The Work Opportunity Tax Credit (WOTC) is a Federal tax credit incentive available to employers for hiring individuals from certain target groups who have consistently faced significant barriers to employment. There are various targeted groups including veterans, people on long-term family assistance, and ex-felons.
A qualified ex-felon is a person hired within a year of:
- Being convicted of a felony or
- Being released from prison for the felony
If you hire a qualified ex-felon you can receive a tax credit of up to $2,400 or the equivalent of 40% of the first year’s qualified wages if the employee works at least 400 hours. The employee must work a minimum of 120 hours to qualify for WOTC.
It is possible that a justice-involved individual that you’re interested in hiring might qualify under several different target groups, which may offer higher tax credit rates of up to $9600. An employer may apply for as many prospective employees as it wishes – there is no limit to the number of new hires who can qualify.
It is critical that employers apply for the credit within 28-days of the individual being hired (the credit is only available to new hires).
Bottom line: The WOTC can provide significant tax savings to your business. This is a time-sensitive process – so please contact California’s Economic Development Department (EDD) or your local AJCC to apply as soon as you want to make a hire.
The Federal Bonding Program funded through the U.S. Department of Labor provides fidelity insurance bonds to indemnify employers for losses sustained through theft, forgery, larceny and embezzlement. These bonds are good through 6 months and up to the amount of $10,000 at no cost.
To qualify for bonding insurance, the job must be a minimum of 30 hours per week and must have the expectation of lasting six months or more. The worker must meet the state’s legal age for working.
On-the-job training (OJT) can be used by employers who are providing occupational training to eligible employees to offset a portion of the costs associated with the time/materials/reduced productivity a business may experience while training a new employee.
The employer can be reimbursed for up to 75% of the trainee’s wage to cover the above costs. Duration can vary, but most often 6 months is the longest duration. This program applies to various Workforce Investment Opportunity Act (WIOA) eligible participants, including the formerly incarcerated. This means that businesses who are prepared to train the formerly incarcerated can be reimbursed a significant percentage of those training costs.
For more information about OJT or to get started, please contact a Business Service Representative at your local AJCC.
In 2016, LA County adopted a Local and Targeted Worker Policy for all County-sponsored construction and development projects with a budget of $500K or greater.
This establishes a mandatory hiring goal – at least 30% of labor hours must be performed by a qualified Local Resident and 10% by residents classified as Targeted Worker, which includes the formerly incarcerated. This means that businesses are better positioned to win County contracts if they hire the formerly incarcerated.