President Obama signed the “Jobs Bill” into law on March 18, 2010. Part of the Jobs Bill is the HIRE or “Hiring Incentives to Restore Employment” Act. The HIRE Act grants employers a tax exemption for their 6.2 percent Social Security (or FICA) payroll contribution for every new qualified employee hired between February 3, 2010, and before January 1, 2011, for wages paid beginning March 19, 2010.
A qualified employee is someone who has been unemployed for 60 days prior to accepting employment. Being “unemployed” means having worked less than 40 hours during the preceding 60-day period. To be qualified, the employee must not be hired to replace another employee unless the employee quit voluntarily or was fired for cause, which includes employees who were terminated as part of downsizing. Finally, a qualified employee must not be “related” to the employer as defined in the U.S. Tax Code.
In addition to the 6.2 percent exemption, employers may earn an income tax credit that is equal to 6.2 percent of paid wages, or up to $1,000, for every new qualified employee who is retained for 52 consecutive weeks. This credit will be taken on the employer’s 2011 income tax. To ensure eligibility for the income tax credit, the employer must ensure that the wages paid to any qualified employee during the last 26 weeks are at least 80 percent of what was paid to that employee during the first 26 weeks.