While the HIRE Act is Great for the Staffing Industry in the Short Term, What About the Long Term Impact of Social Security Reform Proposals We’re Facing?

Recently, I’ve been researching, writing about, and talking to staffing professionals (who use our staffing software) about the Hiring Incentives to Restore Employment (HIRE) Act.  Before continuing – if you are a staffing firm, you have to take advantage of this legislation.  If you hire someone who has not worked more than 40 hours during the previous two months and get them to sign an affidavit (e.g. the IRS’ Form W-11), your staffing firm is exempt from paying the employer portion of social security taxes on their wages.  Check out this recent post on How 3 Staffing Firms Are Saving $1000s with the HIRE Act. 

The Options on the Table

Over the weekend, I came across Laura Mechler’s article “Social Security Cuts Weighed by Panel” in the Wall Street Journal.  Mechler describes the different proposals that the 18-member National Commission on Fiscal Responsibility and Reform (NCFRR) are considering to stabilize the financial future of Social Security; which by 2014 is projected to pay out more than it takes in, and by 2037 would only have enough left in the reserves to pay out 75% of its promised benefits.  The proposals that the White House-initiated bi-partisan committee are giving serious thought to are:   

• Raise the retirement age, which is now set to reach 67 in 2027.
• Reduce the rate at which benefits grow each year.
• Reduce benefits for wealthier retirees.
• Subject a greater portion of income to Social Security tax.  Currently, the first $106,000 of a person’s annual income is subject to both employee and employer social security tax.
• Raise the social security payroll tax, which is now 6.2% for employer and employee. 

Does the HIRE Act and the Need for Financial Social Security Reform Add Up?

While I highly encourage temporary staffing firms to take advantage of the HIRE Act, it makes me scratch my head to consider how such a short term piece of legislation like the HIRE Act works against the long-term financial health of the Social Security Administration with even less flowing into the organization for the remainder of 2010.  Plus, the last two bullet points of action the committee is considering would result in a long term, as in forever, increase in social security taxes for any significant employer, especially those in the temporary staffing industry.   

Some Things to Consider Going Forward

After brushing up on the Social Security Administration’s brief history, I hope that the lawmakers and experts on the NCFRR committee keep the original purpose of the Social Security Act of 1935 at the forefront of their minds and let the spirit expressed in President Roosevelt’s address upon signing the act into law guide their actions:    

“We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.”    

No doubt, action is required, and this is a perfect time for our government to reform Social Security in such a way that it benefits those who need it, will be around for the long haul, and becomes no more of a burden than it already is to staffing firms and significant employers in any industry across the country.      

What are some ideas that you’ve heard or thought of regarding social security reform?  What do you think is best for your staffing firm and the staffing industry as a whole?    

Email me, and feel free to contact us if you have any HIRE Act related questions, or would like to see how we’re helping staffing companies make and save money through our fully integrated front and back office staffing software.    

Everett Reiss
Director of Marketing and Communications
Applied Systems Technology
845-534-7100 X1102
ev@astusa.com    Connect with me on:
Linkedin: http://www.linkedin.com/in/everettreiss
Twitter: http://twitter.com/everettreiss

Sometimes the government passes legislation with big promises attached that never come to fruition. That’s been one of the main knocks against the $850 billion, 1588 page, Stimulus Bill of 2009. A lot of money, a lot of pages, a lot of press, but my wallet didn’t get that much fatter – how about yours?

Maybe you’re experiencing the same thing with the Hiring Incentives to Restore Employment (HIRE) Act, but YOU SHOULDN’T BE! I’ve talked with controllers from three staffing companies that use our staffing software, and they’ve all reported saving thousands of dollars through this legislation. For more on the specifics of the HIRE Act and how to take advantage of it in your staffing industry software check out:

• For the Staffing Industry, To HIRE Act or WOTC – that is the Question.
• Updating Your Staffing Software and Processes for the Federal Hiring Incentives to Restore Employment (HIRE) Act.

One Florida-based staffing firm reported thousands of dollars in savings since tracking and reporting on employees who qualify under the HIRE Act. Candidates, who have not worked more than 40 hours over the previous 60 days, sign an affidavit that the company developed to keep on record that these employees qualify under the HIRE Act. You can either develop your own affidavit or use the IRS’ Form W-11. Then they scan the signed affidavit and attach it to the candidate’s record in our staffing software. They also flag the candidate as qualifying for the HIRE Act within our fully integrated front and back office staffing software system, so that employer social security taxes aren’t calculated on these wages during Payroll.

I also got some hard numbers from two mid-Western staffing firms. One company is paying 69 people per week who qualify for the HIRE Act out of the 638 people they pay each week. During the first quarter they saved $11,000 on employer social security taxes. And this was just for two pay periods since the HIRE Act did not kick in until March 19th. At this rate, they will be saving $71,500/quarter ($11,000 * 6.5 pay periods) for the last three quarters of the year. With such substantial savings, they are pushing their staffing coordinators to be more proactive in getting qualifying candidates to sign the Form W-11. They have built in a strict “audit” process to make sure that candidates who sign the affidavit truly qualify for the HIRE Act. This results in some employees getting paid a few times before they flag them in our staffing industry software as qualifying for the HIRE Act, which means that they’re paying employer social security tax on wages that could be exempt. However, we did provide a process and report within our staffing software for them to recoup these savings, Use Your Staffing Software to Save Every Possible $ on the HIRE Act.

Another mid-Western staffing firm, which places many industrial workers, has been more proactive in getting qualifying candidates to sign the Form W-11, resulting in them not having to pay employer social security on 258 out of the 517 checks they cut each week. They also don’t have as strict of an audit process as the previous company mentioned, so they are able to flag employees as qualifying for the HIRE Act earlier on in the process – before the candidate receives their first or second check.

The key lesson from these three staffing companies is to make sure staffing coordinators are being proactive in determining if candidates have qualified for the HIRE Act. Here are three ways to do this: 

• Make sure they are armed with an affidavit or form W-11 for employees to sign.
• Make sure they know your company’s “audit” process, where to store the affidavit, and how to flag qualifying employees within your staffing software system.
• Make sure they know how much money your company can save by employing people who qualify for the HIRE Act.  Potentially consider incentifying this by offering staffing coordinators/recruiters a percentage of the total HIRE Act savings at the end of the year. 

Contact us if you have any HIRE Act related questions, or would like to see other ways we’re helping staffing companies make and save money through our fully integrated front and back office staffing software.

Everett Reiss
Director of Marketing and Communications
Applied Systems Technology
845-534-7100 X1102
ev@astusa.com
Connect with me on:
Linkedin: http://www.linkedin.com/in/everettreiss
Twitter: http://twitter.com/everettreiss

The Benefits of the HIRE Act for Staffing Firms

It’s been about 5 months that the Hiring Incentives to Restore Employment (HIRE Act) has been in place. The HIRE Act encourages employers to hire people who have been unemployed for 60 or more days by exempting their wages from the related employer social security taxes. For new hires to qualify for the HIRE Act and for their wages to be reported on the 941 as tax exempt from employer social security taxes, you need to get them to sign the form W-11. 

The Challenges that Staffing Firms Face

Our clients who use our staffing software are reporting the following challenges:

• Recruiters and staffing coordinators are not disciplined in asking applicants if they’ve been unemployed for the past 60 days (haven’t worked more than 40 total hours) and giving Form W-11s for qualifying applicants to sign.
• Applicants who are getting put on jobs are not returning their signed Form W-11s before receiving their first few paychecks.
• Staffing firms with a more stringent verification process to make sure all Form W-11 sign-ees truly qualify for the HIRE Act, do not start reaping the benefits from the legislation until the second or third paycheck.

These challenges, if not addressed, spell one thing for staffing firms: lost savings on money that is rightfully theirs through the HIRE Act due to uncollected or tardy Form W-11s.  

The Remedy to Take Full Advantage of the HIRE Act

For the previous quarter on the form 941, you can report the money that should have been saved on wages that should have been reported as exempt from employer social security taxes, but the key is that you need a report that can show you these wages. 

One Report You Should Run Out of Your Staffing Software

Here’s a report we were able to produce for our clients using the built in report writer that comes with our fully integrated front and back office staffing software system. The report prints the paycheck history of all employees who are flagged as qualifying for the HIRE Act and shows whether or not employer social security taxes (ER OASDI Cost, column I) were calculated for the employee’s paycheck. You can run the report for a range of check dates.  

In the example above, BERGER’s payroll record must not have been flagged in our staffing software when her 7/14/2010 check was cut. However, she turned in her Form W-11 in time for her 7/21/2010 check to be employer social security tax exempt. Nevertheless, with this report or a similar report a staffing firm can claim on the 3rd quarter’s 941 the $11.86 savings plus any other money they paid in exempt employer social security taxes. 

Other Staffing Industry HIRE Act Related Information

Here are some past informational staffing industry blog posts we’ve done on the HIRE Act: 

• For the Staffing Industry, To HIRE Act or WOTC – that is the Question
• Updating Your Staffing Software and Processes for the Federal Hiring Incentives to Restore Employment (HIRE) Act

Be sure to talk to your staffing software provider to see if they can provide you with a similar report that shows you the wages on which you’ve paid employer social security taxes that should have been exempt because of the HIRE Act.  Contact us if you have any HIRE Act related questions, or would like to see other ways we’re helping staffing companies make and save money through our fully integrated front and back office staffing software.  

Everett Reiss
Director of Marketing and Communications
Applied Systems Technology
845-534-7100 X1102
ev@astusa.com
Connect with me on:
Linkedin: http://www.linkedin.com/in/everettreiss
Twitter: http://twitter.com/everettreiss

While it seems that the winds in Washington D.C. (depending on your interpretation of events) have not been blowing in the staffing industry’s favor, the Federal Hiring Incentives to Restore Employment (HIRE) Act is one piece of legislation staffing companies can take advantage of.

Origin of a lot of recent legislation affecting the staffing industry

The HIRE Act was signed into law by President Obama on March 18, 2010 and features two incentives to encourage businesses to hire and retain new employees:

• Incentive #1: As of February 3, 2010, if an employer hires someone who has been unemployed the previous 60 days (worked less than a total of 40 hrs during the 60-day period) and the new hire isn’t replacing someone else, then the employer does not have to pay the employer portion of social security on that person’s wages.
• Incentive #2: The employer will receive a $1,000 income tax credit for every newly hired employee (again, not replacements) as of February 3, 2010 who is employed continuously thereafter for 52 weeks.

In order to help you add significantly to your bottom line by taking advantage of these incentives (as employers, currently we’re paying 6.2% of the first $106,800 each of our employees earn), make sure you can do the following in your staffing software:

• Track the employees who qualify for the HIRE Act.
• Be easily able to identify the HIRE Act employees from a search hit list.
• Possibly even be able to attach a scanned copy of the Form W-11 HIRE Act Employee Affidavit.

From a purely process standpoint, you’ll want to consider:

• During the interview process, make sure you identify any candidate who could fall under the HIRE Act and have them sign the Form W-11 HIRE Act Employee Affidavit, which the IRS is scheduled to release this week.
• Recruiters should be taking into consideration those candidates who qualify for the HIRE Act during the placement decision-making process.

Contact us to check out our staffing software and how we’re helping staffing companies capitalize on the latest legislative and staffing industry trends.
 
Everett Reiss
Director of Marketing and Communications
Applied Systems Technology
845-534-7100 X1102
ev@astusa.com
Connect with me on:

• Linkedin: http://www.linkedin.com/in/everettreiss
• Twitter: http://twitter.com/everettreiss