Offering Tax Assistance & Tax Equalization Ensures Higher Employee Retention & Improved Recruitment Outcomes

Many companies are struggling to find and retain good talent. It’s important that benefits, including relocation and assignment benefits, are very competitive and offer employees what they need to have the best possible experience as they uproot their lives and move – be it a long or short-term move.

There are many benefits a company should consider for their employee relocation and global mobility programs. In this article, we discuss tax assistance and tax equalization. According to WHR Global (WHR) Chief Financial Officer, Jami Long, “By providing these tax benefits, employers help offset tax burdens for their employees. By doing so, some of the stress typically associated with relocations or international assignments can be decreased. When you consider that these benefits also help companies stay competitive in the hiring process, it’s a win-win for everyone.”

Tax Assistance versus Tax Equalization

Tax assistance also referred to as gross-up, means an employer grosses up an employee’s taxable relocation benefits. In other words, gross-up is the additional money an employer pays their employee to offset any additional income taxes the employee would owe the respective tax authority when that employee receives a company-provided cash benefit, like relocation expenses. This benefit alleviates some of the tax burdens on a portion of the employee’s income.

Tax equalization, on the other hand, neutralizes an assignee’s tax liability associated with a global assignment. This compensation approach means an assignee pays approximately the same taxes if they had remained in their home country. In other words, the assignee is not paying more or less had they not left their home country, regardless of the actual tax burden in the home and host country.

The following may be old news, but still important to review. In December 2017, the US government passed legislation that directly impacted taxpayers. Under the 2017 law, known as the Tax Cuts and Jobs Act (TCJA), taxpayers are unable to claim certain deductions, including job-related moving expenses.

Tax Assistance in Detail

Per the 2017 legislation, taxpayers must treat any direct payment or reimbursement of moving expenses received from their employer for job-related moving expenses as taxable income. Previously, employees only needed to pass the time and distance test (criteria 50 miles, 39 weeks, and 1 year), to be qualified to deduct moving expenses related to household goods moves, storage, and final moving expenses. Alternatively, an employee paying their moving expenses could deduct those moving expenses even if they didn’t itemize.

Under TCJA, all moving expenditures are taxed accordingly, at least until 2025. However, active-duty military members may still deduct moving expenses. For employers, this can have a significant impact because it could be a deterrent to attracting new talent, or current employees may be less inclined to take a promotion that involves moving.

Benefits of Providing Tax Assistance

If you’re competing for talent and your competitors are offering this benefit and you are not, you could be at a significant disadvantage. Tax assistance can take away some of the objections you might receive from current and/or future employees for relocation. In summary, the benefits of providing tax assistance can include:

  • Helps your relocation program remain competitive.
  • Improves employee attraction and retention efforts.
  • Alleviates some of an employee’s tax burdens.
  • Lessens employee stress, allowing the transferee to focus on their new role sooner.

Drawbacks of Providing Tax Assistance

  • Increases an employee’s taxable income and can change their tax bracket. This could increase an employee’s tax rate and phase out certain tax credits.
  • Increases company relocation expenses.

Tax Equalization in Detail

The transition from a home country to a host country can be difficult and could keep talent from taking expatriate assignments. Housing, cultural acclimatization, family adjustments, and entering a new work environment are just some of the challenges of international moves. Companies will often offer expatriates assistance to make the experience as smooth as possible, including tax equalization. For example, expatriates coming from the US have a unique obligation to fulfill and are required to file taxes on their global income regardless of where it was earned. They don’t have the benefit of being able to break their home country’s tax obligation. Additionally, they’ll have a tax filing requirement in the host country too.

Even though the US provides foreign tax credits that can be applied to the employee’s US return, it may not be enough of a credit to offset their entire US obligation. By providing tax equalization, expats whose combined taxes are higher than what they would hypothetically be without the assignment are reimbursed by the company for the additional incurred taxes. Conversely, if the combined taxes are lower, the assignee reimburses the company for the difference. When new opportunities arise overseas, businesses sometimes struggle to determine how they will fill positions. Many multinational corporations turn to their proven domestic employees and leverage those abilities to develop markets, monetize product offerings and grow the business overseas.

The recruitment/retainment process is even more challenging in highly specialized fields. Consider pharmaceuticals and bio-medical, for example, where there are a limited number of specialized candidates available, and oftentimes many companies are competing for the same talent. According to an article in Fierce Pharma, “Those technical qualifications become even trickier when applied to fields like cell and gene therapy.” Fabian Gerlinghaus, co-founder and CEO of Cellares said, “There simply aren’t enough humans in the highly specialized fields.”

Since the war for talent is even more competitive in specialized fields, providing the right benefits can make a big difference.

Benefits of Providing Tax Equalization

  • Decreases expatriate stress and allows the assignee to focus on the new role sooner. The less economic stress an employee is under, the more they can focus on the personal and professional development of an international opportunity.
  • Improves employee retention and recruiting efforts since the assignee is less likely to decline a foreign assignment or transfer due to tax obligations.
  • Limits tax burden and maintains a comparable home country tax basis for the assignee while on a foreign assignment. This means the assignee’s tax gain or loss is minimized and equalized as much as possible and remains the same had the assignee stayed in the home country.
  • Facilitates positive corporate citizenship for tax compliance in every location the company operates and eliminates the risk of local law non-compliance, tax regulations, and exchange rate controls.

Drawbacks of Providing Tax Equalization

  • Increases company relocation expenses.

Your Relocation Management Company (RMC) can explain how tax assistance and equalization work and help facilitate the process. RMCs can also manage everything for your company, including providing a global statement of earnings to your tax partner and ensuring tax assistance is correctly calculated and implemented.

 

Buckle Up this Summer for Household Goods Move Challenges: Plan Ahead!

International HHG Moves

Arriving just in time for summer, a familiar story; the household goods industry will have a difficult time over the summer months meeting consumer demand. While COVID-19 impacted how household goods suppliers had to perform their services, the need for moving was still great, plus increased levels of restrictions such as mask mandates, cross-border travel restrictions, quarantine periods, supply chain disruptions, and labor shortages, etc., provided even more hurdles. The list is extensive regarding additional burdens household goods suppliers need to overcome, and consequently, we are seeing a sharp increase in fees for services.   

Internationally, global supply chains have been impacted by the war in Ukraine which was already suffering due to Covid lockdowns. With China implementing additional lockdowns including Shanghai, the world’s biggest container port, this has only exasperated the problem. More than 8 million residents in Shanghai are still banned from leaving their residences and this means people that run logistics are not on the job. According to Project44, which tracks shipment times, the delays between China and the major US and European ports quadrupled since late March. According to Daejin Lee, an associate director at S&P Global Market Intelligence, the situation in China will push global inflation higher this year. Last year, inflation was driven by two factors: supply shortages of key parts led to supply chain bottlenecks; and record-high container freight rates.  Both problems continue into 2022, and the war in Ukraine will only make commodities prices rise as well. 

Not only is there an international shipping problem, but there are difficulties in the US. According to the American Trucking Association, they estimate the industry is short 80,000 truck drivers, and there is a fear this number could double by 2030 as more retire from the profession. To try and remedy this problem, the $1 trillion infrastructure bill includes a three-year pilot program that would allow commercial drivers as young as 18 to drive across state lines. In most states, you need to be 21 to receive a commercial driver’s license. However, this would be a band-aid approach and is unlikely to remedy the immediate situation. In response to the shortage, companies are raising wages for truck drivers and these increases are being passed on to consumers. 

How this translates to the relocation industry is that clients and employees must be extremely proactive. For example, according to the US Army and an article written by Chris Gardner, they have 36,984 soldiers that have reporting dates in 2022 during the peak summer season. Fort Sill’s property supervisor, Shirley Castle, stated, “Soldiers and civilians need to contact the local transportation office as soon as orders are received and keep their chain of command informed of any issues or challenges…waiting until 30 days or less before the move to contact the local transportation office could result in non-availability of DoD approved moving companies.”

The way to address all of this is to understand the situation and over-communicate to all involved in the logistics and household goods moving process. This includes clients and their transferring employees by implementing the following:

  • Work with a knowledgeable Relocation Management Company (RMC)that can navigate these challenges.
  • Plan for more shipment time, especially international moves.
  • 30 days’ notice is the minimum; try and plan well in advance.
  • Change to air freight versus sea freight if feasible and affordable.
  • Consider providing a furniture allowance rather than moving furniture.

At WHR Group, Inc. (WHR), our Supply Chain Management department builds and maintains relationships with quality network providers. We continue to monitor this ever-changing situation and its impact on the supply chain and logistics. Through our extensive and well-vetted supply chain network, we can find the right providers to navigate each employee relocation on a case-by-case basis.

 

 

 

 

 

 

 

 

 

Is Your Company Managing the Emotional Toll of an Employee Relocation?

Moving is often considered a top life stressor, so what happens when you add in a few other big stressors like buying/selling a home and starting a different job in a new location? How stressful might that be for a transferring employee? More importantly, how are your relocating employee and their family emotionally impacted by this stress?

Managing the potential emotional toll is a key factor all employers should address, especially if your company considers your employees one of its most valuable assets. As an employer, you must consider costs and logistics but don’t ignore the potential emotional tolls too!

What is the Emotional Toll of Relocating on the Employee?

According to WHR Group Human Resources Manager, Kimberley Uitz, SHRM-CP, “The stress of moving can directly impact an employee’s mental health and engagement with their employer. When employees start to become disengaged, their productivity will start to decline. This will become a trickle-down effect that can directly impact teams and eventually the company itself. Companies need to be proactive when it comes to relocation and their employee’s mental health, and take steps to prevent these declines in both engagement and productivity.”

Even in the wake of the COVID-19 pandemic, employers have continued transferring their employees to new domestic and international destinations. Transferees and their families face a host of potential emotional and mental tolls from a relocation:

  • If one or more family members are unhappy with the move and having trouble settling in, the stress could affect the employee too. The employee might be feeling distracted, disengaged, or unhappy, and they might even consider leaving the new role and moving back to their original location. Uprooting an entire family’s life and acclimating to a new community can be quite difficult.
  • Employee stress associated with moving to a new location might include concerns about a partner’s career, children’s education, learning new languages, cultural differences, selling their old home, or even leaving old coworkers behind.
  • There may be anxiety surrounding new cultural amenities or concerns about the new destination’s real estate market or crime rates.
  • The transferring employee may be worried if the new job will work out.
  • A tired, disengaged or distracted employee’s attitude may be felt by new team members and affect team dynamics.

Employers Should Focus on Employees’ Emotional and Mental Health

All of these stressors can lower employee engagement, decrease company loyalty, increase turnover and affect team interactions. Given the war for talent, it’s important to consider more than just the costs and logistics of employee relocation. A transferee’s emotional needs should not be excluded. “The war for talent continues even with unemployment reaching new highs back in 2020. Recruiters are all competing to fill those critical positions, and companies cannot afford to lose talent as economies will start to bounce back. Those companies that are ready to compete will win in 2021,” says Uitz.

According to an article in Employee Benefit News, “When it comes to employee relocation, most organizations focus on the nuts and bolts, thinking strategically about the costs associated with the move and what will be the most affordable option to get their people from point A to point B. It makes sense from a business perspective, but it’s not how to make a relocation successful. Employers have to remember they are moving people, not just boxes. Any time you deal with people, you need to adopt a human-centered approach.

“While you’re helping them get their belongings from one place to the next, they’re dealing with switching insurances, licenses, and addresses. If they have a family, they need to enroll their children in new schools, find doctors, and a new job for their spouse or partner. On top of that, they might be dealing with some negative emotions from their family, or unhappy with the move. All of this can influence how your employee feels about their new position and how they assimilate into their new role.”

The stakes can be even higher when the employee is relocating from their home country to a new country, and the emotional tolls might take on a new tone. According to WHR’s International Client Services Manager, Linden Houghtby, GMS®, who recently relocated from the U.S. to our Switzerland office, “When relocating to another country, there is additional stress involved in the regular activities that you take for granted at home, like buying groceries, for example. This additional stress can be emotionally wearing.”

According to an article from Talaera, a language training company, “As an HR manager, you want employee relocation to be as smooth as possible. But for many employees, leaving their home country behind is a big deal. The human element is critical to the well-being of your international hires.”

What Can Employers Do to Minimize the Emotional Toll of Relocation?

“Employee engagement can be directly linked to employee mental health. If employees are not engaged, turnover increases and employer costs rise. If a company wishes to remain competitive in the coming year, they need to ensure that all of their employees’ needs are met, including emotional health,” says Uitz.

Make sure you have a relocation policy that includes all potential support including the following:

  • Medical Options
  • Education Options
  • Local Shopping Information
  • Transportation Information
  • Utility Connections
  • Education Assistance
  • Site Visits/Area Orientation
  • Help Buying & Selling Homes
  • Household Goods Move
  • Temporary Storage
  • Family Support
  • Ongoing Assignment Support
  • Language & Cultural Training
  • Immigration Services
  • Property Management
  • Temporary Housing
  • Lists of Community Resources
  • Cost of Living Pay Adjustments for Higher Cost Areas
  • Driver’s License and Registration Information
  • Spousal/Partner Career Assistance

”If relocation is not handled successfully, it threatens the employer’s ability to retain the employee—and it risks losing someone the employer has devoted time and money to develop and move,” according to a SHRM article.

If you want to attract and retain top talent and if you consider your employees one of your most important assets, remember to address more than just costs and logistics. Taking care of your employees’ emotional health will pay out for years to come. Lastly, partner with a good Relocation Management Company (RMC) that will help you provide these invaluable services to your most important assets. It’s important that your RMC understands and honors your company culture.

For more information about WHR’s Relocation Management Services, contact sales@whrg.com or 800-523-3318.

Why should you bother reviewing your relocation policy?

Even though many companies now allow all-remote or hybrid work, they are still relocating employees to fill needed roles and help attract/retain top talent. To be successful, your organization needs a well-prepared and comprehensive relocation policy in place to help in the following areas:

  • Control business costs
  • Ensure you’re meeting employee needs
  • Attract and retain top talent
  • Benchmark your policy against the competition

As a Relocation Management Company (RMC), WHR Group, Inc. (WHR) conducts policy reviews. The following examples demonstrate just how important it is to review your relocation policy regularly. If you don’t already have a policy, you’ll want to create one. Here’s why it’s all so important:

A. Control Business Costs. Are You Paying for Unnecessary Benefits?

Make sure you’re allocating the right amount of dollars to both transferees and organizational needs. It’s also important you’re not paying for unneeded or outdated benefits.

Example #1
A company was giving each transferee a standard $5K-$10K relocation lump sum to assist with any extra expenses. They were also giving executives a lump sum equal to 6 weeks’ salary on top of the $5K-$10K lump sum. Since some executives had large salaries, this allowance sometimes equated to $50K per executive! After review, we recommended the company cut back on that practice for executives. The company saved hundreds of thousands of dollars.

Example #2
A client was paying a cost-of-living differential if the employee was relocating to a higher-cost area. They were paying this out for 3-4 years, plus they were also providing a big lump sum benefit. We recommended a minimum 5% cost of living threshold so that they were not paying transferees moving to only slightly higher cost of living areas. The client saved millions.

Example #3
Another client was giving out non-promotional bonuses to current employees willing to relocate for a lateral role. These bonuses equated to 5% of the employees’ salaries. Since this practice is not common, we recommended they eliminate this from their relocation policy. This saved them significant costs without lowering the value of their program.

Example #4
One of our clients was paying a loan origination fee. Some lenders don’t even charge this fee but if they know the client will pay, they will still charge the fee anyway. Once we alerted the client, they stopped paying the fee unless necessary.

B. Meet Your Employees’ Needs

Is your relocation policy meeting your employees’ needs? The right policy helps to reduce transferee stress so that employees can focus on working in their new location. Giving employees time off to assimilate in their new location, providing support to transferees’ families and gathering post-relocation feedback to make future policy decisions will all help to address your transferees’ needs. 

Example #1
One of our clients was offering a lump sum benefit for all international relocations. By gathering post-relocation survey feedback, we found out transferees were trying to coordinate their international household goods (HHG) shipments and were not spending the full lump sum in the hopes of keeping some of the money. Survey feedback also showed that giving employees that level of choice was adding more stress on them, and it was making the relocation process take longer. Transferees were trying to do it all on their own, plus pinch pennies.

The client considered all key benefits and determined the lump sum was not working. They shifted from a lump sum to a core flex benefit. This meant the client would cover HHG shipments, destination service providers and temporary housing, but they still gave transferees a lump sum amount to be used at the employees’ discretion. Not only did this help reduce transferee stress but it also helped control business costs.

Example #2
One client was not offering destination services to spouses/partners and families of intra-European moves. They assumed that if a transferee/family was relocating from Romania to the UK, for example, destination services were not needed. Through post-relocation survey feedback, it was determined that spouses/partners needed career assistance, language training and help with school searches for their children. The employee had office workers to help them assimilate in the new locations, but the transferees’ partners were struggling with the new language, and even struggling to find necessities like grocery stores. Recognizing the needs of the entire family unit, and not just the transferee is crucial to ensuring a successful move and assimilation.

C. Attract & Retain Talent by Benchmarking Your Policy Against the Competition

Hopefully, your relocation policy is already part of your total rewards and talent management strategy. The right policy will help your company retain current employees and attract top prospective candidates. A weak relocation policy could have a negative impact on your recruiting and retention success rate.

By benchmarking your policy against other companies, you will stay competitive in the war for talent. Make sure your policy provides a choice of offerings since relocation policies are wrapped into job offers. If you don’t benchmark against your competitors, you won’t know if your offerings are good or not. Are they subpar to what everyone else is offering? If you are hiring high-level executives, for example, and the talent is very specific and not easy to come by, you’ll want to make sure you’re competitive with salary, benefits and your relocation policy.

At the same time, benchmarking will ensure you’re not giving away too much when none of your competitors are doing that. Benchmarking your policy against others shows you are in line with the industry. It’s also important to look at your industry and other industries you compete with for talent.

Example #1

Imagine losing a potential candidate because your relocation policy is missing benefits your competitors are including. For example, if your candidate is an executive expecting a full house buyout, but your policy only includes an HHG move and lump sum payout, then you must go back and forth negotiating with your superiors and the candidate. This can waste a lot of time. In the interim, the candidate might receive a better job offer, including more relocation benefits. A relocation policy can be a factor for candidates deciding whether to take one job over another. If you’ve benchmarked your policy against your competition, you’ll already know what their policies include.

Example #2
A client was getting feedback from its talent acquisition team that it was difficult filling certain positions. After reviewing their policy and benchmarking it against their competitors, we discovered that their competition was offering far richer relocation benefits. As a result, the company decided to expand its range of jobs eligible for full relocation benefits.

How often should you review your policy?

WHR recommends you review your employee relocation policy annually, or every couple of years at the very longest. It does not have to be a huge overhaul, but it’s a chance for you to pause and look at employee feedback, plus confirm any changes in your company culture, driving principles, core values, talent strategy, the industry and your competition. This is a time for you to make sure your policy is aligned with all those pieces and your key stakeholders (talent acquisition teams, recruiting teams and HR business partners).

Let Us Help You!

WHR is available to review and/or write your relocation policy (domestic and/or international).

Business Expansion During a Pandemic: Meeting Global Mobility Needs

As Covid restrictions have eased in most parts of the world, many businesses are back to functioning normally. We all know too well the huge strain the pandemic put on businesses worldwide as some companies did not survive. Like most organizations, WHR Group, Inc. (WHR), a relocation management company, based in Milwaukee, Wisconsin, sent its employees home to work remotely until restrictions were lifted and it was safe to work in the office again. Although it may have felt like the world came to a startling halt, WHR’s clients’ needs did not. That’s why WHR expanded internationally during the height of COVID-19. In 2020, WHR opened offices in Basel, Switzerland, and Singapore, to meet the growing demands of its global clients. Opening new offices – and in foreign countries – during a pandemic created its own set of challenges.

Meeting Global Client Demands

Managing WHR’s growing international caseload from the US was no longer practical. Opening regional offices allowed WHR to provide the same level of service to all clients, transferees and assignees. “While Covid-19 dramatically slowed the ability of individuals to cross borders, we persisted in opening these offices to fulfil our client obligations and be prepared to meet future demand,” says WHR President, Paul De Boer. “These offices allow WHR to provide resources where needed and build supplier partnerships that are critical to maintaining industry-best service levels.” The Switzerland office supports clients and their transferees in Europe, the Middle East and Africa; the Singapore office supports the Asia Pacific region. WHR’s Singapore and Switzerland offices provide a range of services including pre-assignment, transition, on assignment and repatriation services to multi-language expatriate transferees. 

Solely and independently owned since its inception 26 years ago, WHR specializes in providing each expatriate with a dedicated relocation team, white-glove service and 24/7/365 availability for the entire relocation process – long or short-term assignments. Along with its U.S. headquarters in Milwaukee, Wisconsin, WHR helps some of the largest organizations in the world and has relocated hundreds of thousands of employees to over 120 countries worldwide.

Hiring, Training Global Mobility Staff & Opening Offices

WHR’s Linden Houghtby, GMS®, was the transitional lead for opening both the Switzerland and Singapore offices. She hired and trained local staff who then assumed leadership and operational roles for each office. Houghtby was instrumental in WHR’s international expansion and instilled WHR’s culture and best practices into its international operations. According to Houghtby, “Remote onboarding across time zones brought its own set of challenges. As most of our Switzerland team was hired after I moved to Singapore, I was doing a lot of training with team members in different times zones, and one of the ways I made this work was to schedule regular touch base calls each day with the teams in both Switzerland and Singapore to ensure consistency and continuity across the two teams. This also helped to embed our culture and develop comradery.” 

Plans to open the international offices were slightly delayed by the COVID-19 pandemic, but WHR was able to proceed. Having these international offices was extremely beneficial as WHR was assisting its clients and their employees manage the immigration and logistic challenges of 2021. “Being in the same time zones as client contacts, transferees, and supplier partners allowed us to have regular calls with stakeholders and navigate the shifting border and movement restrictions,” said Houghtby.

WHR also faced visa delays while trying to open the offices/hire staff, due to government offices closing, tightening immigration requirements, and Brexit. In Singapore, there were challenges as to when Houghtby could go look at office spaces since in-person meetings were not always allowed. Once an office was secured, all work still had to be done remotely.

Looking Ahead

“Creating a footprint in Europe, the Middle East, Africa and Asia has allowed us to engage clients in new and dynamic ways and has deepened our commitment to meet the demands of our global clients,” said De Boer.

Can WHR Help You?

Whether your company is relocating employees domestically or sending them to another country for a short or long-term international assignment, WHR can assist. We will help you design your relocation policy and then manage the program for you.

Contact WHR to discuss your domestic and international employee relocation strategies.