Economic Incentives Continue to Play an Important Role in Site Selection Decisions for Call Centers and Back Office Operations
by King White, on Nov 27, 2017 4:41:31 PM
The role of economic incentives in the site selection process continues to be important to companies with call centers and other similar back office operations such as shared service centers, technical support, IT services and operation centers. Despite the fact that labor availability is probably the most important factor to these users, economic incentives will typically rank in the top five along with other site selection factors such as labor cost, business climate, taxes and real estate. To help you understand how to tap into these economic incentives provided by state and local economic development organizations, Site Selection Group has summarized some of the key factors to consider during the site selection process as well as some great examples of companies that have been awarded economic incentives such as cash grants, payroll tax rebates, tax credits, training grants and other related program types.
Job creation is a call center’s most valuable asset in economic incentive negotiations
Economic incentives are typically offered for both new job creation and the retention of existing jobs. The typical threshold is approximately 50 or more jobs to attract economic incentives or to make it worth it to go through the application process. The job-related economic incentives will often come in the form of cash, training grants or other performance- related incentives. The economic incentives offered for net new jobs are often more than double what is offered for retaining jobs in a community.
Low wages are often the biggest hurdle to receiving economic incentives
The challenge with most call center and back office operations is that wages are often too low to make them eligible for economic incentives. However, shared service centers, tech support and IT service operations will often have more success as they typically pay higher wages. For example, there are many tertiary markets across Texas that will offer incentives for wages as low as $10 per hour while other states such as Kentucky or Arkansas are based on the average wage within the county where the facility is located. Economic incentives often come in the form of cash grants, payroll tax rebates, tax credits and training grants. To help navigate all of the different options, companies will often engage a site selection consultant or economic incentive specialist to provide a more formalized approach to procuring these economic incentives.
Clawback provisions on economic incentives can create risks
Call center operations are plagued by high turnover and global job migration trends which can create higher than normal risk that you may have to pay back economic incentives if you don’t fulfill your job creation commitments. Economic development organizations created these economic incentive clawback provisions to help protect their investment in a company via economic incentives. Some states and cities have even shifted to a pay-on-performance model, which is great for economic development organizations but doesn’t help companies with off-setting their upfront capital investment. Regardless, it is critical to carefully review the details of any economic incentive agreement to identify what happens if you fall out of compliance due to layoffs or restructuring of employee compensation.
Call centers are receiving some very attractive economic incentive packages
The following table identifies some of the recent call center and back office projects that have received economic incentives across the United States.
Recent Economic Incentives Awarded to Call Centers & Back Office Operations
|Company||Project Type||Location||Incentive Value ($M)||# of Jobs||Capex ($M)|
|Gusto||Customer Service Center||Denver, CO||$19.00||1,000||$0.00|
|OnDeck Capital||Sales Center||Denver, CO||$10.14||400||$0.00|
|Comcast Corp.||Customer Service Center||Fort Collins, CO||$8.15||635||$0.00|
|Johnson & Johnson||Shared Service Center||Tampa, FL||$9.10||700||$23.50|
|Kaiser Permanente||IT Support Center||Atlanta, GA||$1.50||900||$20.00|
|Infosys||IT Services & Call Center||Indianapolis, IN||$31.00||2,000||$8.70|
|Republic Services||Shared Service Center||Fishers, IN||$4.50||469||$13.00|
|Centene Corp.||Call Center||Plainfield, IN||$1.53||273||$19.69|
|Senture||Call Center||Williamsburg, KY||$4.00||500||$10.00|
|Teleperformance USA||Call Center||Louisville, KY||$3.80||750||$13.20|
|Firstsource Group||Call Center||Louisville, KY||$3.00||622||$6.70|
|EOS USA||Call Center||Somerset, KY||$2.00||150||$4.00|
|Safelite AutoGlass||Call Center||Rio Rancho, NM||$4.79||900||$0.00|
|Comcast Corp.||Customer Service Center||Albuquerque, NM||$1.24||450||$0.00|
|Maximus||Call Center||Gates, NY||$1.10||2,100||$17.00|
|The Allstate Corp.||Operations Center||Charlotte, NC||$23.75||2,250||$22.00|
|Barclays||Call Center||Cincinnati, OH||$5.00||1,500||$9.30|
|StarTek||Call Center||Hamilton, OH||$1.33||682||$0.00|
|Progrexion||Call Center||Oklahoma City, OK||$6.64||534||$4.00|
|Charles Schwab||Operations Center||Westlake, TX||$6.00||1,200||$100.00|
|JPMorgan Chase||Operations Center||Plano, TX||$4.90||4,800||$220.00|
|USA800||Call Center||Wichita Falls, TX||$3.40||650||$0.00|
|Frontier Telecom||Business Services||Wise, VA||$7.60||500||$0.00|
|Navy Federal Credit Union||Operations Center||Winchester, VA||$6.00||1,400||$100.00|
|ADP||Business Services||Norfolk, VA||$5.00||1,800||$32.25|
Whether it is good or bad, economic incentives are receiving a significant amount of media exposure. As a result, it is critical to investigate the availability of economic incentives such as cash grants, payroll tax rebates, tax credits, training grants and other related program types. Call centers are eligible in many geographies for these types of economic incentives. However, you need to be prepared to value their benefit to you, manage the compliance process and avoid any clawbacks.