HIRE Act Slow to be Implemented

Published: Jul 14, 2010

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HIRE Act Slow to be Implemented HIRE Act Slow to be Implemented
New law aims to help unemployed workers find jobs

By Joyce Routson, for BioSpace.com

Despite a $17.6 billion hiring incentive bill that became law in March, recent jobs data indicate private sector employers have yet to take the government up on its offer to hire more of the unemployed.

The unemployment rate dipped to 9.7 percent from 9.9 percent last month and 431,000 new jobs were added. But the story was behind the numbers as American businesses added just 41,000 jobs – the remainder was hired by the U.S. government for the census.

The resulting 323-point stock market slide following the June 4 Labor Department announcement reiterated the message that private employers aren't confident enough in the economy to start adding workers.

Uncle Sam also stepped in to help with the Hiring Incentives to Restore Employment (HIRE) Act of 2010, signed by President Obama on March 18. The new law provides incentives for hiring unemployed workers, including forgiveness for Social Security taxes paid on qualified new hires. A $1,000 tax credit is available if the hires are kept on the payroll for at least 52 consecutive weeks.

More about the bill's provisions can be found here.

Granted the act is new, but so far it doesn't seem to be playing a large role, according to feedback from recruiters and employers. Some say businesses aren't confident enough in the recovery to expand their staffs; others say the people they need are highly skilled who are already employed or scarce.

One key provision of the law is that it is designed to create new jobs – it can be used only to replace an existing employee if that person left voluntarily or was fired.

Not expanding

A primary reason the HIRE Act isn't being used is because employers aren't doing any hiring, according to a May survey. SmartBrief on Workforce asked 292 managers and HR practitioners if they had hired any unemployed workers because of HIRE's tax breaks.

Only 5 percent said yes. Fifty-seven percent said they weren't doing any hiring; 34 percent said the idea was nice "but we aren’t targeting our efforts." Four percent said they were trying.

"A lot of people aren't doing hiring with or without the act," says Lance Haun, who wrote about the survey and writes about recruiting for two other websites including ERE.net. "They don't have the cash to do it. They aren't adding any employees to their rolls because they don't have the ability. That's a bigger problem – they want to expand but they can't get loans."

In a blog on Brightmove.org,recruiter Nanci Lamborn, SPHR, wrote about another challenge facing recruiters – that the people they want lack the necessary schooling, training, skills or experience.

"Jobs are changing and educational attainment is lagging," she says. "Unfortunately if employers are expected to provide the training necessary to bridge this large skills gap, by the time those retrained workers have learned some of the basic skill requirements to just keep pace, the employer may have spent a year or more of precious salary and have zero productivity to show for it. Suddenly that HIRE deal just became incredibly expensive."

Dionna Keels, an independent recruiter in Atlanta, said colleagues tell her the tax incentives aren't going to "make a significant difference" for most employers. "They are thinking if they find a great candidate and [he or she] happens to qualify, it's a win-win. But it's not going to be a priority."

The incentives could mean more for a small employer or one that hires more hourly workers, Keels says. "It could be very helpful for a small business when unemployment and Social Security are always a concern."

But, she said, when recruiters get 300 to 400 applications for every job they post, "I don’t see recruiters going the extra step to process them."

To qualify for the act's exemption from paying the 6.2 percent Social Security tax, employers must hire a "qualified employee." According to the IRS, that is a person who can certify he or she has been unemployed for more than 40 hours during the previous 60 days. The employee also cannot be related. Companies can rehire laid-off workers, either on a part-time or full-time basis.

The IRS rules can be read here.

HIRE in place

Offering another perspective was RJ Morris, a recruiter for McCarthy Building Cos. of St. Louis. Morris said his company has used HIRE, but that "we're not out targeting people unemployed 60 days or more. We're going to recruit or hire the best person and if it happens the person qualifies, that's great."

He said the incentive was boon for any business: "Anything that can help an organization offset the cost of bringing on new employees we're in favor of in these challenging economic times."

At Kelly Services,the temporary help company has put processes in place to track candidates qualified under HIRE. Government Affairs VP Jim McIntire says people have been hired under HIRE, but "it's a little too early for us to generate data we are confident in sharing."

He agrees that the law might boost hiring among hourly workers, or those "with a higher proportion of lower-skilled workers. These are positions that don't require a high degree of education – for instance hospitality might benefit because their labor pools might draw on people recently unemployed due to the recession."

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