Yes, you read it right. If you’re a business owner, the federal government will pay you to hire unemployed workers. By learning about the HIRE act, businesses that were wary of hiring new employees in this tough economic environment can rest easier.
The long government name is Hiring Incentives to Restore Employment or HIRE. The HIRE Act is the Obama Administration’s way of encouraging businesses to hire employees by giving them certain exemptions on payroll taxes.
Estimates show that it’s working. Businessweek reports that from February 2010 to June 2010, businesses hired 5.6 million new workers who were unemployed for eight weeks or longer. This creates $10.4 billion in money eligible to be paid in HIRE Act tax exemptions and credits.
What do I get?
First, you get a social security break. You can qualify for a 6.2% payroll tax incentive, which, in essence, exempts you from paying your share of Social Security taxes on wages paid to these workers starting on March 18th, 2010.
You also get a $1,000 tax break on your 2011 income tax filing or 6.2% of wages paid to the qualifying worker over the 52-week period, whichever is less providing you retain the employee for at least one year. Wages during the last 26 weeks must be at least 80 percent of wages paid for the first 26 weeks.
How do I Qualify?
Qualifying is surprisingly easy. This is a general business tax credit and the only verification needed is a signed affidavit (using the appropriate form) from the employee. If they do not tell the truth, you as the business owner are not liable.
The HIRE Act does not permit firing of current employees in order to hire employees for a tax credit. The law only allows replacement from attrition or firing for cause but many believe that the “for cause” part may give employers a way to replace higher cost employees with HIRE employees although the act prohibits it.
These tax advantages may not make hiring more employees a viable option for your company at this time but as the economy improves, these credits may be enough to make hiring worth it. When considering whether hiring an employee is viable, don’t forget that paying a current employee overtime each week make be just as expensive as hiring another and receiving the HIRE credit.