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HIRE Act Provides Tax Benefits to Employers that Hire and Retain Unemployed Workers

Posted on March 23, 2010 by Littler Mendelson

Incentive Street Sign.jpgOn March 18, 2010, President Obama signed into law the Hiring Incentives to Restore Employment (HIRE) Act, a measure that provides certain "qualified" employers with limited tax breaks and financial incentives for hiring unemployed workers.  The highlight of this law is a provision exempting certain employers from paying their share of 2010 OASDI (Social Security) taxes on any new hire who has been without full-time employment for at least 60 days.  The maximum tax break an employer could gain per employee under this provision would be $6,621, or 6.2% of total wages paid in 2010 up to the $106,800 FICA wage cap.  This tax "holiday" does not apply to the component of FICA tax covering the Medicare Hospital Insurance (HI) contribution, or other state and federal tax obligations.

Another provision impacting employers is the Business Credit, which provides an income tax credit of up to $1,000 for every new employee hired under the HIRE Act and retained for 52 weeks.  An employer that is already benefiting from the Work Opportunity Tax Credit (WOTC), however, may need to opt out of the HIRE credit if the WOTC benefits are greater.  The HIRE Act also gives employers covered by the Railway Retirement Act (instead of FICA) a comparable tax holiday and retention arrangement.

As with any new law affecting employer taxes, the HIRE Act is somewhat complex in its administration.  For a more detailed discussion of this new law and its tax implications, and guidance on how employers can best take advantage of these benefits, continue reading Littler's ASAP: HIRE Act Signed Into Law -- What it Means to Employers by GJ Stillson MacDonnell.
Tags: Hiring Incentives, Unemployment
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