What to Know About Using a Government
Subsidy to Hire New Employees

by Rebecca Lake

Needing to expand your business is a good problem to have, but hiring and training new employees requires a certain investment of time and money. Fortunately, there are a number of federal and state government programs that are designed to help small business owners with some of the cost. Using these programs to their full advantage begins with knowing how they work.

Subsidy Funding Basics

The first thing business owners need to understand about government hiring subsidies is what form the funding takes. Some programs offer a tax break for hiring certain types of employees. The Work Opportunity Tax Credit, for example, provides a credit of $1,200 to $9,600 for businesses that hire certain categories of disabled workers and veterans.

Other programs offer reimbursement toward the cost of hiring and training new employees. The U.S. Department of Veterans sponsors the Special Employer Incentive (SEI) program, which reimburses small businesses up to 50% of the veteran's salary while they're completing their training. This money is intended to cover supplies, equipment, and other costs of instruction.

Still other programs make grants to small businesses to aid with the expense of hiring new employees. Grants are typically associated with state-run programs, like the one offered by the Texas Workforce Commission. Small business owners in the Lone Star State can get up to $500,000 for coordinating with local colleges to train workers.

What Are the Benefits

The most obvious upside of using a government subsidy or tax incentive to bring new employees on board is the financial element. Tax credits, for example, can prove invaluable if revenues are on the rise and you're worried about getting stuck with a larger tax bill. Beyond that, however, there are other reasons to use a government program to expand your staff.

Many of these programs require workers to undergo extensive training. The New York State Department of Labor, for instance, offers a grant program for employers who hire dislocated workers. The purpose of the program is to ensure that new hires are getting the necessary on-the-job training they need to succeed. The program covers up to 90% of training expenses so you gain the dual benefit of reduced costs and a highly skilled employee.

Having a qualified workforce may ramp up your small business's productivity. That, in turn, can lead to higher levels of customer satisfaction. When your customers are happy, they're more likely to tell other people about your business. From there, you may see your sales climb even higher as a result of this domino effect.

Government hiring subsidy programs also can have a positive impact in a broader sense. When your employees have a steady paycheck coming in, some of those dollars are likely to flow back into the economy as they spend. In short, these programs can prove to be a boon not only for your business but also for your local small business community as a whole.

Compare Your Options Carefully

The government subsidy program or tax break that works best for one business may not be right for yours. Before you jump on a particular opportunity, it pays to consider some key questions first.

First, ask yourself what type of funding is going to be most useful. Would you rather get a lump sum reimbursement for training expenses or an upfront grant? Alternatively, would your business get more of a boost from being able to claim a credit on your taxes?

Next, look at what the guidelines of the program are. Eligibility for a Virginia Enterprise Zone Job Creation Grant, for example, is based on how many employees you're hiring, how much you plan to pay them, and whether you plan to offer them health benefits. Certain businesses, including retailers and restaurants, don't qualify for this grant assistance.

Finally, think about what your long-term goals are and how hiring new employees fits into the bigger picture. Ultimately, you need to be sure that going after a government subsidy or jumping through the hoops needed to snag a new-hire tax break is going to generate the kind of return on investment you're seeking.

About This Author

Rebecca Lake has been writing about small business, investing and real estate for nearly a decade. Her work has been featured on a number of online outlets, including The Huffington Post, Fox Business, CBS News and the Intuit QuickBooks Small Business Center.

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