On March 18, 2010, President Obama signed into law the Hiring Incentives to Restore Employment Act (“HIRE Act”), which is intended to “encourage businesses to hire and help put Americans back to work.”
First and foremost, the HIRE Act amends the 1986 Internal Revenue Code to exempt employers from paying a Social Security excise tax on the wages of newly hired qualified employees.
This exemption applies to any non-governmental business or organization including public institutions of higher learning, for wages paid between March 19, 2010 and December 31, 2011. Under the HIRE Act, the exemption would apply to any “qualified employee” who: (1) is hired after February 3, 2010 and before January 1, 2011; (2) has not worked more than a total of 40 hours in the two months prior to being hired; and (3) was not hired to replace an employee terminated from employment without cause. However, employers have the right to decline this exemption.
Additionally, the HIRE Act provides a maximum $1,000 tax credit to the employer for each “retained worker.” A retained worker is any individual who: (1) meets the “qualified employee” requirements described above; (2) is employed for at least 52 consecutive weeks; and (3) whose wages during the last 26 weeks of the taxable year are equal to at least 80% of the wages earned during the first 26 weeks of the year.