Details on the new HIRE Act signed by President Obama
President Obama recently signed the Hiring Incentives to Restore Employment (HIRE) Act, containing more than $17 Billion in tax credits designed to stimulate employment. The Act also includes $20 Billion for highway and transit infrastructure programs as well. One of the most important provisions for businesses is a tax credit for hiring from the ranks of the unemployed.
Under the Act, when an employer hires a “qualified employee” the employer is excused from paying the normal Social Security match of 6.2% of the wages in 2010. What is a qualified employee you ask? A qualifying employee is one who
- is hired after Feb. 3, 2010 and before Jan. 1, 2011;
- is not hired to replace another employee;
- is not related to the employer;
- and certifies under penalty of perjury that he or she has not been employed for more than 40 hours during the 60-day period ending on the date that employment begins with the new employer.
This incentive can save the employer over $6,000 annually for each qualified employee that is hired. Under certain circumstances, the employer who hires a new employee, and retains their services for 52 weeks, may also be able to receive an additional tax credit available on the 2011 tax return equal to the lesser of $1,000 or 6.2% of the wages paid to an employee for those 52 weeks.
These tax incentives are meant to spur job creation, especially for small businesses who are undecided about whether to begin to ramp up expansion efforts in light of recent economic challenges.
Here is the press release from the Ways & Means Committee Chair describing this bill.
Thanks for the article. The 40-hour threshold actually seems to punish unemployed workers who have tried to work in part-time, contract or temp positions during their unemployment. If they have exceeded 40 hours in short-term employment, but are currently unemployed, they are less attractive to a potential employer because they would not qualify for the credits. Going forward, this creates a disincentive for unemployed workers to seek or accept temp or contract work. I think a better test of eligibility would be that 1) the worker is currently unemployed, and 2) positions of fixed duration (temp, contract etc.) should be exempt from the 40-day threshold.
For example, an individual who has been totally unemployed for a year takes on a one-week assignment within the 60-day period. When the one week is over, the person is again unemployed, by any standard, and should not be considered ineligible. What do you think? Thanks.
I think you raise a good point. Thanks for commenting.
You are correct. It makes the entire bill unattractive since most companies are only hiring temp works now if they can.
I work for a staffing firm that employs temporary workers and this act does actually benefit us because are able to save money on the people we put to work.
Most people do not list very short term temp assignments on their resumes so in many cases an employer may not initially know if an employee makes is eligible.
I just read on irs.gov that new hires replacing former employees can also qualify for this tax break if the former employee left voluntarily or was terminated for cause. I think this is a crucial point for employers to be aware of.
Does anyone know what the minimum age requirements are? We are a YMCA that hire a lot of high school students who would qualify because this is their first job, or haven’t worked since last summer.
Does anyone know if the new hire is required to be a full-time, 40 hour or more employee in order to receive this tax break?