In its latest effort to stimulate the economy and encourage employment, Congress passed the Hiring Incentives to Restore Employment Act (“HIRE” ), which President Obama signed into law on March 18, 2010. This new law provides a limited payroll tax “holiday” for employers bringing new employees on board, along with providing tax credits for those who retain workers.  There are other provisions that are designed to further stimulate the still-recovering economy.  We asked attorney A. Harrison Barnes, founder of LegalAuthority.com to break it down for us in terms of what this new law means. Here’s what he had to say.

In short, the “holiday” provision allows some employers to take a “holiday’ from their obligation to match the Social Security portion of FICA tax for some workers who were hired after February 3, 2010, but before January 1, 2011.  This is applicable on wages paid between March 19 and December 31, 2010. Normally, both employer and employee pay 6.2% on the first $106,800 of wages earned in any calendar year.  There is no holiday from the second component of FICA tax covering the Medicare Hospital Insurance contribution, which equates to 1.45% of wages and is also matched by the employer. Because the tax holiday is limited to OASDI taxes, other state and federal employer obligations, such as federal unemployment taxes or state unemployment taxes are not affected and will still need to be paid.

This law also provides a business credit based on the retention of employees hired under HIRE and retained for at least one full year, says the LegalAuthority.com founder.  The incentives of HIRE are designed to encourage employment by giving employers a break on part of its FICA taxes plus the potential for another business credit for retaining each of these employees for at least one year.

There are ways, however, if an employer wishes to opt out, says A. Harrison Barnes.  These businesses will need to contact the IRS for information on this procedure.  And too, the IRS has already made clarifications on this law and Barnes encourages employers to visit the site for more detailed information on this new law, including a wider scope and further guidance on what constitutes a “qualified employee”.

Finally, Barnes says that although the law was passed on March 18, 2010, it is retroactive for all new employees hired since February 3, 2010.  Another interesting feature of this law is that is applicable for new businesses hiring a complete workforce, too.  And, too, if you had to lay off any of your employees sixty days ago (or longer), you can now bring them back on board and still take advantage of the tax holiday.  They must be full time employees, says Barnes.

If you’ve been readying your business to make its big comeback after the recession, now seems to be a great time to do so.  And if you’re looking for new employees, visit LegalAuthority.com and its sister site, EmploymentCrossing.com.  You’ll find the quality employees you need to help your business succeed.