Dear Valued ADP Client:

On March 18, 2010, the federal government enacted the Hiring Incentives to Restore Employment (HIRE) Act. This $18 billion package is designed to help employers create more jobs for Americans and reward them in the process of doing so.

Central to this act is a provision for a payroll tax holiday that enables qualified employers to avoid the 6.2% Social Security tax for newly hired employees throughout 2010. The act also gives employers a tax credit to employers that keep their new employees for at least 52 straight weeks.

The purpose of this letter is to provide an overview of the new legislation and assurance that ADP has updated our payroll system to accommodate any necessary changes.

OVERVIEW: The HIRE Act

The HIRE Act is focused on job creation. It includes many provisions that impact employers, including payroll tax reductions and tax credits for employers that have employees that meet certain eligibility requirements:
• The 6.2% Employer Social Security Tax exemption applies to 2010 wages paid after March 18, 2010 to individuals hired after February 3, 2010, who were previously unemployed for at least 60 days.
This exemption has no cap or limit as to the total amount of tax benefits that can be claimed by an employer. Employers can save up to $6,622 per qualifying worker, whether they hire one worker or hundreds of new workers.
• Employers are also eligible for a $1,000 income tax credit on their 2011 business tax returns if these qualified workers are employed for at least 52 consecutive weeks and earn at least 80 percent of annual wages.

WHAT ARE THE BENEFITS OF THE NEW LEGISLATION?

• Employers can save the 6.2% Employer Social Security Tax, whether they hire a $40,000 worker, or a $90,000 worker. Employers, including nonprofit organizations, and colleges and universities, would not have to wait until 2011 to benefit from this tax relief because savings would accrue with each payroll processed.
• The legislation also encourages businesses to hire workers earlier in the year because the tax benefit will be greater. For example, a $60,000 worker hired on April 1, 2010 saves an employer about $2,800 in taxes. Delaying the hiring until June 1, 2010 would reduce savings to about $2,200.

WHAT SHOULD I DO IF I HAVE QUALIFIED EMPLOYEES?

With your next payroll, please let your Payroll Specialist know who is eligible. ADP will enter that information in our system to ensure that the employer portion of the 6.2% Social Security tax will not apply to 2010 wages paid after March 18 for those workers.

However, the legislation specifies that any tax exemption savings realized through March 31, 2010 must be applied as a credit to second quarter employment taxes. ADP will automatically calculate and apply this credit at the end of the second quarter (i.e., July 2010) for Tax Filing clients.

If you are a PC client, you can indicate that an employee qualifies by doing the following:
For a new hire: Select the Job Tax Credit checkbox under Employment Info on the Employee New hire Wizard.
For an existing employee: Under Employee Maintenance select Employment Info and change the Job Tax Credit drop down to Yes.

HOW DO I LEARN MORE ABOUT THE HIRE ACT?
ADP has created a Website specifically for this legislation. For more information, please visit www.adp.com/jobtaxcredit

Sincerely,
Your ADP Service Team

Summary only. Details may be found at www.adp.com/jobtaxcredit

The information is provided solely as a courtesy and should not be construed as legal advice. Your legal counsel should be consulted for updates on law and guidance that may have an impact on your organization and specific facts related to your business.

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