Thoughts on the “Hiring Incentives to Restore Employment” (HIRE) Act

Rebecca Woods

SPHR- Vice President, Human Resources

Doherty Employment Group

dohertyemployment.com

Topic: Human Resources

Christmas may have come very early this year for companies who are hiring.  The President signed the HIRE Act into law on March 18, 2010.  The law provides several different opportunities for businesses to take advantage of incentives for hiring employees who meet the following criteria:

Qualified individual:

• Must be hired after February 3, 2010 and before January 1, 2011 and have been employed for fewer than 40 hours within the 60 day period immediately preceding the date of hire
• Cannot be hired to replace an existing employee unless that employee was terminated as a result of a voluntary separation or terminated for cause
• Can be someone who was laid off previously by the same employer as long as they have not worked for more than 40 hours in the previous 60 day period immediately preceding the date of hire
• Can be someone who was in school during the previous 60 day period and therefore had not been working
• Cannot own more than 50% of the business and cannot be related to the qualified employer or to anyone owning 50% or more of the business 
• Cannot be an independent contractor paid via Form 1099
• Household employers cannot claim this new tax benefit

Qualified employers*: are defined as:

• Any non-governmental entity hiring in the United States
• Public and private colleges and universities

*Excludes other federal, state or local government employers

Benefits:

• Base Credit - Employers are forgiven the Social Security tax (6.2%) due on wages paid to the employee up to a maximum wage of $106,800 on wages paid between March 19 and December 31, 2010.
• Bonus Credit - Employers are given a bonus credit for employees who remain employed for a year.  Credit is the lesser of: $1,000 or 6.2% of the wages paid to the employee in 2010.
• The employer's Medicare tax (1.45%) is NOT forgiven.
• The maximum benefit that can be derived is $7,622 per employee, including the bonus payment.

The new law requires that the employer obtain a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period.  Employers claim the payroll tax benefit on the federal employment tax return they file with the IRS. Eligible employers will be able to claim the new tax incentive on their revised employment tax form for the second quarter of 2010. 

As with everything, the "gift" from the federal government in the form of a FICA tax credit will come at a future expense, notably, at the eventual expense of the social security fund.  However, today may not be the day to look a gift horse in the mouth.