By Hema Mason
The federal Hiring Incentives to Restore Employment (HIRE) Act, also known as the “Jobs Bill,” was signed into law on March 18th by President Obama. Recognizing that Americans were greatly concerned about the current state of the job economy during his presidential campaign, President Obama took time from the ongoing Health Care Reform debate to address this situation with the HIRE Act. The law is designed to serve two purposes: job creation and retention for currently unemployed workers, and tax breaks for employers, especially small employers.
The law sets aside $38 billion to accomplish its goals. Roughly $18 billion goes to employers in the form of tax breaks, which they can take when they hire anyone who has been unemployed for at least 60 days, and tax credits when that person works for at least 52 weeks.
Employers will not have to pay the 6.2% Social Security payroll tax they would normally pay when they hire such an employee, for the remainder of 2010. This feature means that the earlier the company hires additional employees, the greater tax benefit it receives. Additionally, there are no caps or limits in place for the Social Security tax benefit. Employers also receive a $1,000 tax credit for employees who remain employed for at least 52 weeks. Unlike the Social Security tax benefit, however, the maximum income tax credit is $1,000.
Employers can realize these benefits for eligible new employees they hire after February 3, 2010 and before January 1, 2011. The law itself took effect when the President signed it on March 18.
Twenty billion dollars of the federal money is designed to go to highway and transit projects, which the White House says will in turn create about 250,000 new jobs. Tax breaks will also be given to businesses that purchase needed equipment.
While there is some anticipation following the passage of this law, there is also debate over whether the law is enough to jump-start the economy and move it in the right direction. Employers still devastated and struggling from the recession may feel that hiring additional employees still does not make business sense for them, given their lack of revenue. Further, with so many questions still to be answered about the passage of the Health Care Reform, employers are uncertain about what mandates will be required of them and will hesitate to hire new employees for that reason. For those employers, the benefits of the Jobs Bill will simply not be enough to change their hiring plans.
On the other hand, employers who are rebounding from the recession, rebuilding their companies and who have already made the decision to hire additional employees may reap substantial benefits. For them, hiring new employees will be cheaper following the passage of HIRE than before. There will undoubtedly also be those employers who are on the fence regarding new hiring; for them the Jobs Bill may actually spur hiring activity. The $64,000 question will be how many of those latter employers there are out there right now.
community Service means Business!
24 March 2010
The Federal Hiring Incentives to Restore Employment (HIRE) Act
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