"We need to pay more for good labor. However, we also know that construction margins are tight, so you may not have extra income to pay higher wages. With an understanding of tax incentives and government programs, you can find ways to offer competitive benefits while pocketing some tax credits at the same time."
March 1, 2022
by Star Building Systems
It’s no surprise that construction is facing a serious labor shortage. You feel it, we feel it, the whole industry feels it. With large percentages of the current workforce reaching retirement age – while the glamour and promises of tech jobs and soft sciences lure away younger people – we were already in a bind before the pandemic. Now, that demand is significantly higher, with somewhere in the neighborhood of ten million jobs to fill.
Making matters more difficult is the fact that hourly wages have gone up. In construction and manufacturing, they’ve increased 5%, but in service businesses, wages have spiked twice as far – yet another competitive disadvantage for construction.
It seems we’re in a tough spot, so Star Building Systems brought in CPA Gene Marks for his ideas on tackling this nearly unprecedented labor shortfall. Marks writes for the Guardian, The Hill, The WA Times, Forbes and Entrepreneur magazine, and created a webinar on this very topic.
“We need to pay more for good labor,” Marks said. “However, we also know that construction margins are tight, so you may not have extra income to pay higher wages. With an understanding of tax incentives and government programs, you can find ways to offer competitive benefits while pocketing some tax credits at the same time.”
Here are some tips to spark some ideas:
It can pay off to look for new hires where others don’t. Regardless of the size of your company, when you hire someone out of prison, off of welfare or someone who has otherwise suffered from long-term unemployment, you can benefit from a Work Opportunity Tax Credit worth up to $9,600 per employee. Get started now, because this program is scheduled to expire in 2025.
Retaining employees has been its own challenge. Partial and full shutdowns meant layoffs for many businesses. Working from home also gave employees a new taste of freedom they don’t want to leave behind. We have some ideas to help you with retention, and if you were able to retain employees through the pandemic, you might be eligible for the Employee Retention Credit. Eligible employers can receive credits for each employee, every quarter, against payroll taxes. The credit expires this year, so you’ll want to act quickly.
The vast majority of employees in the US spent at least some portion of the past couple years working remotely, and the majority of those employees want to retain the option to continue working from home at least some of the time. If you can’t offer higher pay, the flexibility of remote working might be equally attractive. That doesn’t mean you have to give up all control. Marks pointed out “you can still require employees to be available during work hours.” Further, it can be an earned benefit, and be subject to a trial period of 30 or 60 days. If the arrangement is problematic, you can reassess. Be sure to invest in the necessary technology to enable remote working safely – especially security. Marks warns “ransomware attacks have increased fourfold since people started working from home.”
Many millennials and younger workers are choosing careers based more on flexibility, mobility, independence and work/life balance than just salary. That gives you another opening to attract quality workers without having to pay more.
Marks said an extremely attractive offering is to allow employees to “take off as much time as they want – as long as they’re doing their job.” This is another perk that can be earned at a certain level of performance or seniority. “The program still should be designed so no one can take time off without their employer or supervisor approving it,” Marks added. This may sound unmanageable, but it requires employees to get their jobs done, and it offers you some other benefits. Traditional paid time-off (PTO) plans have a use-it-or-lose-it plan, so employees are incentivized to use every last minute. With the unlimited option, there isn’t any guaranteed PTO to lose. Also, Marks explained “when someone leaves the company, you don’t have to pay them for unused vacation.”
When an employee has a medical reason for taking extended leave, such as pregnancy, treating them well can be a win-win. According to the Family and Medical Leave Act, as long as you pay at least 50% of the employee’s salary – which they’re sure to appreciate, as typical FMLA leave only holds your job without any compensation – you’ll get a tax credit of 12.5% to 25%.
Insurance has become its own world of hassles, but there are ways you can augment healthcare coverage to make it easier on your people. Health savings accounts (HSAs), health reimbursement arrangements (HRAs) and flexible spending accounts (FSAs) provide tax-sheltered ways for people to save for healthcare expenses. There are important differences to understand between these systems. For instance, a high deductible insurance plan is required for FSAs and HSAs. In some cases, accounts are owned by the individual instead of the employer. There are also different annual contribution limits, and the funds may or may not roll over each year. Typically, savings can be taken out tax-free after the age of 65.
After the stress of the past two years, most people have come to grips with the fact that we all need some mental health help now and then. Does your insurance plan cover therapy? This is an important consideration, as is ensuring your business culture is one that promotes mental health and work/life balance.
The typical life insurance benefit level is twice an employee’s annual salary, and this is a fully deductible expense. Marks points out “coverage over $50,000 is imputed income and must be included on employee’s W-2.”
Though young people don’t like to imagine they’ll ever be at retirement age, helping them save for that inevitable day is still an attractive benefit. If you don’t have a 401(k) set up, Congress has incentivized you to get one started. The Setting Every Community Up for Retirement Enhancement (SECURE) Act, passed in 2019, nets you up to $15,000 in tax credits for setting up a 401(k) program, with an extra $1,500 if you include autoenrollment.
Marks reminds us that “we have an entire generation of workers who are buried under student debt.” As unfortunate as this is, it also makes for another uncommon way to woo workers. As part of the CARES Act, in 2021 you can get up to a $5,200 tax benefit for paying down your employees’ student debt. You can also receive an employer deduction for paying for employees’ education – and it doesn’t even have to be job related. 529 Plans also allow tax-sheltered savings accounts for future education.
Another simple, but attractive benefit is same-day pay. With HR solutions like Paychex, hourly workers can receive half a day’s wages the same day, and collect the other half at the end of the pay period.
There are also incentives to help employees with their children, and this is very attractive to potential employees, as childcare is a major expense. You can contribute up to $5,000 non-taxable to employees’ dependent care and get a full deduction. This must be a formal plan with rules and cannot favor owners, spouses or dependents. If you have many employees with children, you might consider building or contracting out your own childcare. You can get a tax credit for up to 25 percent of your costs, with a maximum credit of $150,000. Qualifying costs include building a facility, paying to operate it or paying an outside service.
Similarly, if you are willing to help employees with an adoption through a formal plan, you can qualify for deductions. Marks points out that “exclusion phases out for employees starting at $203,540 income, and no more than 5% of benefits can go to owner-employees, spouses or dependents.”
We hope these incentives gave you some fresh ideas on how to attract new talent to your business. If we can be of any assistance at all, don’t hesitate to reach out to a Star representative near you.
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