Grappling with the Federal HIRE Act

According to a question posted on SHRM, can companies with a predominantly part-time or seasonal workforce participate in the most recently enacted Federal Hiring Incentives to Restore Employment (HIRE) Act? SHRM clarifies; the act does in fact cover these workers as it does not specify the amount of hours previously unemployed new recruits must currently work in order to qualify. In the “newness” of the act, many questions such as the above have come up, so let's look at a brief overview of the act, taken from the Federal HIRE Act White Paper, one more time:

What is The Federal HIRE Act?
On March 18, 2010, President Obama signed into law the Hiring Incentives to Restore Employment (HIRE) Act. The purpose of this act is to accelerate the hiring of unemployed workers.

What does this act mean for an organization?
Organizations may be eligible for a payroll tax exemption and additional tax credits. The HIRE Act also allows organizations to retain the employer portion of the Social Security tax, which is normally remitted.

Understanding the Social Security Tax Exemption
The 6.2% Employer Social Security Tax exemption applies to previously unemployed individuals hired after February 3, 2010. Eligible employees must have worked less than 40 hours during the 60-day period prior to employment and must have earned less than $106,800 between March 18, 2010 and January 1, 2011.

This applies to multiple employer types, including non-profit organizations, educational institutions, and corporations. The 6.2% Employer Social Security Tax benefit is recognized before 2011; i.e.: savings are accrued with each payroll processed.
Employers can save up to $6,622 per qualifying employee and there are no limits to the number of employees who can be covered per organization.
The sooner the better: because tax benefits are recognized with each processed payroll, the sooner these hires are made the greater the tax incentives are.

Understanding the Income Tax Credit

If qualifying employees are with the organization for at least 52 consecutive weeks, employers are eligible for an income tax credit. This amounts to 6.2% of the wages paid to the qualifying worker (over the 52 week period) or $1,000, whichever is the lesser amount. Wages during the last 26 weeks must be at least 80 percent of wages paid for the first 26 weeks. Stipulation:

If the new employee is replacing another employee, the organization is not eligible for the exemption and credit “unless such other employee is separated from employment voluntarily or for cause.”
New hires must sign an affidavit asserting that he or she has “not been employed for more than 40 hours during the 60-day period ending on the date such individual begins such employment.”

The forms are as follows:

Form W-11 - Each employee must fill out this affidavit, which must be kept on file and available for review from employee hire date.
Form 941 - After an employer receives the W-11 form from all qualifying employees, the employer can then file Form 941 in order to receive their credits.

Additionally, employers are eligible for tax benefits when returns are filed. For more detailed information, click here.

Removing the political fervor that any government act may provoke, how do you think the Federal HIRE Act will affect hiring in 2010? 2011? Will Retailers, Manufacturers, Non-profits, corporations and essentially all other organizations take advantage of the financial benefits that are expected to ensue? Are the incentives significant enough to spark hiring initiatives?

I personally think yes, but only if organizations have the proper tools to adequately support the necessary steps that each employer must complete, such as document management. If a company has an easy way to store this information without the fear of it being lost or misplaced in a financially feasible way, than employers will be more likely to hire.

If this process was automated, employers wouldn’t have to worry about added expenses accumulated from physically storing employee documents, data entry and the addition of yet another departmental task.; thus, increasing the likeliness for companies to participate. Because of this, I also think companies will begin relying more heavily on technology solutions to simplify and facilitate the process of collecting and filing the forms and claiming the incentives.

It will be interesting to see how the act will affect unemployment in the long run. What do you think?

Also, for a more in-depth evaluation of the Federal HIRE Act, download this FREE white paper.