The Internal Revenue Service (IRS) has set up a website to provide employers with guidance on the payroll tax exemption and business credit provisions of the newly-enacted Hiring Incentives to Restore Employment (HIRE) Act.  This Act, among other things, relieves certain employers from their obligation to match the OASDI (Social Security) portion (typically 6.2% on the first $106,800 of wages for the calendar year) of FICA tax for certain workers hired after February 3, 2010, and before January 1, 2011, who have been substantially unemployed for at least 60 days. The IRS has created a draft model affidavit (Form W-11) (pdf) for employees to certify their un- or underemployment status, although employers may use their own form. This tax holiday covers wages paid to these employees on or after March 19, 2010 and only through 2010, and does not apply to the FICA tax portion covering the Medicare Hospital Insurance contribution nor to other state and federal employer tax obligations. The HIRE Act also creates a similar tax holiday for employers covered by the Railway Retirement Act instead of FICA. A business (tax) credit of up to $1000 is available to certain employers in 2011, with respect to employees retained for at least 52 weeks.

While promoted as a measure to increase employment, the HIRE Act’s intricacies and mechanics will principally benefit employers that now have open positions available, and the ability to fill them quickly. Additionally, given that under certain circumstances the Work Opportunity Tax Credit (WOTC) may provide more generous benefits to employers than the HIRE Act’s tax holiday provisions, an employer will have the option—on an individual employee basis—to opt out of the HIRE Act where WOTC provides a better option.

For a comprehensive analysis of the HIRE Act’s provisions. including the IRS’s recent Q&As, see Littler’s ASAP: HIRE Act Signed Into Law — What it Means to Employers Update – IRS Weighs in. Do you have shovel ready jobs? by GJ Stillson MacDonnell.