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

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