To help jumpstart business hiring and investment, Congress passed and the President signed, the Hiring Incentives to Restore Employment (HIRE) Act. The HIRE Act provides for payroll tax forgiveness and an employer income tax credit of up to $1,000 for qualified new hires. This provision may provide significant benefits to employers who previously laid off employees as a result of a lack of work or due to a change in the seasons. Employers who hire certain previously unemployed individuals may be eligible for a payroll tax holiday for the remainder of 2010 with regard to the employer portion of the 6.2% OASDI share of the FICA tax.
This provision applies to most employers who hire individuals that: (1) begin employment after February 3, 2010, and before January 1, 2011; (2) certify by completing IRS Form W-11 he or she has not been employed for more than 40 hours during the 60-day period ending on the date the individual begins employment with the current employer; (3) is not employed to replace another employee unless that other employee separated from employment voluntarily or for cause (which includes layoff due to lack of work or a change in the seasons); and (4) is not related to the employer in a way that would disqualify him or her for the work opportunity credit. Broadly speaking, this precludes persons who are family members and certain shareholders or equity owners from qualifying for the payroll holiday.
An employer may qualify for the payroll tax holiday for hiring an otherwise qualified individual to replace an employee who was terminated for cause or due to other facts and circumstances, such as where a factory was closed for lack of demand or the construction or landscaping crew was disbanded due to a change in the seasons. When the factory reopens or when construction or landscaping restarts, the payroll tax holiday can be claimed both for rehiring old workers and hiring new workers. However, an employer will not qualify if it terminates an employee without cause in order to claim the payroll tax holiday for hiring the same or another employee.
The relief applies to wages paid beginning on March 19, 2010 and ending on December 31, 2010, subject to certain rules related to the first calendar quarter of 2010 and coordination with the Work Opportunity Credit (although initial analysis suggests that in most cases the payroll tax holiday will be of more benefit than the Work Opportunity Credit.)