The pandemic has truly disoriented U.S. businesses to their core. It has forced firms to try to keep their businesses operating while complying with strict health protocols and standards. COVID has disrupted the supply chains of 94% of Fortune 1000 companies and according to the U.S. Census Bureau’s supply chain disruption survey, the manufacturing industry was the most affected sector.
To jumpstart recovery and reward businesses for retaining staff during the pandemic, the government revamped the Employee Retention Credit (ERC) for manufacturers as part of its Consolidated Appropriations Act of 2021.
The Employee Retention Credit (ERC) is very relevant to the manufacturing industry as it can completely remove a firm’s payroll tax liability and generate a cash refund if the company faced setbacks, such as supply chain concerns or capacity limitations, due to government orders.
ERC for Manufacturers in 2021: Why Manufacturers Stand to Benefit so much from this Credit
The pandemic has essentially disrupted the day-to-day commercial activity and distribution of goods and services across the entire country. These disruptions make manufacturers a prime candidate to benefit from the revamped Employee Retention Credit (ERC) in 2021, which is now available to many more businesses. The Consolidated Appropriations Act allows manufacturers to claim the ERC in 2021 alongside PPP.
Qualified Impacts
Most manufacturers had to face one or more of the following disruptions while navigating the harsh economic realities of the pandemic:
- Full or partial shutdowns due to government-mandated restrictions;
- A decrease in products or service output because of the pandemic;
- Interruption to, or modification of, business operations;
- Supply chain delays and interruptions;
- Capacity limitations due to social distancing; and
- Inability to work or collaborate with vendors either domestically or internationally.
Manufacturers can claim the employee retention credit if their business was affected by any of these disruptions. Even experiencing a loss in revenue may make a manufacturer eligible for an ERC claim.
