How the R&D Tax Credit Helps Manufacturers Invest in Top Engineering Talent

March 6, 2018

Innovate or die.

The same rule applies whether you’re a manufacturer of industrial equipment, medical devices or consumer packaged goods.

And the key to innovation is talent.

In today’s competitive job market, manufacturers must have a plan to not only hire, but also develop and retain valuable research engineers. Here are some tips for ensuring long, happy and productive relationship with your R&D engineers.

R&D Tax Credits Fund Hiring

R&D Tax Credits can offset the cost of salaries for research engineers. To qualify for R&D Tax Credits, your company must be developing or improving a product or process. And your work should involve the hard sciences (e.g., engineering, computer science, biology, etc.).

The U.S. government created the R&D Tax Credit in 1981 as a way of encouraging innovation. The credit provides a dollar-for-dollar offset of income taxes, based on the amount of qualified research expenditures a company has.

In addition to the federal credit, many states have R&D credits of their own that mirror the federal credit’s requirements and provide even more tax benefits.

Private Industry Faces Shortage

According to the U.S. Bureau of Labor Statistics (BLS), the United States will need approximately 1 million more STEM (science, technology, engineering and math) professionals than we will produce in the next 10 years, if we are to retain our historical preeminence in science and technology.

A study from BLS shows that the academic sector is generally oversupplied with engineers, while the government sector and private industry have shortages in specific areas such as software developers, petroleum engineers, data scientists, and those in skilled trades.

The looming wave of Baby Boomer retirements is poised to make things worse.

These shortages have real implications for commercial and industrial product research and development.


When Reshoring, Think Tax Breaks and Costs

What Makes a Good Research Engineer?

R&D engineers are everything you’d expect from a stereotypical engineer (technically savvy, problem solvers), and more. They’re also:

  • Creative, out-of-the-box thinkers;
  • Able to communicate effectively with sales and marketing types, which is particularly important in a manufacturing setting where marketability of new solutions is key;
  • Focused on customers and solutions, in addition to technology. They are attuned to the softer side of R&D, which includes usability, marketability, features and benefits.

Once you’ve found that person — or cultivated her from within your organization — you better hold on to her.

Foster Happy & Engaged Employees

The key to retention is cultivating happy and engaged employees.

It’s challenging but worth the effort, especially for the keepers of your innovation pipeline.

Recruiting is difficult and expensive, and turning a new hire into a fully assimilated and functioning employee in a complex R&D role takes time – about six months, according to a recent article in Harvard Business Review. But those coming into a challenging job from outside the company may take a year to become fully functioning contributors. Don’t risk losing that investment to a competitor.

Many organizations assume that engineers don’t have a career development mindset, so they often fail to provide them with a clearly defined and motivating professional development path. This puts companies at risk of losing employees in whom they’ve invested significant time, money and intellectual capital.

Offer a development path for engineers with the potential to grow into an R&D role, as well as those in R&D engineering today. Most importantly, don’t wait for them to come to you.

By the time your employees are asking for growth opportunities, you are at risk of losing them. Employees stuck doing one thing and one thing only may feel they have no growth potential with your organization. For some engineers that’s okay, but innovative thinkers (the ones you want for R&D) need more.

Encourage employees to look beyond the next few years. Show them how they can grow in salary and position. High-potential engineers will grasp those opportunities for growth. If they don’t find them within your organization, they will look elsewhere.

Organizations are especially at risk of losing engineers when they go back to school for MBAs or advanced engineering degrees. At the advanced degree level, their eyes are opened to the potential for career growth or even entrepreneurship. Those professionals either have to look up (within your organization) or look outside for growth opportunities.

The Big Takeaway

Hiring R&D engineers is expensive and time consuming.

Successful research engineers possess a rare mix of analytical and emotional skills that are necessary for innovation. Once you’ve recruited them, do everything you can to cultivate and retain them.

R&D Tax Credits can offset the salary investment, but the intangibles (training, development and intellectual capital) make retention even more important.


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