HIRE Act May Bring Relief to Unemployed California Workers
On March 18, 2010, President Obama signed into law the Hiring Incentives to Restore Employment (HIRE) Act. The bill is designed to encourage job growth by providing tax incentives to businesses willing to hire unemployed workers. These incentives take two forms: (1) social security tax exemptions and (2) tax credit.
• Social Security Tax Exemption
The HIRE Act exempts employers from paying the 6.2% social security tax for new employees hired after February 3, 2010 and before January 1, 2011. However, the new employee must have been previously unemployed or worked less than 40 hours per week for at least 60 days and does not replace another employee. The bill encourages businesses to hire early in the year because savings accrue as payroll is processed. The tax relief applies to all employers, including non-profit organizations and universities, and there is no cap as to the total amount of tax relief that can be claimed by an employer.
• Tax Credit
For each qualifying new employee, the employer may claim an income tax credit. The amount is either $1,000 for each employee hired after February 3, 2010 and retained for at least a year, or 6.2% of wages paid to the qualifying employee over the period of a year, whichever is less. Unemployed workers should be aware that employers may ask them to sign an affidavit indicating they have not been employed or employed for no more than 40 hours per week during the 60 day period prior to beginning their new employment. This is a requirement under the new legislation.
Thankfully, in IR-2010-33, the IRS announces it is in the process of developing a standard form that can by used by all employers to obtain the required statement.
According to IRS Commissioner Doug Shulman, these tax incentives will “offer a much- needed boost to employers willing to expand their payrolls, and businesses and non-profits should keep these benefits in mind as they plan for the year ahead.” The tax benefits primarily benefit those employers who are filling new jobs, but the benefits are also available to employers who are filling existing positions where the former employee left voluntarily or for cause.
President Obama asserted that this new bill will “promote a strong, dynamic private sector” that will drive job creation. He stated that “…our economy is now growing again and we may soon be adding jobs instead of losing them. The jobs bill I’m signing today is intended to help accelerate this process.” He further indicated that although the bill was necessary, it is only one in a series of bills designed to encourage job growth.
While Democrats champion the HIRE Act, the bill is not without criticism. Many Republicans believe the bill will have little impact on unemployment. As reported by CBS News, there are estimates of roughly $250,000 new jobs by the end of the year, but “the Associated Press notes that this is a relatively insignificant figure in light of the fact that 8.4 million jobs have been lost in the recession.”
While the ultimate effect of the bill remains to be seen, unemployed California workers should take solace in the fact that strides are being made toward new job creation. If you are an unemployed worker and have questions about your unemployment status or concerns regarding inquiries made by potential employers, do not hesitate to contact an experienced California labor law attorney.