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Introducing the Relocation Allowance, an HMRC tax and social security relief for companies and employees. They simply file their expense reports, receive cash from you, and are done. Learn how to take advantage of RA. Ruth resides in the nation's capital, Washington, D.C. I received three offers from three Big 4 firms but all offered salaries were relatively far from $50K. Benivo operates globally and offers relocations across all of North America, Europe, East Asia, and Australia. * Figure quoted by a certified tax expert we consulted on the matter. → Benivo is your compliance-ready partner. Compare salaries in your current city to those in your new location. Thank you for your attention to this matter. Can I expect to have my salary adjusted to market when I start employment? I want to live in. However, as these savings are relatively small on an individual basis, it would be costly to keep track of these expenses on your own. Because of the rather stringent compliance requirements of this scheme, most companies only take use the RA when highly-paid executives move for work. 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. Some relocation packages include a cost-of-living stipend (or cost-of-living adjustment) to help cover increased expenses. $50,000. 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. 40 hours per week x 234 weeks=9360 hours. 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. the employee must not have the option of a cash alternative. The expenses you can claim include: Temporary accommodation at your original location. 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, … ACME London does not have to pay NI contribution (13.8%) on the relocation cost of £2,000. But data shows that switching jobs at the right time can be a smart move no matter where you are in your career.. Chapel Hill, NC. Benivo is your partner to realize these tax benefits. Thus, Frank has. You can divide relocation costs into two broad categories: the costs of moving and your cost of living once you've settled into your new place. 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. If you currently don’t offer any financial support for relocation: There’s nothing to be done in terms of tax optimisation. 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). $50,000. Suggested Change: £18k + £2k relocation cost reimbursements = total is still £20K. Salary estimates are based on 18 salaries submitted anonymously to Glassdoor by Relocation Consultant employees. 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. The cost of living may differ and, naturally, the difference between your current standard of living versus the location to where you relocating will factor into your salary negotiations. 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. 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. Because the employee does not have access to these funds as cash, it is not considered earnings and not taxable via the payroll.Summary and next steps. Comparable salary in Chapel Hill, NC. Great, let’s go a little deeper. Using Benivo’s compliance-ready relocation solution, you easily aggregate all the savings and keep track of the employee’s invoices. Gain a competitive advantage in hiring: More cash-in-hand for your employees. If your employer routinely relocates employees or has a structured compensation plan, ask for the company's salary schedule for the new location. In determining what salary is sufficient, you must ascertain the cost of living in the new location. Therefore, in the salary negotiation process, you have to estimate the cost of her relocation on her behalf before offering her the salary split. Make a tweak to your compensation structure and enable junior employees to benefit from RA as well. However, in our experience, only few companies take advantage of the Relocation Allowance (RA). But the key takeaway, if you were eyeing up rents and latte prices in cheaper locations, was that the company would need to go ahead and know where you were living, for tax reasons, by January 1, 2021, and “we’ll adjust salary to your location at that point.” Responsibility for the integrity of this residential rescaling, he clarified, would rest with each WFH employee: … 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. We discuss TWR here. 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. Moving to a new city and going into a new job can be overwhelming. 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. Relocating for your employer should never be a backward step in your career. P-3 and P-4 = 15. Her work appears in "The Multi-Generational Workforce in the Health Care Industry," and she has been cited in numerous publications, including journals and textbooks that focus on human resources management practices. ** Comprises Benivo’s complete relocation package as well as tax compliance on the Relocation Allowance. It is wise wherever possible to separate any salary increase that comes with relocation from the payment of relocation expenses. Frank pays his NI & taxes on £18,000 which amounts to a total of £2,593. 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. Finally, remember when we said that you cannot give the employee a cash lump sum but that instead you have to reimburse them on their individual expenditures? If the base salary offer is lower than you want, you’re more likely to make up the difference in the relocation package than by asking for a higher salary. Then you decided to come back to european office. It will merely be an educated calculation based on the letter of the law as to be found on HMRC’s website. Salary increases of 5% or less were the most uncommon, with only 9.5% of the sample receiving increases between 0-5%. HMRC is suspicious of such arrangements and may subsequently deny them tax exempt status. the relocation costs. Another one pays £100 per month as an accommodation stipend. A formal contract is not necessary, just a simple signed letter explaining what assistance is being provided by what time. Nonetheless, the following expenses are commonly covered: He currently lives in Manchester where he graduated from university. This tax burden can be reduced by simply having the employee pay these relocation cost and the employer then reimbursing them. 1 We are using the tax rates of tax year 2016/2017. But, a $0.64 per hour wage decrease is a lot less shocking than a $6000 pay cut. One large company we work with pays £500 signing bonus to relocating employees. One of the great things about Benivo is that you can provide a lump sum to Benivo - from these funds, we then draw on reimbursing the employee so that you don’t have to deal with this topic at all. 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. 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. Reading through some of the articles and comments on here, it seems that new hires easily start with a salary above $50K. Further, the average annual salary for my position is $65,000, according to data from Payscale.com. 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. 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). Now, as you’ve said, that adds up. Will you get lower european salary? If a job relocation coincides with a promotion, you should expect a pay increase. 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 … 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”. The challenges of finding where you belong in a strange area will only compound any on-the-job frustration you could have. 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. Filter by location to see Relocation Consultant salaries in your area. 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. Copyright 2021 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. It is an enrichment experience and a chance to be exposed to a new environment. A Letter for Accepting a Job Offer but Requiring a Salary Adjustment. Compared to the scenario in which he’d have received the £2k allowance as part of his salary, Frank wins £640. (2020-12-28 salary.com) It's the support you need for making a smooth transition. If the cost of living is lower, never volunteer to take less pay; if that's the case, stay at your same pay rate. Cost of living refers to the amount of money required to maintain a standard of … Letter of request for salary increase free sample. 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. Also, quality of life is a factor when you're contemplating relocation. 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. While the numbers seem small, they are significant for junior employees who typically earn a modest salary. 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. Instead, the company needs to account for all individual cost items Lisa incurred during her relocation through receipts she kept. 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. 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. 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. 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. Base salary scale: Two different net base salary scales: one for staff with dependants and another for staff with no dependants. 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. *** Estimated cost to replicate all of Benivo’s relocation package benefits in-house. If this is a promotion, visit your new location a couple of times to learn more about the workplace culture and the people. One unified net base salary scale, applied uniformly to all staff, regardless of family status. How to give a relocating employee a 5% salary raise without paying for it yourself. Important to note here that this must not be structured as a salary sacrifice arrangement - i.e. I currently make $50K. Promotion and salary increment letter format. The important time to bring moving expenses into the conversation is during salary negotiations. 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. See how far your salary will go to maintain your standard of living using our Cost of Living Calculator. Some of our clients have 70% of their graduate hires relocating! You will be responsible for corroborating our calculations with your own independent financial advisor. Therefore, make it worthwhile for you to relocate and assure your employer that the salary bump is warranted. To take advantage of this tax benefit, you may need to make a few changes to your compensation structure. 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). The more you currently spend on relocation the more you will save on tax. 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. Ask a Manager: Was I Burned In This Salary Negotiation? The salaries and related allowances of staff … 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. 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. You can’t do what we’re suggesting below for new employees (splitting their yearly salary into a salary and an expenses portion). 100 junior employees like Frank: 100 x £276 = £27,600. Sometimes this change is accounted for in salary alone, but other times this becomes part of the employee’s relocation benefits. Sample letter for salary increase to employee. 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. I live in. Key takeaways in this article: Do we have your attention? If, for example, the cost of living is 10% higher then your salary should be adjusted accordingly. Salary Increment Request Letter to Boss Fatima Group, Cant Respected Human Manger, I hope you are enjoying well your best health. Relocation shouldn't mean taking a loss. 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. I just want to throwback some discussions which were held about a half … Continue reading … Start With a Relocation Costs Budget . $6000/9360 hours=$0.64 per hour. Company saves £276 and Frank saves £640 - this is like a 5% gross salary increase for Frank 1! She holds a Master of Arts in sociology from the University of Missouri-Kansas City. The world is an increasingly interconnected and global place to be. Most organizations operate in different places and people uproot themselves regularly in search of a better future. P-2 = 12. So far, this article is limiting its scope to relocations within or into the UK. Just enter your salary and job title as well as your current location and the city where you're considering a move. Potentially save a lot of money on social security. P-1 = 9. We clearly highlight which of the expenses are eligible for tax deduction and, that way, allow you and the employee to realize this benefit. 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. As you are aware, I have been recently transferred to [Specify new location]. As a precondition for accepting my respective offers, I asked that each company allow my family to take two or three “ This is a big waste! He has relocation cost of £2,000 which the company agrees to cover. 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. Not only will we show you the cost … 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. Salary increases above 20% were also uncommon, with only 12.7% of the sample receiving salary increases of 20.1% or more. The average salary increase was 14.8%, while the median increase was 13.2%. 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. This is more than 12% higher than my current salary of $58,000. 2 There are other countries in which similar rules apply and we will update this blog post as we uncover them. Do you have junior employees who move their home (nationally or internationally) to a new place within the UK to start working with you? Salary Increase Letter: Relocation Dear [Manager Name], I am delighted to be part of this wonderful and professional team. 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. That's where a cost of living calculator (like the one above!) Think of job hoppers, and you likely think of the just-out-of-college crew. Comparable salary in. Once you and the company agree on a compensation package for your relocation expenses, make sure you capture that agreement in writing. $0. 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. Instead, offer her £18,000 + £4,000 relocation support4. $500K. 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. Moving to a new city? This article references a UK-specific tax structure. This is not efficient because these payments are fully taxable. 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. With relocation assistance, you’re not considering just your annual salary, bonus, and benefits, but also the entire package offered to … For example, an expatriate with a €100,000 annual salary will cost the employer €200,000-300,000 per year incl. 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