The Hiring Incentives To Restore Employment Act ("Hire Act") Represents Significant Benefit For Employers

On March 18, 2010, the Hiring Incentives to Restore Employment Act (“HIRE Act”) was enacted in response to the continuing high national unemployment rate. For employers there are two (2) prominent provisions. The first is payroll tax forgiveness and the second is a worker retention credit. The statute applies to private employers (and some government employers).

The Hire Act provides incentives for the hiring of unemployed individuals [who must have worked forty (40) hours or less during the sixty (60) days preceding the new employment] after February 3, 2010 and before January 1, 2011. The statute (PL 111-147 – HR 2847) provides, in pertinent part:
(3) QUALIFIED INDIVIDUAL: For purposes of this subsection, the term ‘qualified individual’ means any individual who:

  1. begins employment with a qualified employer after February 3, 2010, and before January 1, 2011,
  2. certifies by signed affidavit, under penalties of perjury, that such individual has not been employed for more than forty (40) hours during the sixty (60) day period ending on the date such individual begins such employment,
  3. is not employed by the qualified employer to replace another employee of such employer unless such other employee separated from employment voluntarily or for cause. 

To qualify the employee must not be a “related party.” A related party is a person directly or indirectly related to a 50% or more owner of a corporation or to a person owning more than a 50% capital/profits interest in a non-corporate employer.

Private sector employers hiring a “qualified individual” will be exempt from theSocial Security employer payroll tax on the individual.  As an employer’s Social Security payroll tax is currently 6.2% of the first $106,800 of wages, the savings to a company can be substantial.

The Hire Act also provides that an employer retaining a qualified individual for fifty-two (52) consecutive weeks will be eligible for a tax credit referred to as the hire retention credit.  The retention credit is equal to 6.2% of wages paid to the qualified individual for the fifty-two (52) consecutive weeks of employment capped at $1,000.  An employer will not receive the hire retention credit if the wages of the employee in the second half of the fifty-two (52) week period are less than 80% of the wages earned in the first half of the period.  The hire retention credit will be claimed on the employer’s 2011 income tax return.

An employer will not be eligible for either the payroll tax exemption or the hire retention credit unless the qualified individual signs an affidavit, under penalty of perjury, attesting to their being unemployed for the sixty (60) day period preceding employment.  The Internal Revenue Service has developed a form [W-11, Hiring Incentives to Restore Employment (HIRE) Act Employer Affidavit] but an employer may use a similar statement if it contains the information provided in the W-11 form.