Act spurs more jobs, insurance

May 10, 2010
| By Pete Daly |
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Federal programs to incentivize employers who hire unemployed workers or offer health insurance are now in effect, although the one receiving the most attention is the HIRE Act, according to Claude Titche, a partner at Beene Garter LLP in Grand Rapids.

Titche said his company has received a number of calls about HIRE, which in his opinion ¡°gets people working, and that¡¯s what we need. We need employment.¡±

The health insurance incentive under the Patient Protection and Affordable Care Act, however, is limited to small companies or nonprofit organizations, and is not receiving as much interest, he said.

HIRE stands for Hiring Incentives to Restore Employment. The act was signed into law in late March by President Obama, the first in a series of bills that the administration and Congress plan to introduce to reduce unemployment.

HIRE offers employers a 6.2 percent payroll tax incentive, in effect exempting them from paying the employer share of Social Security employment taxes on wages paid in 2010 to newly hired workers who were previously unemployed or semi-employed.

Qualified workers must have begun employment after Feb. 3 this year or before next Jan. 1. They have to have been unemployed in the previous 60 days before being hired or worked fewer than 40 hours for someone else during that period.

Those hired may not be replacing other employees, unless the former employees voluntarily quit or were terminated for cause. There must be a net increase in head count, according to information provided by Beene Garter.

¡°Any size company can qualify for the HIRE Act,¡± said Titche.

Employers must file a new W-11 form from the IRS for each person hired, on which the new hire confirms that he or she meets the specified qualifications for the HIRE Act.

Titche said he has read reports that construction companies that are calling back employees laid off over the winter will qualify for the HIRE Act.

Anybody that¡¯s growing or hiring new people can qualify, he said, including seasonal employers such as construction, agriculture and golf courses.

Scott Hancock, an associate attorney at Warner Norcross, said a HIRE employee earning the maximum amount subject to Social Security tax could save the employer roughly $6,000 for an entire year.

One company that Hancock spoke to about the HIRE Act is Jost International in Grand Haven, which has been manufacturing parts for semi-trailer OEMs and the after-market for about 20 years. According to Brenda Teunis, the human resources manager at Jost, about 10 new employees were added recently, bringing the total number of employees to about 70.

¡°Of the 10 that we hired, I believe seven qualify¡± for the HIRE incentive, she said.

She said the HIRE Act didn¡¯t necessarily drive the company¡¯s decision to add more employees. There are ¡°people in the work force right now that would qualify, because a lot of people had been laid off six months or more¡± until recently.

The HIRE Act ¡°wasn¡¯t a determining factor¡± on who was hired, either. Itwas the individual¡¯s qualifications, she said.

Some of the assemblers hired at Jost are trained on the job, she said, but the company keeps an eye out for experienced welders, in particular. Although Jost can train them, ¡°welding does seem to be more of a ¡®you¡¯re good at it or you¡¯re not,¡¯ so we do tend to lean toward people that have got more experience.¡±

The HIRE Act also can provide an employer with a corporate income tax credit worth up to $1,000 for each new hire who remains there for 52 consecutive weeks.

Teunis said she understands that an employer cannot receive both the 6.2 percent payroll tax credit and the $1,000 corporate tax credit. She expects Jost to take the payroll tax credit.

The tax credit contained in the Patient Protection and Affordable Care Act recently signed into law by President Obama is one of the first health care reform provisions to go into effect. The credit, which takes effect this year, is designed to encourage small employers to offer health insurance coverage for the first time or maintain the coverage they already have.

In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees in 2010. The credit is specifically targeted to help small businesses and tax©\exempt organizations that primarily employ low and moderate income workers.

The credit phases out as firm size and average wages increase. The credit is not available to employers with 25 or more full©\time employees, or employers that pay average wages of $50,000 per year or more.

However, because the eligibility rules are based in part on the number of full-time equivalent employees, not the number of employees, businesses that use part-time help may qualify even if they employ more than 25 individuals.

For tax©\years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax©\exempt organizations.

The maximum credit goes to smaller employers ¡ª those with 10 or fewer full©\time equivalent employees ¡ª paying annual average wages of $25,000 or less.

¡°The employers who qualify for this credit are going to have to be fairly profitable to be able to afford to pay health insurance for their employees, so I don¡¯t think this is going to be a huge benefit for many companies,¡± said Titche.

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