10 Common Myths of International Relocation

by | Apr 9, 2015 | News

Compared to U.S. domestic relocation, relocating internationally is a whole other process. Here, we’ve dispelled the top 10 myths often associated with international relocation. 

international relocation
Work visas are not required if the employee is going to work in a country for less than 30 days.
If the employee is going to perform productive work for an employer in a country where they are not eligible to work, then, regardless of the time spent, most countries will require them to obtain a work visa. While certain business trips are permitted, workers cannot technically work (exchange physical or mental labor for money) without a work visa.
Once you approve your employee's new position in the new country, it's OK for them to go there immediately and start working.
Organizational approval of the new position is only half the battle. A work visa approval grants your employee the permission to begin work in a new country immediately. Keep in mind that the visa approval process varies by country. Once the employee applies, they may have to wait weeks to months before receiving their visa to enter the country and start employment.
The employee will be able to get a very similar home in the new location.
A different location means different standards, including what is important in a home. This can mean larger outdoor spaces versus larger kitchens, or smaller everything in comparison to U.S. “norms.” Not to mention price differences: Housing issues vary around the world as economic standing, living conditions, and cultural norms come into play.
Everyone speaks English, so it will be an easy transition.
A common misconception is that English is the only language the employee will need to know, wherever they travel. Besides being wildly presumptive, it’s also completely untrue. Not everyone in every country speaks English, let alone fluently. Plus, learning a new language opens up other doors for embracing a new culture. By offering language training, you can ensure your employee is better able to acclimate to the new culture.
The employee may need to learn a new language for a smooth transition, but their family doesn’t.
Actually, relocating to a new country can often be more stressful on the family than the employee. The employee’s spouse is also leaving behind friends, family, and possibly even a career. Children, who are often seen as more resilient, can feel secluded in a new culture that they don’t understand. It is important for the company to offer language and cultural training, not only to the employee, but the family as well to ensure they are able to thrive in their new environment.
Trailing spouses leaving behind a career just need time.
Time, unfortunately, is not the heal all for this type of adjustment. Even when provided with allowances, spouses can feel lost and insecure when leaving their old career for the unknown. Not knowing the language, culture, or types of jobs available can be overwhelming and draining. Offering career support, resume building, and job coaching can help the trailing spouse find a new career path faster than when left alone, which will help them adjust to their new surroundings that much faster.
It is difficult for the employee to fit in and they often feel secluded in their new country.
Employees can feel these emotions, especially if they don’t receive any kind of cultural training. It is important that they assimilate into the new culture as soon as possible to avoid seclusion. Many employees join other outside activities that assist with meeting new people, learning the new culture, and language. The more cultural training they have, the happier they will be in their new position and new lifestyle.
Expatriates coming to the U.S. don’t need cultural training.
Yet another misconception is that expats coming to the U.S. do not need cultural training. There is a perception that the U.S. is easy to navigate, but, in fact, the U.S. is a very different culture, and visitors are often surprised about the differences they were not expecting. For instance, the way Americans conduct themselves at work, toward strangers, and even eat pizza or shake hands is not the same as the rest of the world.
Culture shock never happens when an employee is returning to their home country after an assignment.
Typically employees feel a sense of culture shock when relocating to new a new country, but it is often overlooked that they can experience these same emotions when going back to their home country. Employees will need to go through an adjustment period, just like they did when they first moved internationally. The employee made a new home in their new country, so they have to get back in the mindset of their old country being home again. A change in job role, along with family adjustments, and the new surroundings can all be overwhelming for the employee.
Offering tax equalization benefits to employees means they will not have to worry about taxes.
Tax equalization is the benefit that allows your employee to continue to pay taxes as if they hadn’t left the U.S., and the company would cover the cost of the difference from the new country. Even if you offer them this benefit, they will still need to be aware of their own tax situation since they are the ones held liable if anything were to be wrong. It is essential that employees remain tax compliant while on assignment or if they are permanently transferring to their new country.

10 Common Myths of U.S. Domestic Relocation

by | Mar 12, 2015 | News

If relocating is the third most stressful event in a person’s life, then there’s no surprise the amount of gray area perceptively surrounding the industry that strives to define and streamline it.

We’ve collected the 10 most common myths about U.S. domestic relocation and dispelled them, once and for all, to shed light on the thousands of successful and stress-free moves experienced by our customers each year.

domestic relocation
Relocation companies make money buying and selling houses.
Relocation companies provide a market-based offer for an employee’s home based on the appraisal criteria set forth by the Worldwide ERC®. Typically, two appraisals are ordered from independent companies, and the results are averaged for an offer on the employee’s home. Relocation companies do not make a profit on buying and selling the home, but rath­er are paid a fee for services regardless of the property’s eventual sales price.
If a relocation company makes pay­ments to vendors, it’s not a taxable reimbursement to the employee.
All payments made on behalf of an employee to a vendor can be considered taxable income to the employee. The exceptions to this are household goods move costs, final move costs to the destination, and any costs associated with a qualified home sale program.

Note: This article was written in 2015, prior to the Tax Cuts and Jobs Act. 

Home sales are taxable if they don't meet the IRS '50-mile test.'
Home sales fall under a different IRS tax rule than other relocation expenses, specifically Revenue Ruling 72-339. And while other relo­cation expenses use the “50-mile test” to deter­mine tax protection, the test does not apply to a home sale program. Organizations can treat home sales like any other business expense.
Short-term assignments lasting longer than 365 days do not need benefits taxed until day 366.
Short-term assignments less than one year are treated like any other business trip. However, once an assignment is required beyond 365 days in duration, travel reimbursements are taxable. If, for example, a short-term assign­ment was designated as 400 days in duration, all travel expenses are taxable from day one. If the assignment was originally designated as 325 days in duration but at day 250 is changed to extend beyond 365 days, then at day 250 all travel reimbursements become taxable. You cannot wait until the 365th day to account for taxability.
Relocation companies’ service pro­vider fees can vastly increase an orga­nization’s relocation spend.
Provider fees typically account for only 3 – 5% of total relocation spending. While a small amount in comparison to total cost, these fees can reap great rewards in cost savings, program struc­ture, and ensuring tax compliance. 
Employees receiving a lump sum benefit will need to find rental arrangements on their own.
Even if the transferring employee is not receiving destination assistance as part of their relocation package, there are still options that can help them when searching for a rental. Before an employee even sets foot in the new destination, they can begin their search online. However, if the employee is having difficulty finding or securing a unit on their own, the relocation company can set them up with a national rental finding agency or local brokerage to assist in the search. Each will offer different levels of service for a set fee or percentage of the monthly rent depending on location.
Finding a rental is easier and less time consuming for my employees than purchasing a property.
Signing a lease may be easier than closing on a new home, but that doesn’t mean it is less time consuming. Renting, especially in larger cities, is in high demand. Units go on and off the market in a matter of minutes in some areas, so it is important for employees to have as much time as possible to find a unit that will meet their needs.
Relocating with pets will be easy for employees moving within the U.S.
Relocating pets within the U.S. is much easier than relocating outside the U.S., but each state still has its own rules and regulations that must be followed. Finding a new home can be challenging when dealing with city breed restrictions or housing restrictions (such as apartment, condo, or HOA restrictions). Another thing to keep in mind is transporting a pet is a non-taxable expense per IRS relocation guidelines, but the employee will still need to figure out the best means for transporting their pet(s), whether that is personally by car, air, or a pet transportation service.
Business travel is not taxable for the employee and their spouse.
The only business travel expenses that are not taxable are the employee’s. Spousal travel expenses would be considered taxable. The only way a spouse’s travel expenses could be classified as tax exempt is if that spouse is also an employee of the company traveling for business purposes.
Employees are aware of the cost of living differential between their old location and new destination.
Cost of living can vary drastically between locations, which is why it is important to discuss with employees early on about what they can expect in their new destination. If the cost of living is higher, they will need to figure out what they are looking for in a new home and how much they want to spend. Offering a Cost of Living Allowance (COLA) to employees moving to higher cost of living areas can also help with their transition by gradually assimilating them into their new higher cost of living area.