce taxes. Some common forms of fringe benefits are family and medical leave, retirement plans, workers’ compensation, and health insurance.

Education Assistance Program

Educational assistance, often referred to as “tuition reimbursement,” is when the employer pays for part or all of an employee’s educational expenses. This is a strategy used to attract and keep employees who are interested in continuing to learn. It can help employees learn new skills and move up in the company.

Accountable Plan Deduction

This is a plan that follows the IRS regulations for reimbursing business expenses to workers so that it is not counted as income, subject to withholding taxes, or required to be reported on a W-2.

Profit-Sharing Plan

A Profit-Sharing Plan is a tax advantaged retirement plan offered by employers where they contribute to their employees’ account based on the profitability of the business.

Retirement Plans In General

A retirement plan, such as a traditional 401(k), is a savings plan offered by an employer that has some tax advantages for the employee. The employee has an agreed upon percentage of each paycheck contributed directly into an investment account. Three of the most popular retirement plans are the 401(k), a SIMPLE IRA, and a SEP IRA.

Medical Reimbursement Plan

A Medical Reimbursement Plan is a health plan funded by an employer that reimburses employees, employees’ spouses, and dependents for specific medical expenses not covered by any other plan. This can prove to be a very attractive strategy with the rising cost of health care.

Section 139 Disaster Relief

A qualified disaster relief payment includes any amount paid to an individual as a reimbursement for necessary personal, living, family, or funeral expenses incurred as a result of a qualified disaster. The expenses must not be already covered or reimbursed by any type of insurance.

Getting the Most Out of Tax Employee Retention Strategies

If you are a business owner and are looking for strategies to improve employee retention, tax deductions and credits can be a powerful strategy. However, good business owners use a variety of employee retention strategies each year. Tools such as Corvee tax planning software help taxpayers quickly find the strategies available to them. Learn more about employee retention tax strategies and request a demo today.