The restaurant industry has long dealt with high turnover, seasonal staffing fluctuations, and narrow profit margins, and recent pressures have only made this worse. Rising labor costs, inflation, supply-chain disruptions, and shifting workforce availability are squeezing margins even tighter.
But what if there were a way to expand your talent pool, reduce labor costs, and build a more stable workforce, all while promoting diversity and community goodwill? With the Work Opportunity Tax Credit (WOTC), especially when combined with a modern HR and payroll platform like PeopleWorX, you can turn these challenges into opportunities.
In this post, we’ll explore today’s hiring pressures in restaurants, explain how WOTC works, and show how PeopleWorX integrates WOTC to deliver streamlined hiring, compliance, and long-term workforce value.
1. Understanding Today’s Restaurant Hiring Challenges
Rising Labor Costs & Minimum Wage Pressures
Across many states, increases in minimum wage and tipped wage reforms have driven up labor costs. For full-service restaurants operating on slim margins, even modest hourly wage increases can dramatically affect profitability.
Lingering Staffing Shortages Post-COVID
The pandemic triggered a major shift in the restaurant labor market. Many experienced workers left restaurant jobs due to instability, health concerns, or burnout, and many have not returned. As a result, restaurants now face deeper staffing gaps, longer hiring cycles, and lower retention rates.
Inflation, Supply-Chain Pressures & Operating Headwinds
Inflation has driven up food, utilities, rent, and other operational costs. Combined with supply-chain disruptions, this squeezes restaurants from both ends, making it harder to raise menu prices without losing business and harder to pay higher wages without eroding margins.
Unpredictable Workforce Availability & Labor Pool Limitations
Traditional hiring pools may no longer provide enough qualified, dependable talent. Moreover, stricter immigration enforcement and visa backlogs in some regions, especially for back-of-house roles historically filled by immigrant workers, have added staffing risks.
Bottom line: Rising costs + shrinking talent pool + unpredictable workforce availability = a major challenge for restaurants trying to stay profitable and staffed.
2. What Is the Work Opportunity Tax Credit (WOTC)?
The Work Opportunity Tax Credit (WOTC) is a U.S. federal tax credit designed to encourage employers to hire individuals from certain historically under-employed or disadvantaged groups, for example, veterans, long-term unemployed, SNAP or TANF recipients, and others.
Once certified as eligible, employers can claim a credit against taxes (or payroll taxes, for certain tax-exempt employers), providing a meaningful financial incentive to hire from these groups.
Depending on the category and hours worked, the credit can range from roughly $2,400 up to $9,600 per eligible hire.
Because WOTC is legally available to all businesses, regardless of size, even small restaurants can take advantage.
The COVID-19 pandemic fundamentally reshaped the restaurant labor market, leaving lingering workforce shortages that continue to challenge restaurant owners and general managers.
3. How WOTC + PeopleWorX Can Help Restaurants Lower Costs and Expand Hiring
At PeopleWorX, we’ve embedded WOTC screening into our hiring and payroll workflow, so restaurants don’t need to handle additional paperwork manually. Our integrated approach lets restaurant owners focus on people, not compliance overhead.
What PeopleWorX does for you:
- Automated WOTC Screening & Compliance: New hires fill a simple questionnaire during onboarding; the system flags eligible candidates and handles the required paperwork for certification and filing.
- Smart Scheduling & Workforce Planning: Use data-driven scheduling tools to match staffing levels with demand, avoid overstaffing, and reduce overtime costs.
- Accurate Payroll & HR Compliance: Ensure wage, tax, and regulatory compliance are handled correctly, avoiding costly mistakes or penalties.
- Expert HR & Retention Strategy: Our restaurant-specialist HR team helps you craft hiring, onboarding, and retention strategies that fit the unique dynamics of hospitality staffing.
By combining WOTC financial incentives with streamlined operations and workforce planning, restaurant owners can significantly reduce labor costs while building a stable, loyal, and motivated team.
4. Long-Term Benefits for Restaurant Operations
- Improved Retention & Lower Turnover: WOTC-eligible hires often seek long-term employment, especially when paired with good onboarding and management support. This reduces frequent hiring cycles and training costs.
- Enhanced Profitability Through Cost Savings: Tax credits lower labor costs, enabling reinvestment into better wages, benefits, training, or business expansion.
- Stronger Employer Brand & Community Engagement: Hiring from underrepresented or disadvantaged groups supports diversity and inclusion, which can improve community relations and customer loyalty.
- Resilience in Tight Labor Markets: Expanding your hiring pool beyond traditional candidates gives you a competitive advantage when talent is scarce.
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Register for the next Peopleworx Webinar →FAQ: Work Opportunity Tax Credit (WOTC) for Restaurants
1. What types of employees qualify for the Work Opportunity Tax Credit (WOTC)?
Eligible employees include individuals from federally designated groups such as qualified veterans, SNAP or TANF recipients, residents of designated low-income communities, and long-term unemployed individuals. Once certified, these hires can qualify your restaurant for a WOTC credit.
2. Can small or independent restaurants benefit from WOTC?
Yes. WOTC is available to businesses of all sizes, including small, independent, and single-location restaurants. Even hiring just one eligible employee can lead to meaningful tax savings.
3. Does hiring a WOTC-eligible employee affect their wages or benefits?
No. WOTC is a tax credit for your business and does not change wages, benefits, or employment conditions for the employee. They receive the same compensation as any other hire.
4. Can part-time restaurant employees qualify for WOTC?
Yes. WOTC applies to both part-time and full-time workers, as long as they meet the required number of hours worked. The tax credit amount is calculated based on their earned wages and the eligible category.
5. How much money can a restaurant save using WOTC?
Restaurants can receive anywhere from $2,400 to $9,600 per eligible hire, depending on the employee’s category and hours worked. Even a handful of eligible hires each year can result in significant tax savings.
6. Why do many restaurants miss out on WOTC benefits?
Many restaurant operators simply don’t know WOTC exists, or they assume the process is too complicated. Others miss the strict 28-day filing deadline after hiring. With an integrated payroll and HR platform like PeopleWorX, these administrative hurdles are automated or handled on your behalf.
7. What is required to apply for WOTC?
Employers must:
- Have the candidate complete IRS Form 8850 during the hiring/onboarding process
- Submit the form to their state workforce agency within 28 days of the hire date
- Complete additional documentation (ETA 9061 or 9062) A provider like PeopleWorX automates this during onboarding so nothing gets missed.
8. How does PeopleWorX make WOTC easier for restaurant owners?
PeopleWorX integrates WOTC screening directly into your digital onboarding workflow. New hires answer a few questions, and the system automatically identifies eligibility, handles required forms, and submits them for certification. You stay compliant without extra paperwork, and you receive all eligible tax credits.
