According to New York Democrat Sen. Charles Schumer and Utah Republican Orrin Hatch, the co-sponsors of the bill, the 'Hire Now Tax Cut Act of 2010,' would allow any private-sector employer, including a nonprofit organization, that hires a qualifying worker to forgo paying the 6.2% employer’s share of the Social Security payroll tax on that employee for the remainder of 2010.

The Senators claim that the legislation would provide an immediate benefit for companies who hire qualifying workers because they would not have to wait a year to claim the tax savings in the form of a tax credit.

As an additional incentive, however, employers can claim a tax credit of USD1,000 for any qualifying worker hired under this initiative that the employer keeps on payroll for a continuous 52 weeks. The idea behind the proposal is that the more a business pays a worker (up to the maximum Social Security wage of USD106,800), and the longer a business has a worker on its payroll, the greater the tax benefit.

In order to be eligible, the employee’s pay in the second 26-week period must be at least 80% of the pay in the first 26-week period. Workers hired after the date of introduction (February 2) are eligible for the payroll tax forgiveness and the retention bonus, but only wages paid after the date of enactment receive the exemption from payroll taxes.

Hatch says that a company employing a qualifying worker on an annual salary of USD50,000 on March 1, 2010, would save USD2,583 in tax. Hiring a worker on a salary of USD90,000 on April 1, 2010 would save the employer USD4,185.

However, for workers that would otherwise be eligible for the Work Opportunity Tax Credit (WOTC), the employer must select one benefit or the other for 2010 to prevent employers "double-dipping" the two schemes. The WOTC allows employers to claim back 40% of the first USD6,000 of wages paid to employees of one of 11 targeted groups.

Hatch argued that the proposals represent an "affordable, effective and targeted" way to reduce unemployment in the US.

“As a conservative, I appreciate that this proposal isn’t about more and more government spending; it’s about tax relief to get employers hiring again, which is exactly what millions of unemployed Americans most desperately need," he said.

The legislation, according to Schumer, has widespread bipartisan support in Congress, and is also backed by the White House as well as businesses.

“Congress must focus like a laser on job creation, and that’s what this proposal does,” said Schumer. "This bipartisan proposal will put people back to work right away and help create the only thing that will finally bring us out of this recession: Job growth.”