Relocation can be an incredibly exciting opportunity for the rising talent with your organization. Enthusiasm can dampen, however, if the cost of living in the destination location is higher than in their current home base. Business may be booming in hot housing markets like San Francisco, New York, LA and Boston, but asking employees to make a move that impacts their bottom line can prove a burden to yours. Offering COLA (cost of living assistance) to talent considering assignment can offset increased living expenses that relocating employees incur when they make a move from a low cost area to a high cost one. There are a host of options to employ. Here are 5 simple tips to avoid problems.
1. Use pre-decision services
It’s easy to make the right decision when you’re fully informed. A pre-decision service is a wise investment to help employees understand the ins and outs of the new location. Housing options, commute times and local/state tax issues can all influence an employee’s decision to take a move or go on assignment. Homework done ahead of time can go a long way to saving costs affiliated with a failed relocation.
2. Base eligibility on location or threshold
You can limit the cost of living provision by considering a minimum differential that triggers the benefit. This enables you to contain costs while providing assistance to employees impacted by the greatest difference in costs. Differentials are usually 5% or 10% and very few companies exceed 15%. Homeowners and renters are typically treated identically. If you are asking a reluctant family to move from Des Moines to New York, this tactic may be to your best advantage.
3. Cap maximums and tax assistance
Whether or not allowances are capped or salary amounts are considered varies from industry to industry. The majority of companies don’t cap the allowance or use a maximum salary in their COLA allowance calculation. Just over a third of organizations provide tax protection on COLA.
4. Create a transparent payment schedule
Paying a large COLA up front introduces risk for an organization. Most programs provide assistance over a 3 year period on a declining basis. Including a payment with each pay period is the most common method. Some companies make annual, semi-annual or quarterly payments. Whatever your method, be sure to have clear and explicit language written into the agreement so there’s no surprises on either end and no litigation drama.
5. Implement declining scale allowances
Provide allowances on a sliding scale as employees become used to their new home area and what it costs to maintain their lifestyle in the new locale. Time periods can range from 3 to 5 years. Lump sums are ideal for renters who need help with one-time expenses such as security deposit.
Deploying critical talent to high cost markets can be a hard sell but it’s not impossible. Showing your employees that you understand their point of view and can provide reasonable solutions through the judicious use of COLA can mobilize your staff to sign on to assignment.
For more information on COLA best practices, request a copy of our latest COLA whitepaper.
Weichert Workforce Mobility will be conducting complimentary, half-day educational summits for HR & corporate mobility professionals in Zurich and Geneva. These programs offer strategies for measuring engagement levels across your mobile workforce and insight to key mobility trends that will impact your program for years to come. Subject matter experts from the corporate and provider perspectives will provide valuable insights and best practices to make it faster, easier and more cost-effective to manage mobile talent.
To ensure an intimate learning environment, attendance at these events will be limited. Dates and locations are as follows:
Tuesday, 10 October, 15:00 – 20:00
Rennweg 7, 8001 Zürich, Switzerland
Wednesday, 11 October, 15:00- 20:00
Rue de Lausanne 14, 1201 Geneva, Switzerland
Following up on our earlier post about the Ontario Non-Resident Speculation Tax that became effective June 1, the following is a summary of current status as obtained from reliable sources but which cannot and should not be relied upon as legal or tax advice and Weichert clients should review this tax law status with their applicable tax advisors.
Quite simply, several material developments have occurred that corporate clients and relocation companies should be aware of as they undertake home sale transactions within the Greater Golden Horseshoe* Region (GGH).
Foreign national purchasers (essentially any buyer who is not a Canadian citizen or permanent resident or a couples purchase in which neither spouse is a Canadian citizen) will be subject to paying the 15% purchase price speculation tax, and relocation companies and clients should be prepared accordingly. Please note that some special foreign purchaser exemptions may apply, and would need to be pursued by experienced local counsel with the Ontario Ministry of Finance.
Today, we have a lot of Jetsons-style technology, literally at our fingertips. Who doesn’t love FaceTime, Google searches and the Roomba (Ok, maybe not the Roomba)? To remain competitive and keep your rising mobile talent happy, it’s vital to acknowledge that the construct of family has also progressed. Let’s visit some of the major points that are part and parcel of 21st century mobility management.
What Makes A Family A Family
As technology has changed, so too has our definition of “family.” No longer defined by Dad, Mom and 2.2 children, families can be multigenerational, include domestic partners, be single parent in nature and even have members of a different species. Being sensitive to your mobile employee’s particular situation strengthens the corporate relationship, increasing the likelihood of a successful assignment.
When your mobile employee is not flying solo, it’s imperative to lend support and consideration to a spouse or partner who may be feeling less than thrilled about uprooting his or her life. Often, there is an entirely separate, established career to consider and offering career counseling assistance can help. The loss of a second income may be the kind of financial hit the family just can’t take and can influence whether or not your preferred assignee signs on. Continue Reading →
Today’s post was authored by guest blogger Dave Leboff, President, US Operations for Immedis Inc., a premier global payroll solutions provider based in Dublin and New Jersey.
The Brexpat vote is a year in the rear view mirror and it continues to create growing ripple rings for Europe, the US and the world. A year ago I wrote a short article about the potential effects of Brexpat on exchange rates and, therefore, on expatriate allowances. That prediction is bearing out.
If we take a look at employees with Cost of Living Allowances the effect over the past year can be illustrated by looking at the Cost of Living Allowance (COLA). Continue Reading →
Last week, Marianne Schmidt, our VP of US Domestic Tax and Reporting, conducted an engaging webinar on ways companies can save cost by re-examining their tax gross-up processes. Attendees had a lot of questions, and while we didn’t have time to address them all during the Q&A segment of the webinar, we have, as promised, presented them here, along with Marianne’s responses, for your reading pleasure. Marianne remains happy to continue this dialogue with anyone interested; feel free to reach out to her directly or through your Weichert contact.
In what situation would a person only gross up deductible items for FICA only? If items are deductible wouldn’t they normally be non-reportable on the ER side?
Deductible moves and deductible expenses are two entirely different subjects. A deductible move is one that meets all the criteria (is closely related to the start of work, meets the distance test and meets the time test). HHG and final move expenses (except meals and mileage > IRS limit) are not reportable if paid to a third party and are only reportable (not taxable) if they are reimbursed to the employee. Deductible expenses are taxable expenses that have been paid to or on behalf of your employee and are the types of expenses that are deductible on schedule A of your 1040. Those deductible expenses should be grossed up for FICA only, otherwise your employees will experience a tax gross up windfall.
I thought the US payroll is pay-as-you-earn, therefore you need to issue the withholding payments and report the income when the transaction occurred to be compliant?
We do not withhold taxes from payments, we only provide gross up calculations to payroll. Once payroll assigns a check date, normally the taxes are due the next day.
What is the risk involved with moving to gross-up once per year?
Moving to an annual reporting schedule is the decision of your company, the risk would be whatever you make it or not. From my perspective, however, the risk is no different than other frequencies. Our clients have always been compliant and have never failed or been questioned under audit. Continue Reading →
On April 20, 2017, the Province of Ontario enacted a 15 per cent non-resident speculation tax (NRST) on the purchase or acquisition of properties in Metropolitan Toronto and its surrounding areas, referred to as the “Greater Golden Horseshoe” (GGH).
The GGH incorporates the greater Toronto area, including Toronto itself as well as Brant, Dufferin, Durham, Haldimand, Halton, Hamilton, Kawartha Lakes, Niagara, Northumberland, Peel, Peterborough, Simcoe, Waterloo, Wellington and York.
Similar to the 15% NRST tax imposed for greater Vancouver area in British Columbia in August 2016, the Ontario NRST, which went into effect on April 21, 2017, is intended to hamper the bid-up by foreign buyers/corporations in the metropolitan Toronto residential housing markets. The announcement was included as part of the 16-point proposal introduced in the Ontario government’s Fair Housing Plan, which aims to bring stability to Ontario’s real estate market.
While research shows a growing number of millennials choosing to purchase homes, the majority of this demographic still prefer to rent, especially in metropolitan areas, which are far more attractive to skilled employees looking for work/life opportunities in vibrant cities.
Of course, as the experts say, living in these locations ain’t cheap. Especially in New York City, where the median rent for a two bedroom apartment is $1,638 in the metro area and $3,895 in Manhattan. Groceries in NYC cost 28-39% more than the national average and public transportation is about 75% higher than the average city.
Companies certainly feel that this can be a deterrent to mobile employees, which is why cost-of-living allowances are on the rise. According to Worldwide ERC’s recent Relocation Assistance, U.S. Domestic Moves survey, 39 percent of companies reported using such allowances in 2016 versus 32 percent in 2012. Among companies reporting difficulty in transferring employees to high-cost areas, the most frequently cited reason (by 80 percent of respondents) was “very high housing costs.” Continue Reading →
On November 1, 2016, China’s State Administration of Foreign Experts Affairs (SAFEA) launched a pilot work permit program in select regions of Beijing, Shanghai, Tianjin, Anhui, Guangdong, Hebei, Shandong, Sichuan and Ningxia. The program is widely anticipated to roll out nationwide on April 1, 2017.
China’s previous foreign work permits have been integrated into the Permit System for Foreigners in China, a single work permit based on a three-tiered classification system. The permit provides a federal model, eliminating the often troublesome and inconsistent regionally administered policies.
The three-tiered system classifies foreign workers as A, B or C level candidates, based on their education, salary level, age, time spent working in China and Chinese language skills. Applicants who receive more than 85 points are given the letter A, 60 to 85 points, B, and less than 60 points, C. Continue Reading →