The Hiring Incentives to Restore Employment (HIRE) Act, is aimed at economic recovery and enacted in to law on March 18, 2010 However, employers need to act quickly; this is a time-limited program that expires December 31, 2010.
The Instant Savings (Payroll Tax Exemption):
The HIRE Act of 2010 provides a payroll tax incentive for employers to hire workers who have been unemployed for 60 days or more, which in turn promotes job growth. Employers, who hire unemployed workers this year, qualify for a 6.2% payroll tax incentive that, in effect, exempts them from their share of Social Security taxes on wages paid to workers after March 18, 2010. The reduced tax withholding has no effect on the employee’s future Social Security benefits, and employers will still need to withhold the employee’s 6.2% share of Social Security taxes, as well as income taxes.
The Rebate (Retention Bonus):
In addition to the 6.2% Social Security tax savings, businesses can claim an additional general business tax credit, up to $1000 per worker, when the new-hires are retained for at least one year. This tax credit is taken when the business files their 2011 income tax return. For each unemployed new-hire, that completes 52 consecutive weeks of employment, the employer can claim the income tax credit equal to, the lesser of $1000 or 6.2% of the wages paid during the 52 weeks. This $1,000 maximum credit is equivalent to about $16,130 in wages per new-hire. Therefore, if an employer has 10 new hires that are paid at least the minimum of $16,130 each, the income tax credit would be $10,000.
Restrictions Apply:
As with all sales, there are certain restrictions and regulations that apply. To obtain this instant savings and rebate, first, qualified new-hires:
1. Must be unemployed for 60 continuous days or more, prior to being hired; or, if working part-time, could not have worked more than 40 hours total during the 60 days prior to being hired.
2. Must sign and Affidavit (Form W-11), which is their statement to item number one.
3. Must not be a relative of the owner of the company
Second, employers:
1. Must hire qualified new-hires between February 3, 2010 and January 1, 2011
2. Can receive the tax credit when replacing a current employee, but only when that employee terminates voluntarily or is terminated for cause.
3. Cannot claim the payroll tax exemption and the work opportunity tax credit (WOTC), but can claim both the WOTC and the retention bonus.
The HIRE Act, can provide a huge savings to mid-market and smaller companies.
Lisa Pettigrew
Human Resources Manager
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