Practices Offered Financial Incentives for New Hires

August 11, 2010
Michael Sheehan

The federal government and even a publicly traded company are hoping to thin the ranks of the unemployed by giving employers financial incentives to hire new employees.

With the jobless rate still stubbornly high, both the federal government and some private businesses are hoping to thin the ranks of the unemployed by giving employers financial incentives to make new hires. The government’s stimulus takes the form of tax credits; in the private sector, at least one major bank is offering lower interest rates to businesses that hire new employees.

Under the Hiring Incentives to Restore Employment (HIRE) Act, enacted March 18, 2010, if you hire a person who has been unemployed for at least 60 days, you may qualify for a 6.2 percent payroll tax credit, which effectively means that you won’t have to pay your share of an employee’s Social Security taxes. The credit won’t affect his or her Social Security benefits and you still have to withhold his or her share of the tax. In addition, if you keep the new hire on your staff for at least a year, you may be able to claim a business tax credit of up to $1,000. To qualify for the tax breaks, you must make the new hire before Jan. 1, 2011, and you must get a statement from the new employee that he or she has been unemployed for at least 60 days.

The incentives seem to be working. Between February and June, businesses hired 5.6 million new workers who had been unemployed for eight weeks or longer, making those businesses eligible to receive up to an estimated $10.4 billion in HIRE Act credits, according to a recent Treasury Department report.

To learn more about the HIRE Act, click here.

Aside from the government, financial giant JPMorgan Chase & Co.'s Chase Bank is lowering its rate on a new Business Line of Credit by 0.5 percent for each new hire, up to a maximum of three people. Businesses that already have checking accounts with Chase can qualify for an additional 0.5 percent off their loan rate. The lower rate applies for the life of the loan.

With many banks under fire for ignoring the credit needs of small businesses, Chase officials have pledged to up the bank’s small-business lending by $4 billion, to a total of $10 billion. For details on the program, go to the Chase Loan for Hire Web page.