What Is the Work Opportunity Tax Credit (WOTC) and Why Employers Miss It

Many employers leave money on the table every year without realizing it. Not because they did anything wrong, but because they never knew the opportunity existed.

The Work Opportunity Tax Credit, commonly called WOTC, is a federal tax credit designed to encourage employers to hire individuals who face barriers to employment. While large employers with high turnover often know about it, many small and mid-sized organizations do not.

What is WOTC?

WOTC is a federal tax credit available to employers who hire individuals from specific qualifying groups. These groups include, but are not limited to:

• Veterans

• Individuals previously incarcerated

• Long-term unemployed individuals

• Recipients of certain government assistance programs

• Individuals living in designated empowerment zones

If a newly hired employee qualifies and remains employed for a required period of time, the employer may be eligible for a tax credit.

How much is the credit?

The value of the credit depends on the employee’s qualifications and how long they remain employed. Credits can range from a few hundred dollars to several thousand dollars per qualifying employee.

The longer the employee stays, the larger the potential credit.

Who is a good fit for WOTC?

WOTC tends to make the most sense for employers who:

• Hire more than 20 employees per year

• Experience moderate to high turnover

• Operate in industries like restaurants, hospitality, manufacturing, logistics, or retail

Employers with very low hiring volume or minimal turnover may see limited benefit.

How HR Butler helps

HR Butler helps simplify the WOTC process by integrating eligibility screening directly into electronic onboarding through isolved. This allows employers to automatically check whether new hires qualify for WOTC without adding administrative burden.

Once credits are identified, the employer pays a service fee to the organization administering the credit and receives the full tax benefit when filing year-end taxes.

Why This Matters

WOTC is not a loophole or a gimmick. It is a government-backed incentive meant to support both employers and workers. When implemented correctly, it can offset hiring costs, reward retention, and reduce tax liability, all without changing how you hire.

Many employers qualify and never know it. That’s the real problem WOTC solves.

Have questions about how to get set up or want to learn more? Contact us today.