New Federal HIRE Act May Not Increase Employment

Posted by in Federal News, Recruiting, Hiring and Retention | Comments Off on New Federal HIRE Act May Not Increase Employment

When the federal Hiring Incentives to Restore Employment Act (HIRE) became law, its purpose was to provide tax incentives to employers to hire more of the high number of unemployed. Employers (including nonprofit organizations) will be exempt from paying their share of Social Security taxes on wages paid from March 19 through Dec. 31 for new employees hired after Feb. 3, 2010. An important fine-print point is that, to qualify, those new hires must have worked 40 hours or less during the 60 days prior to their hire date. Employers also receive a $1,000 credit on their business income tax returns if they keep the new employees for at least one year.

Despite the best of intentions to help the unemployed, business owners and the general economy, the HIRE Act may offer incentives that won’t result in more employers hiring more employees. According to one small-business owner, his decision to hire more workers is not dependent on what he characterized as a “little kickback” from the government. Even as a small-business owner, he clearly understands that labor is also a commodity, and is ruled by the law of supply-and-demand.

A spokesperson for a huge global company echoed that thinking when she also stated that the HIRE Act wouldn’t have much effect on the company’s hiring practices. She said the volume of work is what drives the need to hire more workers. She added that the company is much more likely to expand its workforce because of retirements and typical employee turnover.

Of course, the federal government’s best intentions also include additional information that must be provided by employers on a revised W-2 tax withholding form and the new W-11 form, which eligible employees must complete, so employers can claim the benefit.

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