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Ask the Mobility Expert: “Should We Gross-up Lump Sums for New Hire Grads?” 08.26.2014 | Jennifer Connell

Q: Our company moves a lot of new hire grads who receive a lump sum. Is there a best practice for whether or not this lump sum should be grossed-up?

A: While they’re not right for everyone, new hire graduates are one demographic for which the lump sum is very appropriate. According to the results of ERC’s New Hire Policies Survey, 46% of companies offer at least some entry-level new hires a lump sum to cover mobility expenses.

A lot of existing research doesn’t get into whether or not this amount should be grossed-up, but in my experience helping companies develop policies, the majority do provide tax assistance (in the form of a gross-up) on lump sums, even for those at the new hire grad level/tier. ERC’s survey data adds that when items are reimbursed, 70% of companies cover the gross-up for the additional federal and 64% cover the state tax liability caused by the move, supporting my findings.

One of the reasons companies provide this support to their new hires is that, generally speaking, this demographic, being fairly new to the workforce and mobility programs, may not be fully aware of the tax impact.

Further, lumps sums for new hire grads are typically low, or nominal, and if tax assistance is not provided, the overall amount of assistance is drastically reduced. This requires employees to be even more resourceful with their funds, which can be perceived negatively and reflect poorly on the new company.

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Written by Jennifer Connell

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Jennifer Connell, SCRP, SGMS-T, is a Practice Leader with Weichert’s Advisory Services group. She has over 25 years of experience in the workforce mobility and employee benefits industries and received Worldwide ERC’s Distinguished Service Award in 2017. She has also spoken on workforce mobility topics at industry conferences throughout North America.

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