If you're like most companies, you are not taking advantage of the Relocation Allowance (RA), a tax break that both companies and employees benefit from when the employer pays for an employee’s relocation expenses. Step increments (see table here) Differing numbers of steps within grades. One of the keys to an easy relocation is to make sure that you, your significant other, and your family are all on board with the decision. the relocation costs. Let’s say you’re working at Google in Europe, then you relocate to the USA using L1 visa with adjustment of the salary to be higher. I live in. In some cases, employees accept a job offer and relocation, only to discover that the job is more challenging than they anticipated, so they end up struggling with not just a new job but getting accustomed to a new city and lifestyle. Therefore, compensation can differ by industry, city or even position in the company (executives tend to get more). Relocation is an area in which companies are more willing and able to negotiate because salary is a recurring expense (and thus a bigger commitment) while relocation is a one-time expense that, in some companies, comes from a … *** Estimated cost to replicate all of Benivo’s relocation package benefits in-house. Benivo is a tool to provide relocation support to all employees, irrespective of salary level and seniority. That's where a cost of living calculator (like the one above!) With tax equalization, housing allowance, cost-of-living adjustment, and other benefits, the typical expatriate compensation package is two to three times the home-country base salary. When employees relocate to or within the UK, both they and their employers can save a lot of money on Income Tax and National Insurance. The reasons why companies do not designate relocation support as such when reimbursing junior employees and new starters are: This is where Benivo comes in. TWR is about expenses incurred during business travel - which can last up to two years. Suggested Change: £18k + £2k relocation cost reimbursements = total is still £20K. Filter by location to see Relocation Consultant salaries in your area. However, as these savings are relatively small on an individual basis, it would be costly to keep track of these expenses on your own. Company saves £276 and Frank saves £640 - this is like a 5% gross salary increase for Frank 1! With Benivo, companies are now able to offer, for £499 per employee, a full suite of relocation tools to all employees and new starters. For example, an expatriate with a €100,000 annual salary will cost the employer €200,000-300,000 per year incl. Because of the rather stringent compliance requirements of this scheme, most companies only take use the RA when highly-paid executives move for work. ** Comprises Benivo’s complete relocation package as well as tax compliance on the Relocation Allowance. Although we would love you to use Benivo to leverage our compliance-readiness, working with us is, of course, not a requirement to take advantage of the tax benefit. If the cost of living is lower, never volunteer to take less pay; if that's the case, stay at your same pay rate. One of the many benefits of Benivo is that we keep track of all the relocation-related expenses the employee made and keep an electronic copy of all invoices. Gain a competitive advantage in hiring: More cash-in-hand for your employees. Reading through some of the articles and comments on here, it seems that new hires easily start with a salary above $50K. The challenges of finding where you belong in a strange area will only compound any on-the-job frustration you could have. If a job relocation coincides with a promotion, you should expect a pay increase. Salary Increase Letter: Relocation Dear [Manager Name], I am delighted to be part of this wonderful and professional team. A Letter for Accepting a Job Offer but Requiring a Salary Adjustment. *** Estimated cost to replicate all of Benivo’s relocation package benefits in-house. (2020-12-28 salary.com) Start With a Relocation Costs Budget . Ask a Manager: Was I Burned In This Salary Negotiation? Will you get lower european salary? This tax burden can be reduced by simply having the employee pay these relocation cost and the employer then reimbursing them. I currently make $50K. She holds a Master of Arts in sociology from the University of Missouri-Kansas City. Great, let’s go a little deeper. $50,000. It will merely be an educated calculation based on the letter of the law as to be found on HMRC’s website. Through technology, we are able to dramatically reduce the cost of a service that, in its traditional form, was so expensive so as to only be affordable for senior employees. Details can be found. Online calculators will help you determine the differences between geographic location, including salary differentials to measure whether your pay should be upgraded to adjust to the cost of living in your new city. Always negotiate for a salary increase, never a decrease, even if the cost of living in the new location is lower than where you're currently living. He currently lives in Manchester where he graduated from university. Sometimes this change is accounted for in salary alone, but other times this becomes part of the employee’s relocation benefits. Designating a portion of compensation to an employee as Relocation Support helps a company save on tax/social security in line with current legislation and provide a cash boost to the employee to whom moving expenses are a large cost factor. Salary estimates are based on 18 salaries submitted anonymously to Glassdoor by Relocation Consultant employees. Prepare yourself for change, even if you're staying with your current employer -- the workplace culture might be different, depending on the geographic location. HMRC is suspicious of such arrangements and may subsequently deny them tax exempt status. A budget is essential for managing the day to day expenses, and you can apply the same concept when a move is in the cards. Compared to the scenario in which he’d have received the £2k allowance as part of his salary, Frank wins £640. This article references a UK-specific tax structure. The relocation allowance must be spent or the relocation benefits provided by the end of the tax year following that in which the relocation took place. Introducing the Relocation Allowance, an HMRC tax and social security relief for companies and employees. See how far your salary will go to maintain your standard of living using our Cost of Living Calculator. $0. $500K. Instead, offer her £18,000 + £4,000 relocation support4. We clearly highlight which of the expenses are eligible for tax deduction and, that way, allow you and the employee to realize this benefit. ACME London does not have to pay NI contribution (13.8%) on the relocation cost of £2,000. I’m never going to turn down an extra $6k over a 4.5 year period for doing the same work. For a non-mustachian applying the 30% COL adjustment to the full income and saying they want an income of $70k might be appropriate. 2 There are other countries in which similar rules apply and we will update this blog post as we uncover them. Using Benivo’s compliance-ready relocation solution, you easily aggregate all the savings and keep track of the employee’s invoices. In this article, we will cover RA. In the UK, there are two ways to save on tax and National Insurance (NI) when it comes to employee relocation - Relocation Allowance (RA) and Temporary Workplace Relief (TWR). When you finally have a job offer in hand, you might be so excited about the proposition of starting a new job that you simply want to dispatch a response that says, "I accept." Always negotiate for a salary increase, never a decrease, even if the cost of living in the new location is lower than where you're currently living. I want to live in. Chapel Hill, NC. Because if used correctly, the RA can leave an employee with a. To take advantage of this tax benefit, you may need to make a few changes to your compensation structure. Relocating for your employer should never be a backward step in your career. The more you currently spend on relocation the more you will save on tax. can ** Comprises Benivo’s complete relocation package as well as tax compliance on the Relocation Allowance. Just enter your salary and job title as well as your current location and the city where you're considering a move. For a mustachian, they would need a salary of $100k - $30k x 30% = $91k to still be able to save $70k and maintain their lifestyle (now by spending $21k). It's the support you need for making a smooth transition. How Salary Cost-Of-Living Adjustments Are Calculated . If, for example, the cost of living is 10% higher then your salary should be adjusted accordingly. 100 junior employees like Frank: 100 x £276 = £27,600. If you are relocating many junior employees on a regular basis and are not taking advantage of the Relocation Allowance, you are leaving a lot of money on the table, both for yourself and the employee. But, a $0.64 per hour wage decrease is a lot less shocking than a $6000 pay cut. It is an enrichment experience and a chance to be exposed to a new environment. Salary and Post Adjustment Salaries are determined within the framework of the United Nations Common System and are paid in the currency of the duty station. A formal contract is not necessary, just a simple signed letter explaining what assistance is being provided by what time. However, he does not have to pay income tax and NI contributions on the £2,000 which he spent on various items in the context of his relocation. Post adjustment is an amount paid in addition to the net base salary, which varies according to the cost of living at each duty station in comparison to New York (the base of the UN remuneration system). You can’t tell them “you’re currently making £20k - let’s change this to £18k and we will pay for your relocation expenses of £2k”. This net bonus translates into an effective 5.23% gross salary increase!3From the company’s point of view, the savings can become very meaningful if there are many relocating employees. 52 weeks per year x 4.5 years=234 weeks. If you live in one location but work in another, the cost of living calculator will make those adjustments to provide an accurate estimate of the change in COL. Make a tweak to your compensation structure and enable junior employees to benefit from RA as well. Your time on the career ladder is also likely to involve relocation – either you find the perfect job in the strangest place or your current employer offers you an opportunity elsewhere. Base salary scale: Two different net base salary scales: one for staff with dependants and another for staff with no dependants. → Learn how to save even more using Temporary Workplace Relief. Comparable salary in Chapel Hill, NC. Say you, based in Glasgow, hire a junior employee, Lisa, who currently lives in France, and plan to pay her a salary of £22,000. The estimates calculator helps United Nations staff members understand changes to the salary and benefits under the new compensation package for internationally-recruited staff in the Professional and higher and the Field Service categories that was approved in December 2015 by the General Assembly resolution (A/RES/70/244). If you're considering moving to another town or city you may be wondering what salary you'd need to maintain your standard of living in the new location. If you have strong intakes of graduates, this will become a significant source of savings. If you currently offer a signing bonus because the employee will incur relocation cost: As outlined in Frank’s case above, change the signing bonus to a commitment to reimburse the employee for their relocation expenses. The rationale is that you're building a new life in a strange location and you may be uprooting your family to accommodate your professional growth. I just want to throwback some discussions which were held about a half … Continue reading … Relocation shouldn't mean taking a loss. And if you think: “We don’t have a budget for this”:In many cases (see the examples above), this will actually end up saving you money. Our platform offers a very cost-efficient, compliance-ready solution to realize savings immediately - both for existing and for new employees, no matter their salary level, and even if you currently don’t support employees financially in their relocation. Had Frank received the £2,000 as part of his paycheck, he would have had to pay 20% tax and 12% NI contribution on it. * Figure quoted by a certified tax expert we consulted on the matter. The salaries and related allowances of staff … Given that the employee would have to agree to this arrangement, this would be considered by HMRC to be a voluntary salary sacrifice and therefore, expenses incurred would be fully taxable. Ruth Mayhew has been writing since the mid-1980s, and she has been an HR subject matter expert since 1995. A negotiation about relocation compensation is the same as any other negotiation. This expense can be claimed if your original home is unavailable or unsuitable as a result of furniture removal or other factors relating to the relocation. That's your starting point -- not the maximum of what you should request, because you have the added expenses of moving and possibly selling a home and buying a new one. Let’s compare two scenarios in Lisa’s situation (reminder: Lisa makes £18,000 and the relocation cost are £4,000): * Figure quoted by a certified tax expert we consulted on the matter. By making these changes (adjusting compensation to separate relocation cost; using Benivo to effortlessly realize the savings), companies can P-1 = 9. These figures may change over time. Salary Increment Request Letter to Boss Fatima Group, Cant Respected Human Manger, I hope you are enjoying well your best health. Copyright 2021 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. Promotion and salary increment letter format. Key takeaways in this article: Do we have your attention? One large company we work with pays £500 signing bonus to relocating employees. 1 We are using the tax rates of tax year 2016/2017. 3 Frank’s net pay is £15,407 (£18k gross) + £640 (tax savings) = £16,047, which is as much net pay as he would have if he were paid £18,941 gross, which is 5.23% more than £18k. Do you have junior employees who move their home (nationally or internationally) to a new place within the UK to start working with you? Moving to a new city? Example - new starter Frank moving to London: Traditional scenario: £20k annual gross salary, By making these changes (adjusting compensation to separate relocation cost; using Benivo to effortlessly realize the savings), companies can. While this is already being done for senior employees, mid-level and junior employees usually miss out on this tax benefit because they receive their relocation support in the form of a one-off bonus (which is fully taxable). Sample letter for salary increase to employee. According to the Workforce Vitality Report from ADP, full-time workers who switched jobs in Q1 2017 saw a 5.2% increase in salary, compared to a 4.3% bump for those who stayed put. Important to note here that this must not be structured as a salary sacrifice arrangement - i.e. 40 hours per week x 234 weeks=9360 hours. I will be starting in 2011. Once you and the company agree on a compensation package for your relocation expenses, make sure you capture that agreement in writing. If you currently offer a relocation support bonus: As outlined in Frank’s case above, change the bonus to a commitment to reimburse the employee for their relocation expenses. But data shows that switching jobs at the right time can be a smart move no matter where you are in your career.. You will be responsible for corroborating our calculations with your own independent financial advisor. Both you and she will end up saving significant amounts: It’s worth stressing that tax relief on relocation support isn’t available when the employer pays the employee a lump sum. With relocation assistance, you’re not considering just your annual salary, bonus, and benefits, but also the entire package offered to … If you currently don’t offer any financial support for relocation: There’s nothing to be done in terms of tax optimisation. Avoid going into salary negotiations blind -- do your research and set your sights high because it's not just about the money you need to be successful. As you are aware, I have been recently transferred to [Specify new location]. Then you decided to come back to european office. P-2 = 12. One unified net base salary scale, applied uniformly to all staff, regardless of family status. What is COLA? Proactively helping the employee reduce their tax burden is a forward-thinking measure by the employer and sets the relationship off to a positive start. They simply file their expense reports, receive cash from you, and are done. Not only will we show you the cost … Like all salary packaged items, you can’t claim an income tax deduction on packaged relocation expenses. The expenses you can claim include: Temporary accommodation at your original location. You won’t need to pay NI contribution on these reimbursements, and your employees won’t be paying tax on them. Thank you for your attention to this matter. → Benivo is your compliance-ready partner. Salary increases above 20% were also uncommon, with only 12.7% of the sample receiving salary increases of 20.1% or more. Benivo operates globally and offers relocations across all of North America, Europe, East Asia, and Australia. Think of job hoppers, and you likely think of the just-out-of-college crew. Moving to a new city and going into a new job can be overwhelming. The average salary increase was 14.8%, while the median increase was 13.2%. Eligible are the following cost categories: cost of buying and selling a home, moving cost, cost for temporary accommodation, bridging loans and certain items for domestic use; The list is complex. This is only valid up until £8,000 of relocation cost. Therefore, in the salary negotiation process, you have to estimate the cost of her relocation on her behalf before offering her the salary split. Therefore, make it worthwhile for you to relocate and assure your employer that the salary bump is warranted. Cost of living allowances or adjustments (COLA) go by many names but operate essentially the same: An employee is relocated from a low or moderate cost of living location to a higher cost of a living location, … I received three offers from three Big 4 firms but all offered salaries were relatively far from $50K. Instead, the company needs to account for all individual cost items Lisa incurred during her relocation through receipts she kept. Benivo is your partner to realize these tax benefits. For junior employees paid £18-25k, the cost often outweigh the benefits.With Benivo, this situation is history. Certain eligible cost incurred in an employee’s relocation, up to a threshold of £8,000, are not subject to NI and Income Tax.Example: Frank (yearly salary: £18,000) is starting a new job with ACME London. How to give a relocating employee a 5% salary raise without paying for it yourself. The Ladders: Salary Negotiation Tips: Let the Employer Make the First Salary Offer. Also, quality of life is a factor when you're contemplating relocation. If this is a promotion, visit your new location a couple of times to learn more about the workplace culture and the people. So far, this article is limiting its scope to relocations within or into the UK. However, in our experience, only few companies take advantage of the Relocation Allowance (RA). The world is an increasingly interconnected and global place to be. Some of our clients have 70% of their graduate hires relocating! While the numbers seem small, they are significant for junior employees who typically earn a modest salary. What types of cost can be deducted up to what amount? 5 We are not a financial advisor and our estimate cannot be interpreted as constituting a binding commitment of any kind. The Salary.com cost of living calculator helps you to make cost of living comparisons cost comparisons easily and quickly. $50,000. Putting structures in place to benefit from tax relief will not only be a welcome cash injection but also a competitive advantage in your hiring process. A 10% raise in salary is would put my compensation in line with industry and regional expectations for the work. Cost of living refers to the amount of money required to maintain a standard of … A new chapter in your professional career and moving to a new location all at once can be exciting, provided you have the means and your employer is open to negotiating a salary and benefits package that serves you well in your new city. Look for differences between the responsibilities of your current job and the one you're accepting to ensure that the job is comparable to your level of expertise and qualifications. Employer relocation: your rights When an employer moves, employees with a mobility clause in their contract have to move unless they can prove the request is unreasonable. Are the other cities on your list more or less affordable than your current home? Strive for a salary that enables you to have the same -- or higher -- quality of life in your new city than you have in your current hometown. Because relocation expenses are a one-time cost for a company, negotiating a relocation package is sometimes easier than negotiating a higher salary. Ruth resides in the nation's capital, Washington, D.C. Keep in mind that companies tend to vary in what they offer, and larger companies have more standardized policies. You can’t do what we’re suggesting below for new employees (splitting their yearly salary into a salary and an expenses portion). If your employer routinely relocates employees or has a structured compensation plan, ask for the company's salary schedule for the new location. Nonetheless, the following expenses are commonly covered: Frank pays his NI & taxes on £18,000 which amounts to a total of £2,593. Now, as you’ve said, that adds up.