As a business owner, it’s important to take advantage of all available resources to boost employee retention. One valuable tool in this effort is the employee retention credit (ERC), which was established as part of the CARES Act to help employers retain their workforce during the COVID-19 pandemic.
However, navigating the complexities of claiming the ERC can be challenging, and many businesses are not fully aware of the requirements and best practices for maximizing this benefit. To help you make the most of the ERC and ultimately boost your retention rates, we’ve put together some essential tips for claiming the credit.
Understand the eligibility criteria
The ERC is available to businesses that experienced a significant decline in gross receipts or were subject to a full or partial suspension of operations due to government orders related to COVID-19. It’s important to understand the specific eligibility criteria so you can determine if your business qualifies for the credit.
Calculate the credit accurately
The ERC is calculated as a percentage of qualified wages paid to employees during the eligible period. The maximum credit amount is $5,000 per employee for 2020 and $7,000 per employee per quarter for 2021. Be sure to carefully calculate the credit amount to ensure you are maximizing this benefit.
Document and retain necessary records
To claim the ERC, you will need to provide documentation to support your eligibility and credit calculations. This includes records of gross receipts, government orders, and employee retention details. It’s crucial to maintain thorough and accurate records to substantiate your ERC claim in case of an audit.
Review any previous COVID-19 relief received
If your business has received other forms of COVID-19 relief, such as Paycheck Protection Program (PPP) loans, it’s important to understand how these programs interact with the ERC. There are specific rules and limitations regarding double-dipping, so it’s essential to review your previous relief to ensure compliance with ERC requirements.
Seek professional guidance
Given the complexity of the ERC and the potential impact on your business, it’s wise to seek professional guidance from a qualified tax advisor or accountant. They can help you navigate the intricacies of the ERC, ensure compliance with regulations, and maximize the credit amount you receive.
In addition to claiming the ERC, here are some strategies to boost employee retention and create a positive work environment:
1. Provide competitive compensation and benefits to attract and retain top talent.
2. Offer opportunities for professional development and career advancement.
3. Foster a positive company culture that values and supports employees.
4. Recognize and reward employees for their contributions and achievements.
5. Provide a flexible work environment and implement policies that promote work-life balance.
By combining the benefits of the employee retention credit with these retention-boosting strategies, you can strengthen your workforce, improve employee satisfaction, and ultimately drive the success of your business. Taking advantage of these opportunities can help you weather the challenges of the pandemic and emerge with a stronger, more resilient team.