Basics of 2010 HIRE Act

March 18, 2010, the Hiring Incentives to Restore Employment (HIRE) act was enacted into law. Today I’d like to share with you the details of HIRE and how it might impact you.

First, employers who hire a new employee between February 3, 2010 and Jan 1, 2011 are exempt from paying their share of the payroll tax (the 6.2% FICA/Social Security withholding) effective with the employees first paycheck after March 18, 2010.

Important to note: for this to apply, the newly hired employee must have been out of work for 60 days prior to being hired with an allowance for a total of 40 hours work over that period. This does not impact the wage history for the employees’ social security benefits.

The second provision is for an up to $1000 tax credit for retaining those newly hired employees for over a year, provided their second 6 month period wages are at least 80% of the first 6 months.

As these tax breaks are meant to raise the employment level, a new hire may not fill an existing position unless that employee left on their own or was fired with cause. Hiring a family member or any relative also doesn’t qualify for this break.

This may seem a trivial amount, a total $3500 or so for a $40K/yr worker. But consider that when car companies are looking to stir up business, it’s small concessions, zero percent financing or a couple thousand dollars cash back that helps to move that $30,000 car. As it appears the economy’s bottom has already passed, this new provision may provide the boost some employers need to hire on that next worker.

Comments (7) Leave your comment

  1. Why doesn’t TurboTax Business 2010 let you claim this tax credit? Why is this credit not supported, if you’re writing about it here?

  2. I am a substitute teacher hired through a temp agency in 2008. I don’t work in the summer because school is out. That agency has asked me to sign a W-11 stating my hire date as being in 2010. Is this legit? I feel like I would be perjuring myself for their benefit. They say it is just another form they need on file and I have to sign it. What do I do???

  3. The Bill doesn’t spesify if the newly hiried employee needs to be hired for full time or part time? In our line of work, most people who are working 27 hrs are full time (due to traveling). And in teaching industies, I think that 22 hrs is considered full time.

    So if the perpon worked 40hrs in 2prior mo., and is hired as a part time, does the company get a tax brake?

    Thank YOU!

  4. Is a seasonal employer who consistently terminates employees every November and hires (some of the same former employees) every April able to take this “holiday” from social security?

  5. No, Phil, the government is trying to incentivise companies to create new jobs, and place people in those positions who have been out of work, or not working full-time for at least two months (in case you hadn’t noticed, the economy is kinda bad and unemployment is near 10%).

    As a business owner, I applaud this measure, and the tax break will likely allow me to create a new position within my company.

    Taxpayers aren’t paying for this, this just cuts businesses a break on payroll taxes. And as someone who pays about 30-35% of total payroll dollars in taxes already, I’m all for it.

  6. So the taxpayers have to pay to hire someone who hasn’t worked 40 hours for two months? So the incentive is for employers to hire people who aren’t even trying to do some work for 2 whole months? And people are rewarded for not working for 2 months?

    None of this makes any sense. The government needs to stop taking our money and just let businesses make business decisions.

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