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.