Netchex – Due to the recent passage of the Hiring Incentives to Restore Employment (HIRE) Act, Netchex has added the ability for our clients to designate eligible employees as “qualified individuals” as defined by the new legislation. The HIRE act allows for “qualified employers” to be exempt from paying their portion of Social Security on wages paid to “qualified individuals” after March 18, 2010 if designated.
The 6.2% Employer Social Security Tax exemption applies to previously unemployed individuals hired after February 3, 2010 who have worked less than 40 hours during the 60-day period prior to employment and whose 2010 earned wages after March 18, 2010 and before January 1, 2011 do not exceed $106,800.*
- Employers can save the 6.2% Employer Social Security Tax, whether they hire a $40,000 worker or a $90,000 worker. Employers, including nonprofit organizations, and colleges and universities, would not have to wait until 2011 to benefit from this tax relief because savings would accrue with each payroll processed.
- The legislation also encourages businesses to hire workers earlier in the year because the tax benefit will be greater. For example, a $60,000 worker hired on April 1, 2010 saves an employer about $2,800 in taxes. Delaying the hiring until June 1 would reduce the savings to about $2,200.
- This exemption has no cap or limit as to the total amount of tax benefits that can be claimed by an employer. Employers can save up to $6,622 per qualifying worker, whether they hire one worker or hundreds of new workers.
Employers will receive an income tax credit which is either $1,000 for each qualifying worker hired after February 3, 2010, and employed for at least 52 consecutive weeks, or 6.2% of wages paid to the qualifying worker over the 52-week period, whichever is less. Wages during the last 26 weeks must be at least 80 percent of wages paid for the first 26 weeks.
- Any new hire must certify “by signed affidavit,” under penalties of perjury, that he/she has “not been employed for more than 40 hours during the 60-day period ending on the date such individual begins such employment.”
- Neither the 6.2% Employer Social Security Tax exemption nor the retention tax credit is permitted if a person is hired to replace another employee “unless such other employee is separated from employment voluntarily or for cause.”
The Hiring Incentives to Restore Employment (HIRE) Act can be reviewed here.