In times of widespread economic distress and unemployment, the government might attempt to spur hiring by enacting laws that provide companies a tax credit for some new hires. New hire tax credits are typically tied to employees within a certain category, such as the long-term unemployed or veterans. These credits differ in amount, but they often include a reduction in the amount of payroll tax an employer is responsible for paying. This can save a company several thousand dollars per employee, but do they actually create an incentive for companies to hire more people?

A Tampa CPA from Reliance Consulting, LLC, can help explain how new hire tax credits might affect your company’s bottom line. Chances are, even if your company’s entire payroll tax burden is waived for a period of time, a new hire tax credit by itself won’t be enough to prompt you to add a position you weren’t going to add anyway. Each employee costs tens of thousands of dollars per year in benefits, insurance, and other expenses. Economists explain that what drives hiring is demand for goods or services, something any small business owner is likely to confirm.

However, a new hire tax credit might help convince you to hire someone who falls into one of the categories indicated by the credit. The benefit comes into play if you are going to add a new position or position anyway, and you find that someone in the indicated category is as qualified for the position as another candidate who does not fall under the tax credit category. Of course, the other benefit is that by hiring someone who falls into a category supported by a payroll tax credit, you are doing your part to help a person who the government believes needs extra assistance in the job market.

To learn more about how new hire tax credits might or might not help your company, contact Reliance Consulting.