COVID-19 Vaccine Tax Credits and Other Ways the Vaccine Affects Your Restaurant Business

COVID-19 vaccines are all over the news.

There have been lots of different incentives from across the United States to encourage more Americans to become vaccinated. There are reports of free beer, doughnuts, chances to win a new vehicle—all to add a bit of incentive to get the COVID-19 vaccine.

But how does the vaccination rollout affect your restaurant business?

Many employers were already making their own choices about how to provide paid leave for restaurant employees getting vaccinated or those who are recovering from any possible side effects.

But significantly, the federal government has recently announced tax credits for businesses providing paid leave for employees getting COVID-19 vaccinations.

Earn tax credits for providing COVID-19 vaccination paid leave

The Internal Revenue Service and the Treasury Department released a plan that allows small and mid-sized businesses to claim a new kind of tax credit.

According to the April 21, 2021 IRS press release, “Eligible employers, such as businesses and tax-exempt organizations with fewer than 500 employees and certain governmental employers, can receive a tax credit for providing paid time off for each employee receiving the vaccine and for any time needed to recover from the vaccine. For example, if an eligible employer offers employees a paid day off in order to get vaccinated, the employer can receive a tax credit equal to the wages paid to employees for that day (up to certain limits).”

If your business has fewer than 500 employees, you are an eligible employer. You can receive an employer tax credit for providing paid time off for employees to receive the vaccine. This also covers any time employees need to recover from side effects of the vaccine.

These tax credits are part of the $1.9 trillion American Rescue Plan Act of 2021, which was finalized in March. The credits are available from April 1, 2021 through September 30, 2021.

If you are interested, you can find more information from the IRS here.

The COVID-19 vaccine and your restaurant business

It’s been a difficult year for the restaurant industry. For both restaurant employers and restaurant employees, many are looking forward to returning to a “new normal.”

At the beginning of the vaccine rollout, eligibility varied by state and locality. However, vaccines are now available to all adults above the age of 16, nationwide.

As you consider scaling up your restaurant operations now that local indoor dining restrictions are becoming loosened, you may have questions about how the vaccine can affect your business.

If your employees have questions about vaccinations, you can point them to resources like the CDC’s Essential Workers Vaccine Toolkit.

Here are a few of the most common questions about restaurant businesses and the vaccine.

Can Restaurants Require All of Their Workforce to be Vaccinated?

Legal experts appear to agree that a COVID-19 vaccination requirement can be allowed under current federal employment law.

However, employers do need to prepare to make exceptions, either for reasonable accommodations or because an employee is in a certain group classification protected under the law.

You may be able to legally mandate vaccinations for your company, but the real question is whether you should. Encouraging or recommending a vaccination is a different strategy than mandating it. If requiring your employees to have a vaccination may affect your morale or staffing, you may want to examine all of your possible choices.

With all these legal and practical issues to consider, this area of employment law is still developing and changing. There also may be state or local laws in your jurisdiction that can affect your decision.

There are many resources available for employers, such as this fact sheet from the Restaurant Law Center of the National Restaurant Association. However, be sure to talk to your legal counsel about the best strategy for your particular business in your locality.

No matter what you decide, you should be working to draft your policy and communication about it now. The more open and clear you can make your conversation, the better.

What if You Mandate Vaccines and an Employee Refuses?

Even if you decide to require vaccines, you may experience resistance from some employees.

All reasons may vary. If an employee refuses because of a disability or medical condition or a “sincerely held” religious belief, under federal law you will need to consider reasonable accommodations.

Other employee objections may be protected (at least the initial objection) under the National Labor Relations Act, Occupational Safety and Health Act, or other state laws.

Truthfully, the legal landscape for mandating employee vaccinations is quickly shifting, with some jurisdictions limiting or even prohibiting vaccination requirements. The best course of action for your business is to consult with legal counsel and see what options are available to you.

Vaccines and the Restaurant Staffing Crisis

The current crunch for labor in the restaurant industry has made vaccines an even hotter topic for operators. Although there isn’t likely only one cause for the labor shortage, many experts do point toward workers still having health concerns related to the pandemic.

The vaccine has the potential to protect workers as they return to the restaurant industry. Especially as restrictions on dine-in and restaurant capacity start to lift, and workers are interacting with more guests, vaccines may be a critical part of returning to full staffing in the restaurant industry.

COVID-19 Vaccines Driving the Return to Full-Capacity Dining

Some local rules take vaccines into account for restaurant capacity rules.

For instance, at the end of March 2021, the state of Illinois passed a new rule that “anyone with proof of full vaccination prior to an event or outing does not count against the COVID-19 related capacity limits – which are still in place across the state.”

Similarly, in California, maximum capacity at restaurants in counties within the “moderate” tier is 50% or 200 people, whichever is less. However, capacity may increase to 75% if all guests show proof of a negative COVID-19 test or full vaccination.

These rules will continue to fluctuate and change as the vaccine rollout progresses. However, it is sure that as businesses and groups figure out how to reopen safely, vaccines are playing a critical role in determining what the timeline looks like.


It seems like news about the COVID-19 vaccine rollout is changing at light speed, with new developments coming out every day. However, staying on top of the latest updates can help your business stay ahead of everything related to restaurant staffing and employees.

R365 HIRE makes it easy to attract, hire, onboard and retain the best employees for your restaurant group. Request a free demo of R365 HIRE today.

Ready to learn how Restaurant365 can help you streamline your back office and discover profits?

Schedule a demo today.