Remember the days (not so long ago) when you had to justify bringing in temporary workers, citing the merits and the fact that the slightly more expensive workers would save money in the long run? Well, if President Obama’s jobs proposal passes, it just might be cheaper to hire workers — through small staffing firms.
Here’s why. The American Jobs Act calls for cutting the employer’s portion of the 6.2 percent Social Security tax in half on the first $5 million in wages. Now that may not seem a big deal for large corporations like IBM or Google, but even CW programs for large companies could realize siginificant savings if they work through smaller staffing firms. The tax break allows small staffing firms to save disproportionately. Further, the Social Security tax would be eliminated altogether for any growth in payroll up to $50 million above the previous year.
As a result, prices will fall as the mark-ups for these workers drop. And end users of contingent labor could demand that staffing firms pass on these savings. The act also gives a $4000 tax credit to employers that hire a worker who has been looking for work for more than six months. Of course, the act has to pass. But if it does, it will provide a bunch of little tax breaks for the small guy. This could make it cheaper to hire workers if you are a small business. And for the big guys on the block, you could use the (little) staffing firm.