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What is a Relocation Package & What Should it Include?

Posted by CapRelo on Wed, May 30, 2018

WHAT IS A RELOCATION PACKAGE?

When a company offers an employee long-term employment in a location more than 50 miles from the current work location, a company may offer a relocation package. This usually covers the employee’s reasonable moving and other work-related expenses. By offering transferees a relocation package, employers provide comprehensive financial and other types of assistance to relieve the employee and their family of the expensive burden of relocation. A well-developed relocation package not only provides peace of mind as well as incentive to accept the job offer for the transferring employee but reflects positively on the company’s reputation for attracting top talent.

relocation package helping with moving costs

 

Are Relocation Packages Common?

In years past, relocation assistance was offered almost exclusively to higher-level employees or specialized contractors. Today, with a more global economy and better-educated global workforce, the competition for the best talent is stronger than ever; consequently, smart companies are jumping on the relocation benefits bandwagon to attract and keep their best employees.

A recent survey by Atlas Van Lines reported an increase of 13 percent over a three-year period among companies offering relocation assistance. Companies are finally catching on to the fact that having a strong, attractive relocation package in place not only makes excellent business and branding sense, but has become a reality for those companies that wish to remain competitive.

Learn more about relocation packages in our free guide.

- HR PROFESSIONALS ARE OPTIMISTIC ABOUT RELOCATION-

Another recent survey by Worldwide ERC® indicated an upward trend in U.S. transfer volumes: a 4% increase in relocation for current employees and a 7% increase for new hires. And companies anticipated another increase in the next year 

- THE ROLE OF MILLENNIALS IN CORPORATE RELOCATION -

One thing that can be said for sure about this demographic group that is quickly taking over the workforce: they like to be on the go. Already having overtaken the Baby Boomers in the workforce, millennials are arguably the most technology- and travel-adept generation to ever show up on the scene.

Millennials are changing the face of workplaces around the world, as they demand work environments that not only acknowledge their contributions but also their need for flexibility and a good balance between work and private lives. In an Urban Bound study, a full 71 percent of millennials also expressed a desire to work abroad at some point in their careers – a fact that shouldn’t be lost on corporate recruiters.

- Relocation Packages and the Modern Workforce -

Relocation packages are increasingly becoming used not only as a way to keep in-house talent happy in the event of a transfer, but as an effective recruiting tool – particularly for globe-trotting millennials, who often relish the chance to travel and broaden their business and personal horizons. If companies find that they’re losing talent, especially as part of a transfer process, then a review of their relocation policies and strategies may be in order to keep up with the changing faces of the modern workforce.

searching for relocation package information

  

Components of the Average Relocation Package

The average job relocation package will include the following features. Please note that this is a more subjective, than objective, list. Depending on the industry and their competition’s relocation packages, employers can tailor their programs to offer the most competitive and attractive packages to attract and retain top talent. Many organizations either designate an in-house relocation manager to help oversee the move from beginning to end or, increasingly, turn this complex job over to a professional relocation management company. 

Successful assignments and transfers depend on competitive, comprehensive relocation packages. These should be compliant with IRS regulations, and should also align with the organization's goals and objectives. Regardless of the type and number of relocation package components, those that meet the needs of both the employer and employee will be most effective. Oftentimes, these components can be negotiated. But what are some of the features common to the average job relocation package?

Find more relocation package examples and features in our free guide.

  • Full pack and/or unpack services. The employee's household goods are packed by a moving company, saving the employee time and stress. After arriving at the new destination and home, moving company personnel unpack the household goods.
  • Quality moving company service with reasonable insurance coverage. Some moving companies are known for quality moves, some are not. Since moving charges are usually based on total weight, insurance for damaged or lost goods should be equal to your goods’ value.

  • Home sale or lease-breaking penalty assistance. Home sale help can come in a variety of ways, from company-sponsored reimbursement for money lost on quick home sales, professional marketing help to accelerate the timing of sales to the employer buying the home. Renters can expect employers to pay contractual penalties for early lease termination.

  • House-hunting trip, minimum one. Standard relocation programs commonly include at least one, preferably two, company-paid house hunting trips of short duration to give the transferee and family opportunities to find new homes. House-hunting expenses incurred in looking for a new home: transportation, lodging, meals and in some cases, childcare so the kids can stay home (and out of the way) while the parents can house-hunt in peace. (According to the Illinois-based search firm Witt Kiefer, companies are increasingly encouraging families with younger children to leave them home, and reimbursing them for the expense, while looking for a new house.)

  • Temporary housing. Standard relocations include at least 30 days of temporary housing for transferees.

  • Transportation, including auto moving, to the final destination. Most relocation packages include reimbursement for transporting your transferee and his/her family to the new location. If the transferee can travel by auto, reimbursing for mileage expenses is common. Should the move require plane or train transportation, standard packages often include reimbursing the cost of moving the transferee’s vehicle(s).

  • Miscellaneous expenses. As usual the “miscellaneous” category can encompass a lot of small costs. These can include driver’s license fees, pet registration and licenses, cleaning services at the new home, utility hook-ups and other move-related expenses. To keep this category cost controlled, identify or cap most eligible costs.

These are commonly included features of standard relocation packages, which we outline in our guideDepending on your industry and facility locations, there may be more features in the typical relocation package.

Popular features in a standard relocation program may also include:

  • temporary living expenses when transferees must meet hard deadlines to move
  • storage costs for household goods before employees can move into new homes
  • spousal employment assistance in the new location
  • childcare costs and elder help for transferees caring for elderly parents.
  • school location assistance for school-age children
  • a loss-on-sale allowance in the event your present home sells for less than its purchase price (not uncommon since the Great Recession)
  • trips home for those in longer-term temporary housing, usually limited to one every 30 days

Your typical relocation package may or may not include some or all of the noted features. However, in all cases, you should regularly compare your package with those of your competition. If your program is significantly deficient in some area, make senior management aware of the discrepancy, advising them to consider upgrades to keep your standard package equal to your competition’s packages.

While it can be true that the higher the level of an employee’s status within an organization, the more comprehensive and inclusive the job relocation package will be, more savvy companies are offering to underwrite relocation costs even for newer employees as a means of attracting and keeping their top talent. Each company has its own benefit structure and policies vary, so potential transferees need to understand from the outset what is and isn't included (but could be negotiable) to secure the best deal on job relocation packages.

what the average relocation package includes

 

What Kinds of Relocation Packages are Available?

There are almost as many types of relocation packages as there are employees needing the assistance and the companies that hire them. The company’s financial resources and situation, the length of employment, as well as whether the employee is a homeowner or renter also play roles in determining the size and coverage offered in a relocation package.

A core or typical relocation package usually covers the costs of moving and storing furnishings and other household goods, along with help selling an existing home and costs incurred house hunting, temporary housing if necessary and all travel costs by the employee and family to the new location.

Find out more about relocating employees with families in our free article.

Besides the coverage itself, there are a number of ways to administer the package:

  • Direct billing: The transferring company hires and directly pays for a moving company as well as costs involved in selling a current home and all other services needed to help relocate the employee and family.
  • Lump sum: A set amount of money is given directly to the employee to pay for moving and related expenses. For tax purposes, the government considers this as income and therefore taxable, so to offset tax liabilities, companies often reimburse for those in the form of a gross-up (link to gross-up blog post), which frees the full amount of cash for the move. Another possible drawback is that it may be difficult to correctly estimate the total costs up front, due to unexpected out-of-pocket expenditures. If a mover’s initial estimate is lower than the actual costs, for example, the employee may have to dig into their own pockets to cover the difference.
  • Reimbursement: The employee pays for everything up from and is reimbursed by the company after the move. This requires careful record keeping by the employee, including tracking all receipts for expenses. Additionally, employers will likely set a limit above which they will not reimburse.
  • Third-party (outsourced) relocation: In this scenario, all logistics related to moving, including real estate or rental expenses are outsourced to a third party that coordinates a comprehensive array of services. Some of these may include marketing and sale of an existing residence, spousal employment assistance, storage of household goods, if necessary, and rental assistance.
  • Expatriation assistance: This is additional relocation assistance used by multinational companies for employees relocating outside the country, beyond the typical moving and transport of household goods and real estate help. Covered benefits may include overseas trips to search for suitable housing and assistance with obtaining spousal work visas, finding and selecting schools for employees’ children and finding the way around a city in a foreign country. Language and cultural assimilation instruction offered through a relocation package serve to help the employees’ comfort zone and confidence by adjusting to the new culture and its customs.

Offering employees choices in relocation packages provides incentives for current and prospective employees to remain and pursue careers within a company. With competition among companies for top talent, offering attractive relocation packages is a win-win for both companies and employees.

the different types of relocation packages

 

WHO GETS A RELOCATION PACKAGE?

While it is becoming more common for new, junior-level employees to also be offered relocation opportunities, typically the higher the employee’s rank within the organization, the more extensive the covered expenses of a relocation package. A recent graduate just starting their career may have only the basic expenses of moving, while a vice president will often have additional services covered, such as child care while house hunting, as well as airfare and car rentals, lodging and meals for the employee and his/her spouse.

 

HOW ARE EXPENSES COVERED?

Assistance may consist of lump sum cash payments toward expenses, direct billing by the company for all moving expenses or reimbursement after up-front payment by the employee.

Relocation is an area where job candidates and new hires may have a bit more ground to negotiate, as it usually costs much less to move an employee than to pay a higher salary. In fact, a Worldwide ERC survey from 2015 reported that companies spent an average of $71,803 in 2014 to move newly hired homeowners and $23,766 to move newly hired renters.

 

Relocation Packages are good for both sides

Most companies want to save as much money as possible in the course of job transfers while still ensuring that the employees and their families are comfortable and ready to get to work as soon as they arrive in the new location. When used a recruiting tool, a strong relocation package can make a difference in attracting the best job candidates – a critical factor in remaining competitive in a global job market.

relocation packages help transferees

 Editor's note: This post was originally published on February 11, 2014, and has been updated for accuracy and comprehensiveness.

 

Topics: relocation management services, corporate relocation program, standard relocation package, employee relocation

CapRelo Named HRO Today Baker's Dozen Top Global Relocation Company in 2018... Again!

Posted by CapRelo on Fri, Apr 27, 2018

2018-Bakers Dozen

For a baker in medieval England, there were laws relative to the cost of wheat used to make the bread they sold. Bakers could be subject to various punishment if they sold the bread for more than what is was worth. The widely known term ‘baker’s dozen’, of 13 instead of the usual 12, originated when bakers would throw in an extra loaf of bread when selling a dozen for the fear of coming up short. 

As a provider of services to clients who rely on CapRelo to ease the mobility process for employees and their families, we never want to come up short. It’s why we are driven to give more than what is expected—just like bakers with that 13th loaf!

It’s rewarding when those with whom you do business rank you as the best at what you do. Such is the case when HRO Today again named us at the top of a list of global relocation companies with the annual HRO Today’s Baker’s Dozen Award. 

Every year, HRO Today rates companies based on three subcategories: quality of service, deal size and breadth of services. While the feedback is anonymous, it comes solely from the buyers of relocation services. These are the people for which we wake up every day and come to work. I am honored to announce we have been rated fourth Overall and second for Quality of Service.   

Our dedicated team helps to empower employers make the best decisions that drive their global talent. We listen to the needs of global HR teams to find ways to better connect with their cultures and help solve challenges. I’m very proud of our team on this important achievement. 

Would you like to learn more about custom relocation solutions? Leave a comment below or give us a call!

Topics: HRO Today, Baker's Dozen

Tax Rates by Country - Global Wages vs. Take-Home Pay

Posted by CapRelo on Wed, Mar 28, 2018

There are precious few certainties in life but as the old saying goes, taxes are one of them. With America’s tax season in full swing, that inevitability is sure to be on the minds of many in the United States.

During this time of the year it is easy to forget that America isn’t the only country where tax considerations loom over the population, as well as how different tax rates and financial realities can vary around the globe.

With that in mind, CapRelo decided to take a look at salaries, taxes and take-home pay from a number of countries all over the world, and to contextualize that information for an American audience. Here’s what we found.

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To get a baseline on how the average citizen in each country can expect to be taxed, it’s necessary to know how much the average citizen makes. CapRelo examined a report from an intergovernmental economic organization listing the average annual salary for the countries we analyzed. After converting local currencies to their equivalent in U.S. dollars, it was possible to assemble the map above, which illustrates how much the average worker can expect to make around the globe. The countries in darker red are nations where workers are compensated the most.

 

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Of course, the taxman will take a cut, and we were able to find the overall percentage of salary that someone making an average wage can expect to pay in taxes in each country. This was done by taking post-tax earnings and dividing them by pre-tax earnings. We felt this was the best way to produce a consistent comparison across countries, given the occasionally complex nature of various tax codes.

 

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Once taxes have been paid, we get a better picture of exactly how much money the average annual wage is for workers around the globe. This chart shows post-tax take-home pay, once again converted to U.S. dollars. Countries in dark red here have the highest take-home pay.

 

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Comparing maps can make it challenging to ascertain the exact scope of tax impact, so we decided to visualize the data an additional way to show how much of the average wage in each country is consumed by taxes.

 

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Many in America comment on how much they have to pay in taxes, so we thought it would be fun to look at how that rate would change in other countries. By taking the average annual American wage and factoring in the rate it would be taxed in other nations, it is possible to see where things could be better or worse. Only ten of the surveyed countries would produce a lower tax bill than Americans already experience, with the rest taking more… at times, significantly so. Bet you never thought you’d be happy with your current taxes!

 

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Finally, CapRelo wanted to provide an even more detailed examination of taxes around the globe. The result features much of the same data that has already been presented, like average annual salary and post-tax take-home pay for every country (and the average American wage), as well as some new information. First is a more detailed breakdown of the specific tax rate as it applies to the average wage in each country, and second is an analysis of purchasing power.

The latter feature utilizes the Big Mac Index, a metric devised by The Economist that takes the price of a McDonald’s Big Mac in two countries to determine the relative value of money in each place. Utilizing this tool, we were able to find out how much the post-tax take-home pay was actually “worth.” As a result, we see that while somewhere like Russia has an average post-tax take-home pay amount equivalent to just $8,456, that money allows someone to buy the same amount of “stuff” as someone with $19,488 in America. On the flip side, Switzerland’s average take-home pay of $84,006 only goes as far as $65,567 would in the United States.

While taxes may be constant, the information above demonstrates how actual cost impact definitely isn’t. Hopefully seeing how taxes compare across the globe—along with the extra two days afforded by this year’s April 17 deadline—takes a little bit of the sting out of filing this year!

Download Talent Mobility & US Taxes: What You Need to Know

 

Topics: relocation taxes, mobility and taxes, taxes

Tax Reform and Transferees: What You Need to Know

Posted by CapRelo on Tue, Feb 06, 2018

Red Ring Binder with Inscription Tax Law on Background of Working Table with Office Supplies, Laptop, Reports. Toned Illustration. Business Concept on Blurred Background. 3d Render..jpegTax reforms in 2018 will have an impact on deductions and property taxes. Here is a brief summary of the primary changes. Please note that individuals should always consult their tax advisors.

Moving Expense Deduction

As of January 1, 2018, movement of household goods, storage and final move travel are taxable to transferees. With the elimination of the moving expense deduction, the "50 mile", "39 week" and "one year" rules as well as the 18 cents per mile vehicle allowance are no longer relevant. This change should be reviewed closely with your mobility management company to fully understand the impact to your organization.

Tax Rates and Withholding

The tax rates are generally lowered, which should reduce the marginal tax rate for employees. The supplemental withholding rate that is used by most companies to withhold on taxable relocation benefits and to calculate gross-up will fall from 25% to 22%. However, with the loss of moving expenses and other deductions, companies will need to manage their gross-up programs carefully, especially with the new tax rates. 

State and Local Income, Sales and Property Taxes

State and local income, sales and property taxes remain deductible, but only up to $10,000 combined. Employees moving into high-tax areas are more likely to be affected.

Mortgage Interest Deduction

The mortgage interest deduction is retained, but the maximum loan amount to be able to deduct was reduced from $1 M to $750,000. Employees moving into high-cost areas are more likely to be impacted by this new threshold for mortgage interest deductions.

Home Sale Capital Gains Exclusion

There were no changes here. Both the House and Senate had proposed changing the required ownership and use as a principal residence to five out of eight years from the current two out of five. That would have certainly impacted relocation with many transfer­ees moving again inside of a five-year window, but fortunately there were no changes regarding Capital Gains on homes.

Tax Brackets and Rates, 2018

2018 Tax Brackets.png

 

Today's post is brought to you by our friends at Colonial National Mortgage. Click here to download a copy.

Colonial National Mortgage

 

Although this written communication may address tax issues, it is not a covered opinion as described in Circular 230.  Therefore, to ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication (including any attachments), unless expressly stated otherwise, was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matter(s) addressed herein.

Topics: tax impact of relocation, relocation taxes, mobility and taxes

Maternity and Paternity Leave Laws Around the World [2017]

Posted by CapRelo on Wed, Nov 29, 2017

Having a baby and welcoming that new life to the world is a joy for parents. But being able to step away from work to care for the baby can vary significantly depending on your job and where you live. Being that CapRelo is a global mobility company that helps companies and individuals relocate throughout the world, we wanted to take a look at the family leave laws on a global scale.



We felt this was particularly an important subject to cover as this impacts many families involved in the relocation process. Not only do these families have to adjust to their new surroundings, but they also have to adapt to new laws regarding maternity, paternity, and paternal leave, if applicable. For this study, we focused on the family leave laws in the 25 countries with the highest GDP as well as the members of the European Union in order to get a variety of countries throughout the globe. Information was taken from government websites, an ILO report, and WageIndicator.org.

Countries with the best family leave

Consider yourself lucky if you’re in the following countries that provide generous maternity policies: Australia, Poland, Bulgaria, and Sweden. For dads, paternity laws in these countries were some of the best in the world: Finland, Slovenia, Lithuania, Sweden, and Brazil.

Swedish parents are lucky in that they are entitled to 480 days of paid parental leave when a child is born until the age of 8. During 390 days out of 480, they are entitled to 80 percent of their regular wages, and the remainder at a flat rate. Fathers in the Netherlands actively participate in “Papadag” (daddy day), which is a day off of their workweek during paternity leave to spend taking care of their children. The driving force behind this is to promote a better work-life balance and equality in parenthood.

In regards to pay, we were pleased to find that the majority of countries pay 100 percent (or close to) of the wages to the mother and father during their leave.

Countries lacking in family leave

Interestingly, many countries do not have laws that give significant leave time for mothers or fathers. This can be a difficult reality for parents. The United States, for instance, has one of the worst policies in that there is no mandated leave for mothers and fathers. With that being said, maternity and paternity leave is up to the employer's discretion which can be a positive or a negative.

One pattern that was fairly consistent was the lack of leave time for fathers. Paternity leave is almost always lower than maternity leave, but it was surprising to see how little some fathers actually get. According to our research, the following countries have no mandated paternity leave in place for fathers: Japan, Germany, India, Russia, Switzerland, Croatia, Czech Republic, Austria, Ireland, Malta, Cyprus, and Slovakia. Some countries, such as Mexico, Saudi Arabia, Taiwan, Korea, and Indonesia, have below-average maternity leave laws.  

Takeaways

Overall, the statistics we found show that family leave laws can vary significantly throughout the world. It’s no secret that this is a passionate and important subject regardless of the country someone lives in. Mothers are almost always allowed longer leaves, but paternity leave has been growing in recent years. Even if you have little control over your next country of residence, it’s vital to understand these policies and take them into consideration. However, no matter the family leave laws, a new baby is a wonderful (if maybe stressful) thing for new parents.

Relocating Employees with Families

 

Topics: human resources, employee engagement, employee benefits

12 Key Points in an Employee Transfer Letter

Posted by CapRelo on Fri, Sep 15, 2017

Employee Transfer Paperwork

Employee transfer letters are given to employees who are being transferred to a different branch, department or location of their employer. The reasons for the letters is more than just common professional courtesy. Transfer letters provide employee and employer the "ground rules" of the transfer.

Learn more about how to write an employee transfer letter with our free article.

Foundation for Transfer Letters

The purpose and reasons for issuing transfer letters is central to successful employee relocations. Among the motivation and goals of these documents are the following: 

  • Create a written record of the employee's transfer for the personnel file.
  • Provide evidence that the employee's compensation account follows the employee accurately.
  • Track the personnel in each department to ensure a correct head count for staffing purposes.

Whether the transfer is employer-generated or a mutual agreement between employer and employee, the transfer letter offers visible, physical evidence of the move from one department or location to another

Transfer Letter Checklist

Consider the following items as a template from which to create appropriate transfer letters.

  1. The employee's full name and current address, with accurate contact information.
  2. Identify the reason for the transfer
  3. Name of the department or location from which the employee is transferring.
  4. Name of the department or location to which the individual is moving.
  5. The exact effective date the transfer will take place
  6. State the official start date in the new location, if the date is different from the effective date of the transfer
  7. The name of the supervisor in the new department to whom the transferee will report.
  8. The creation or issue date of the transfer letter.
  9. Note the details of the position in the new location, including any bonuses the employee is to receive as a result of the transfer.
  10. Use a standard letter or memo format, whichever is consistent with previous transfer letters issued by the employer.
  11. Closely proofread the letter to ensure accuracy.
  12. Ensure the letter or memo has the original signature of the appropriate person authorizing the transfer.

If there is a change in title or responsibilities, details about those changes may be described. Additionally, changes in titles and duties should be documented for inclusion in the employee's personnel file. The letter should refer to the the company's relocation policy and summary the portions of the policy applicable to the employee. 

The most vital feature of transfer letters is their clarity. They should be straightforward and direct. This will avoid misunderstandings or confusion regarding the transfer.

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Topics: employee transfer, writing relocation offer letter, employee relocation

How To Determine Fair Tiered Relocation Packages

Posted by CapRelo on Thu, Jul 13, 2017

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Companies offer relocation packages to their employees in tiers to help control relocation costs. Tiered packages are often established to address a variety of complex issues, but essentially it means that what is offered to one employee may not be offered to another. A company trying to retain existing employees or attract prospective talent may find they are able to offer more attractive packages using a tiered program. Determining a fair tiered policy is often merely a matter of weighing certain criteria against its value for the company.

You can learn how to save time and money using tiered relocation packages in our free guide.

Assign by Position and Experience

High-level services are usually considered much more valuable within a company than those functions carried out in lower level positions, which require fewer responsibilities and little need for certain skills sets. For this reason, employees who have reached certain levels in the company (professional, manager or executive level, for example) may be seen as more valuable within the organization and may be offered more robust relocation packages than others.

Examine Existing Living Status

Sometimes, an employee’s homeowner status could be one of the key factors in whether they are offered a higher or lower tier of relocation package. Employees who own homes may need to be offered additional benefits, especially when considering the complexities inherent in having to sell or rent their homes to relocate. Likewise, a company may determine that an employee who rents a residence will need less assistance and will have fewer difficulties moving.

Another factor that may be considered is if employees have families, in particular those with young children who might be more resistant to relocation than single employees. Offering employees with families a more attractive relocation package might help them overcome both practical and psychological barriers to moving.

Corporate policy and culture should always factor heavily into decisions that determine the features offered in tiered relocation packages. For some companies, financial factors may be the bottom line. Other companies may place higher value in employee morale, or in their public perception as an “employee corporation.” Senior management and Human Resources should therefore work hand in hand with the finance department to establish specific criteria when determining the features offer in tiered relocation packages.

Save Time & Money Using Tiered Relocation Packages

 

Topics: Tiered relocation packages, attracting new hires

How To Calculate Tax Gross-Up for Relocations

Posted by CapRelo on Tue, Feb 03, 2015

tax-calculator

Relocation tax gross up defined:

When an employee receives a one-time tax relocation incentive or reimbursement of taxable relocation costs and the company adds to the reimbursement amount, a tax gross up occurs. Reimbursing transferred employees is good corporate relocation policy as it improves employee retention and productivity while helping maintain good customer/employee relations and management.

How is tax gross up calculated?

  • Flat Method – A flat percentage calculated on the taxable expenses and then added to the income. For example, an employer will gross up at a rate of 25% for taxable expenses.  If the transferee is paid $1,000, the gross up would be 25% of this, or $250, and therefore the transferee would receive a benefit of $1,250 total.  Note that the gross up is also considered taxable income and may create an additional tax liability to the transferee.

    It’s important to note that this method likely doesn't cover the employee's tax liability since the gross up is taxable income. Additionally, this method is not compliant with supplemental withholding regulations.

  • Supplemental/Inverse Method – This method is often used because not only are relocation expenses considered income, but the gross up is considered income too.  Therefore employers will pay the gross up on the gross up.  To determine the amount, add up all the tax rates (fed, state, OASDI, SS) and then divide the taxable expense by the sum of the tax rates. Take this number and subtract the taxable expense. 

     

    Supplemental-Inverse Gross Up.png

    This methodology covers gross up on the gross up, but may not accurately reflect the tax bracket of the employee.

  • True-Up Method – This method is typically handled by a CPA or full-service relocation companies and also incorporates the tax on tax calculation. The difference is this methodology takes into account employee income and IRS Form 1040 tax filing status. In most cases policy dictates that only company-earned income will be considered and other forms of income, such as spousal income or investment income, won't be taken into account.

Should your company handle relocation tax itself or give the job to a pro?

Many corporate accounting and finance departments, while adept at handling day-to-day corporate financial operations and record-keeping, may not have the expertise when it comes to accurately and fairly figuring tax gross up. Due to the complexity of tax laws and other local, state and federal regulations, turning the work over to a full-service global mobility management company may be beneficial.

The consequences of miscalculating or ignoring tax gross up:

  • Extra work and time (read: increased company expenses) as well as frustration for your accounting and HR departments if they need to recalculate and correct mistakes and possibly issue corrected W-2 forms (W-2C).
  • A possible audit and /or tax penalties and other fines.
  • Diminished employee morale due to being unfairly taxed, resulting in lowered productivity and retention rates.

The take-away:

Working with an experienced global mobility management company that can efficiently handle all aspects of a transfer may prove beneficial in eliminating tax errors and omissions. Among its many services, a good global mobility management services provider will track expenses and submit accurate reports of taxable costs as well as help calculate tax gross up. As one of your preferred suppliers, a trusted global mobility management company can give you and your transferees peace of mind – along with a lower tax bill. 

 

Download Our Guide to Managing Business Travelers

 

Although this written communication may address tax issues, it is not a covered opinion as described in Circular 230.  Therefore, to ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication (including any attachments), unless expressly stated otherwise, was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matter(s) addressed herein.

Topics: calculating tax gross up

Avoiding Employee Turnover After A Relocation

Posted by CapRelo on Wed, Mar 26, 2014

Please enjoy our video, "How To Avoid Employee Turnover After A Relocation - CapRelo."


Download

 

Topics: employee retention, employee relocation concerns, talent management

Important Features of a Home-Finding Trip

Posted by CapRelo on Tue, Aug 20, 2013

istock_000010968215large-resized-600Competitive relocation policies should include components related to finding a home in the new location.  One such benefit is to offer one or two home finding trips to the destination location.  There are several additional provisions that are considered competitive components.

Our free article provides additional information on real estate considerations for your relocation policy.

House-Finding Trip Provisions

Locating an appropriate home in an unfamiliar new location is a major transferee concern. Whether they are homeowners or renters, relocating employees need assistance when moving. In addition to setting reasonable parameters and time periods for each trip, among the most valuable home-finding trip policy features are:

  • Airfare or mileage reimbursement.
    Depending on the distance of the destination location from the current workplace, transferees and their spouses may prefer to drive or need to travel by commercial airlines.

  • Lodging.
    Describe (or name) acceptable hotels and maximum nights that your company will permit. This is another competitive feature that permits you to exercise cost control, while clearly defining your reimbursement policy.

  • Rental car.
    Transferees need flexible transportation for visiting homes in the new location. Unless employees are relocating to the center of a major city, such as New York, where taxi-fee reimbursement may be a better option, providing a rental car for viewing houses is an important feature.

  • Daily meals allowance.
    Set reasonable per diem meal allowances, capped depending on the parameters of your house hunting policy features. For example, do you permit transferee only, transferee and spouse or transferee and family home-finding trip reimbursement? Defining your daily allowance per person should eliminate confusion or uncertainty.

  • Expert assistance from a real estate agent.
    Be sure to partner with a local or national real estate firm with at least one available agent who has proven experience in relocation house hunting necessities and time constraints. Transferees will maximize their home-finding time, while employers control costs and get the results they want.

These house hunting trip features, accompanied by logical, reasonable and equitable reimbursement maximums, accomplish at least two important goals.

  1. You will offer a competitive corporate relocation program that helps you control most home hunting trip expenses.
  2. Your transferees will endure less uncertainty, stress and concern with finding an appropriate home in the destination location.

Compare your home-finding policy benefits with competing companies’ policies.  Be prepared to modify your policy to keep your relocation program competitive in your industry.

When you combine consistency of application with flexibility to modify policies when necessary, your relocation program will produce the desired results. Surprises faced by employers or transferees are unwelcome events. Minimizing uncertainty and confusion with house hunting trips delivers rewards to employers and transferees alike, while ensuring a smooth, cost-controlled relocation experience.

Free Article:  A Guide to Developing  Relocation Policies

Topics: Corporate Relocation Costs, House Hunting Trips

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