The U.S. government wants you to hire locally. That’s the clear message behind the HIRE Act, a law that doesn’t just incentivize domestic hiring but actively punishes outsourcing. At first glance, the penalties look severe enough to scare any business owner into hiring locally.
But here’s the question smart business leaders are asking: Do the numbers actually force me to stay local?
The answer is no. Even with the HIRE Act’s dual-penalty structure, outsourcing through LoftyHire still creates meaningful savings compared to the staggering cost of a U.S. hire. The penalties add friction, yes, but the math still tilts heavily toward global hiring if you do it strategically.
This blog breaks down why.
The HIRE Act’s Dual-Penalty Mechanism
The power of the HIRE Act comes from its one-two punch:
A 25% Excise TaxAny “outsourcing payment” made by a U.S. company to a foreign person for labor or services triggers a 25% excise tax. This isn’t a tax on profits. It’s a direct tax on the transaction itself. If you pay $40,000 to a global Executive Assistant, you immediately owe $10,000 more to the IRS.
Denial of Tax DeductibilityNormally, payroll and contractor expenses are deductible, reducing your taxable income. Under the HIRE Act, outsourcing payments cannot be deducted. That means you must pay corporate income tax on money you already spent, creating a “tax on a tax.”
Together, these mechanisms make outsourcing look brutal. Every outsourcing dollar gets hit twice: first by the 25% excise tax, then by being taxed again through nondeductibility.
But brutal isn’t the same as decisive. To understand whether outsourcing is still viable, we need to run the numbers against the real cost of U.S. hiring.
The True Cost of a Local Hire
A local hire in the U.S. is not just about the posted salary. Employers pay a premium on top of wages through benefits, taxes, and overhead. Let’s look at what hiring a mid-level Executive Assistant typically costs:
Base Salary: $80,000 per year.
Benefits Package: Health insurance, dental, vision, 401(k) match, paid time off — easily $20,000.
Payroll Taxes: Social Security, Medicare, unemployment, and workers’ comp — roughly $10,000.
Overhead: Equipment, software licenses, HR administration — $5,000.
Total Cost of a Local Hire: $115,000 per year.
That’s the baseline you’re competing against.
Outsourcing After HIRE Act Penalties
Now let’s calculate what an outsourced Executive Assistant through LoftyHire costs, factoring in the dual-penalty mechanism.
Step 1: Base Outsourcing Cost
LoftyHire connects you with a highly qualified Executive Assistant at $40,000 per year.
Step 2: 25% Excise Tax
$40,000 × 25% = $10,000.New subtotal: $50,000.
Step 3: Denial of Deductibility
Without deduction, the $50,000 is treated as taxable income. At the 21% corporate tax rate:$50,000 × 21% = $10,500.
Step 4: Final Outsourcing Cost
$40,000 + $10,000 + $10,500 = $60,500 per year.
Comparing the Two
Local Hire (Fully Loaded): $115,000
LoftyHire Outsource (After Penalties): $60,500
Savings: $54,500 per year, per role.
Even after paying a penalty that feels deliberately punitive, outsourcing through LoftyHire still cuts your costs nearly in half.
And remember: this is just for one position. Multiply across three or four roles, and you are looking at six-figure savings annually.
Why the Numbers Still Favor LoftyHire
The math is the backbone, but the strategy is the muscle. Here’s why LoftyHire remains the better choice even under the HIRE Act’s penalties.
1. Local Costs Inflate, Penalties Are Fixed
Local salaries, benefits, and insurance premiums rise every year. The HIRE Act penalties, on the other hand, are a fixed percentage. As domestic costs balloon, the relative advantage of outsourcing actually grows.
2. Compliance Is Predictable
You know exactly what the excise tax and nondeductibility mean for your books. That predictability lets you plan. Local hiring costs, with healthcare hikes and turnover risk, are much harder to forecast.
3. Quality Talent Is Global
LoftyHire isn’t about bargain-bin hiring. It’s about connecting with skilled professionals who deliver executive-level support. You’re not sacrificing quality, just sidestepping inflated local costs.
4. Opportunity Cost of Local Hires
Every dollar spent on bloated payroll is a dollar not invested in growth, marketing, or product development. LoftyHire frees up capital so you can build momentum.
Busting the Myth: “Outsourcing Isn’t Worth It After Taxes”
Critics argue that once penalties are applied, outsourcing stops being attractive. That myth only holds up if you compare outsourcing to an imaginary local hire stripped of benefits and overhead.
But businesses don’t live in imaginary scenarios. They live in a reality where every U.S. hire comes with layers of cost and red tape. Against that backdrop, LoftyHire outsourcing still delivers double-digit percentage savings.
Two Different Paths
Company A (Local Hire)
Hires one U.S. Executive Assistant at $115,000.
Growth slows because capital is tied up in payroll.
CEO spends more time on admin because they can’t afford a second hire.
Company B (LoftyHire with Penalties)
Hires one global Executive Assistant through LoftyHire at $60,500.
Saves $54,500 immediately.
Uses savings to hire a part-time Marketing Specialist, also through LoftyHire.
CEO gains back 15 hours per week.
By year-end, Company B is leaner, faster, and more competitive. The penalty didn’t stop them. It simply became another cost of doing business, outweighed by the gains.
The Strategic Benefits Beyond Cost
Outsourcing isn’t just about dollars. The right global team transforms how you operate.
Agility: Scale your team without the long-term liabilities of local payroll.
Resilience: Global hires diversify your workforce, making you less vulnerable to local labor shortages.
Focus: Leaders reclaim their time to concentrate on strategy and growth instead of HR fire drills.
Global Insight: Professionals outside the U.S. bring fresh perspectives and innovative solutions.
LoftyHire delivers all of this while guiding you through compliance so penalties never turn into crises.
Addressing the Fear Factor
Let’s be real: penalties sound scary. And that fear is exactly what the law is designed to create.
But smart leaders know the difference between fear and fact. The facts show:
Yes, outsourcing payments are taxed twice.
Even so, outsourcing costs less than half of a local hire.
The compliance burden is navigable with the right partner.
Fear keeps companies bloated and slow. Facts empower them to act.
Why LoftyHire Is the Smart Partner
LoftyHire isn’t just a connector. We are a strategic outsourcing partner. That means:
We Vet Talent: Only top-tier professionals who can deliver at U.S. standards.
We Simplify Compliance: Guidance on structuring payments and reporting so you stay clear of unnecessary risk.
We Maximize ROI: Helping you design roles that deliver the most value per outsourced dollar.
We Scale With You: As your company grows, we grow with you, layering on roles from support to marketing to operations.
Outsourcing Still Wins
The HIRE Act was built to punish outsourcing. Its dual-penalty mechanism, a 25% excise tax plus denial of deductibility, is harsh, no question.
But when you run the numbers, the reality is undeniable: outsourcing through LoftyHire still beats expensive local hiring. Even after penalties, you save tens of thousands per role per year, while gaining flexibility, global insight, and the ability to reinvest in growth.
The government may want you to hire locally. But your balance sheet, your strategy, and your future growth demand a smarter path.
That path is LoftyHire.