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PATH Act Offers Solution to Finding Skilled Construction Labor

by: Smith and Howard

May 17, 2016

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The construction industry has been showing substantial growth, in many markets at least, for a few years now. This is good news, of course. But there’s a frustrating side as well: Some contractors continue to face a distinct shortage of skilled labor.

After maintaining skeleton crews during the recession, many construction companies have finally built up the confidence to start hiring again — only to find that many former employees and potential hires have moved away or left the industry entirely. Meanwhile, unemployment remains stubbornly high among some groups of potential employees.

The Protecting Americans from Tax Hikes Act of 2015 (the PATH Act), signed into law last December, may offer a solution to both of these problems. Among the many tax breaks it extends or makes permanent is the Work Opportunity credit. Contractors would be well advised to explore the possibility of deepening their hiring pools and thereby perhaps qualifying for this valuable credit.

Credit Details

The Work Opportunity credit offers a tax incentive to employers that hire individuals who belong to certain identified “target groups.” The PATH Act extends this credit through 2019, and also expands the credit to employers hiring qualified people who have been unemployed for 27 weeks or more.

The amount of the credit depends on which target group the new employee belongs to, the wages paid to that individual, and the number of hours he or she worked during the first year of employment. The maximum credit earned for each member of a target group hired is generally limited to $2,400 per adult employee. But it can be as high as $9,600 per qualified veteran.

Furthermore, employers aren’t subject to a limit on the number of eligible individuals they can hire. If there are 10 eligible individuals, the credit can be 10 times the amount listed.

Target Groups

So who are the people in the target groups? You can get detailed information on the target group qualifications from the Department of Labor’s website, but some of the most pertinent categories for construction businesses include:

  • Unemployed veterans, including disabled veterans,
  • Residents of designated communities, including Empowerment Zones and Rural Renewal Counties,
  • Individuals with disabilities who have completed rehabilitation services through, and been referred by, a certified agency,
  • Ex-felons meeting specific criteria, and
  • Summer employees age 16 or 17 who reside in Empowerment Zones.

It’s important to note that an employer can’t claim the credit for his or her relatives or dependents, former employees who are rehired, or majority owners of the business — even if they would otherwise meet the target group criteria.

Application Process

Along with the extension of the Work Opportunity credit itself, the existing certification forms to apply for the tax break will also remain in use. IRS Form 8850, the prescreening notice, should be completed and submitted by the day the job offer is made.

Once the qualifying individual is hired, you have 28 days from his or her start date to complete and submit the Labor Department’s ETA Form 9061 or 9062 to your state workforce agency. Submission procedures may vary somewhat from state to state, so consult your tax advisor when seeking to claim the credit. 

Extra Incentive

Obviously, the prospect of receiving a tax credit isn’t reason enough to add employees to your payroll. You need, first and foremost, a strong enough backlog of projects to warrant a new hire. And every employee you bring on board must be capable of fulfilling his or her job responsibilities. (See “3 tips for hiring wisely.”) But if both of these criteria are met, the Work Opportunity credit offers an extra incentive to raise your staff level to be ready for new opportunities.

3 Tips for Hiring Wisely

Whether you’re looking to add to your office staff or field crews, you should always try to find workers who are capable, motivated and a good fit for your construction company’s culture. Here are three tips for hiring wisely:

  1. Create the right job posting. Take care to describe the position fully and accurately. Be specific about the skills and experience you want applicants to bring to the job. Providing detailed information about the kinds of projects on which your construction company works will improve the chances that you’ll attract knowledgeable applicants who are interested in your specialty.
  2. Ask for references, and then follow up. Always ask applicants to provide references who can attest to their skills and experience — and always contact those references to see what they have to say. Often, former employers will only verify that an individual worked there for a particular period of time. But it doesn’t hurt to ask more probing questions.
  3. Start with a probationary period. Make clear at the outset that new hires will need to show you how well they can do on the job before they’re considered full-fledged employees. Provide a manual that spells out your company’s policies and the consequences of violating them. Where state and local laws allow, explain that employees are working “at will” and can be fired without warning and for any reason. Consult your attorney for all of the particulars.

For more information about Smith & Howard’s Construction Advisory Services, please contact Sabre Linahan at 404.874.6244 or simply fill out our contact form below.

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