On March 18, 2010, President Obama signed the new Hiring Incentives to Restore Employment Act (HIRE) into law. This federal legislation creates brand-new tax breaks for hiring and retaining unemployed workers.

Employers will get a “Payroll Tax Holiday” for new hires and a potential tax credit bonus. 

Normally, an employer is required to pay its share of Social Security taxes on wages earned by employees. For 2010, the portion of the tax is 6.2 percent on the first $106,800 of wages.

Under the HIRE Act, an employer is effectively excused from paying its share of the 6.2 percent tax on wages received by "qualified employees." This exemption applies to wages paid after the date of enactment through the end of 2010. The maximum value for each qualified employee is $6,621.

For example, if a qualified employee is hired in March and receives $50,000 in wages in 2010, the employer saves $3,100 (6.2 percent of $50,000) in Social Security tax.

The new law defines a "qualified employee" as someone who meets all of these criteria: 

• Begins work after February 3, 2010 and before January 1, 2011.
• Has not been employed for more than 40 hours during the previous 60 days (ending on the start date).
• Was not hired to replace another employee unless the former employee separated from employment voluntarily or for cause.
• Is not related to the employer and does not own more than 50 percent of the business, either directly or indirectly.

A qualified employee may be either a full-time employee or a part-time employee. There is no minimum requirement for the hours worked. The payroll tax forgiveness does not apply to the 1.45 percent Medicare portion of payroll tax. Household employers (for example, hiring nannies) cannot claim the new tax benefit.

The exemption officially begins with wages paid in the second calendar quarter of 2010. Employers entitled to tax relief for the first quarter will be credited against their general Social Security liability for the second quarter.

In addition to the payroll tax forgiveness, an employer can claim a tax credit if it retains a qualified worker for a minimum of 52 consecutive weeks. The credit is equal to the lesser of: $1,000 or 6.2 percent of the employee's wages paid during the 52-week period. If the employee quits or is fired before the end of the one-year period, no credit is allowed.

Please click the following links for more information directly from the IRS: 

New Incentives for Hiring - New tax benefits aid employers who hire and retain unemployed workers.

 Questions? We Have Answers - Our Q&As will help you understand the details of the HIRE tax breaks.

 The HIRE Act - The language of the Act itself contains additional information for you.

Please click the link below to open a draft of the new HIRE Employee Affidavit.  This form will be permanently added to our forms page as soon as the final draft is released. 

Form W-11