Implementing the HIRE act in SAP US Payroll

I've received questions from a few customers on how the HIRE act is going to be implemented in SAP US Payroll. And the answer is: I wish I knew! They haven't released anything yet. Since this is a regulatory requirement, customers should expect (or maybe demand) SAP to release a transport or note that will have all the system customizations needed to implement it. It seems like a fairly simple update to me; if I was going to do it, here's what it would look like:

1. Create a statistical wagetype for IT 0014 Recurring Payments & Deductions, and name it something like 9HIR. Set processing class 20 to a 4 to make sure it gets saved to the RT before taxes are calculated. This is your flag to designate which employees are subject to the HIRE act tax credit. Enter the wagetype on the eligible employees from the date of hire to the end of the last payroll period of 2010; set the amount field to 1.00.
2. Create two more statistical wagetypes - one to represent the employer-paid Social Security taxes that are exempted and one for the Social Security wages; let's call them 9404 (Exempted Taxes) and 9704 (Exempted Wages).
3. We need to post the tax credit to accounting. For wagetype 9404, map it to the same symbolic accounts as your /404 (or whichever user wagetype is used for posting Social Security tax) - and make sure that it is posted with the opposite signs. Normally, /404 will post to an expense account with a + and a liability with a - ; so 9404 ought to post to expense as a - and liabilities as a +.
4. Create a rule that is triggered by the presence of wagetype 9HIR, that copies wagetype /404 to 9404 and /704 to 9704. So if the rule sees 9HIR in the RT, copy /404 to 9404 and /704 to 9704; otherwise don't do anything.
5. If you are using 3PR (Third Party Remittances) to pay your taxes, add wagetype 9404 to your HR Creditor and make sure its sign gets reversed so that it reduces the payable amount.

And that's about it. When payroll runs for an employee with wagetype 9HIR, it will create copies of the employer-paid Social Security wagetypes, which you can then use to post the tax credit to FI and also have them present for reporting on the 941 and W-2.

There are other ways to do this - for example, how to designate the employees subject to the HIRE act process - which I'm glad to discuss. It will be interesting to see how SAP implements it.

p.s. Thanks to Jarret Pazahanick for the email thread that led to this.

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Update Oct 15 2010

SAP released note 1497930 a while ago that allows customers some flexibility on how the 941 form gathers HIRE Act data for reporting. Essentially you can now create your own tax form group containing the exempt wages and map that to the tax form field of the 941. In my example above, I believe that would be wagetype 9404 - just map it to a new tax form group and map that tax form group to tax form fields EWGP and EW1Q.

Or, if you don't have too many HIRE act employees to deal with, you could enter some manual entries in Tax Reporter for those same tax form fields. Just run a payroll report for your HIRE Act employees to get their /704 wages, and enter them in the manual entries.

I've sort of settled on a combination of my approach and the one Raj Aitha describes in the comment - exempt the employee on IT 235 and then have a trigger in payroll to identify the exempt employees and their exempt wages.

Aside from the note, one customer I worked with put their own code in an enhancement point, right after Tax Reporter calls feature 10HAR, to flag the relevant HIRE Act employees.