If you're thinking about hiring new employees, you are going to want to read this!

In March this year, a new bill was signed into effect that gives small business owners tax incentives when they hire new employees. The Hiring Incentives to Restore Employment (HIRE) Bill is designed to encourage employers to begin hiring again. Of course, there are eligibility requirements for those new employees, and not all new workers are considered eligible.

The new employees must be:

·         Hired between February 3, 2010 and January 1, 2011.

·         Unemployed during the 60 days prior to starting work, or, worked less than 40 hours for someone else during those 60 days.

When you hire an eligible employee, your business gets to:

·         Claim an exemption from payroll taxes of the employer's share of Social Security taxes on wages paid to these employees after March 18, 2010. (This equals about 6.2% of the wages.)

·         Claim an employer tax credit of up to $1,000 per worker for each worker retained for at least a year when you file your 2011 income tax returns. 

The sooner you hire the more tax benefit you will receive, since the benefits are designed to diminish over time and disappear completely by January 1, 2011.

By the way, a second benefit of the HIRE tax incentive is to give you the ability to deduct up to $250,000 worth of new equipment purchased this year, up from the previous $125,000 last year. Make sure you ask your CPA about that!

I'm sure this raises all sorts of questions, and I'll answer several of them here. However, please consult a qualified tax specialist, CPA, or other business professional if you have more questions.

HIRE is especially helpful to employers who are adding new positions to their payrolls. New hires filling existing positions can also qualify if the workers they are replacing left voluntarily or for cause. Family members and other relatives do not qualify. Employees you laid off may be eligible if you re-hire them after they have been unemployed for 60 days, or if they worked less than 40 hours total for someone else.

In addition, the new law requires that the employer get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked no more than 40 hours for anyone during that 60-day period.  This is called the W-11 Form that must be signed by the employee.

Businesses, agricultural employers, non-profit organizations, Indian Tribal Governments and public colleges and universities all qualify to claim this payroll tax benefit.   However, family members  and relativelys do not qualify.  Homehold employers cannot claim it as well. The bill doesn't require that the employee be employed before. For example, if you want to hire a high school or college student or even an intern for the summer, they might qualify.

If you are starting a new business, every one of your new hires can qualify, if they were previously unemployed as described above.

I encourage you to consider this new tax break if you are getting ready to hire new employees. And if you have any questions whatsoever, please do call me or send an email.  I'll help you in any way that I can.

The state of California is very serious about making sure employees are paid their wages in a timely manner once they quit or are laid off.

The magical time period is only 72 hours and the clock starts ticking when your employee gives you notice, or quits without notice.    For company terminations or lays, employers are required to submit them payment of all wages on their termination/lay-off date.

Penalties for not paying the employee his wages can be stiff and are equal to the employee's daily pay for the first 30 days.

Here's a scenario:

Joe works in your warehouse sorting and stacking boxes for $10 an hour. He is unhappy with his supervisor and on Wednesday after lunch storms into your office and announces that he's had enough. He throws his keys on your desk and demands to be paid for the last 12 days he's been working, because he's quitting.

The best thing you can do at that point is cut him a check!

The next best thing you can do is tell Joe that you will have his check ready Friday morning and he can come by and pick it up. At this point, because Joe quit without giving you any notice, you have a grace period of 72 hours (three days) to get him his last paycheck. Alternatively, you can tell Joe that if he doesn't want to come in on Friday to pick up his check, you will send it out in Friday's mail. If he says yes, then you confirm his mailing address with him, get authorization in writing, wish him well and call your payroll provider.

If you don't pay Joe his wages or put it in the mail on Friday, then you can be hit with penalties for every day after the 72-hour period that you fail to make payment, up to 30 day's worth of wages. And it includes weekends and holidays! You can see how this might add up rather quickly.

Now, let's talk about Mary.

Mary is an administrative assistant who earns $21 an hour and accrues vacation time. Sadly, Mary is a lousy employee and you've decided to terminate her. So, you call her into your office on a Friday and deliver the bad news that you're letting her go. As she is stunned and starting to get teary-eyed, you hurriedly hand her the check you've prepared and usher her out the door.

 So when she shows up at your office on Thursday morning the next week, you're puzzled and a little concerned. Mary, no longer tearful, states that yes, you paid her for her wages, but you didn't include the paid vacation time-five days worth -that she has accrued. And she wants it NOW.

Your best course of action is to hurry into your office and write the check because if you don't she can march down to the labor board and file a complaint. You not only owe her for the vacation time, but because of the amount of time that has gone by, you also could face a Waiting Time Penalty worth her daily wages for the six days from Friday to Thursday because you didn't pay her the entire amount she was due when you terminated her. You don't want to be hit with fines!

Now, if an employee gives you a notice to terminate that is at least 72 hours in advance, then you are required to give him or her their final paycheck on the day they leave. You've already had the 72 hour grace period because they gave you a notice ahead of time.

As you can see, this can be confusing and if not handled correctly, costly. Don't try to navigate it alone. Please call me, call anytime. It's important to have a knowledgeable expert on your side.