Instead, the company needs to account for all individual cost items Lisa incurred during her relocation through receipts she kept. The more you currently spend on relocation the more you will save on tax. By making these changes (adjusting compensation to separate relocation cost; using Benivo to effortlessly realize the savings), companies can Think of job hoppers, and you likely think of the just-out-of-college crew. The important time to bring moving expenses into the conversation is during salary negotiations. 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. Thank you for your attention to this matter. 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 … How Salary Cost-Of-Living Adjustments Are Calculated . Learn how to take advantage of RA. The average salary increase was 14.8%, while the median increase was 13.2%. 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. You won’t need to pay NI contribution on these reimbursements, and your employees won’t be paying tax on them. Compared to the scenario in which he’d have received the £2k allowance as part of his salary, Frank wins £640. the employee must not have the option of a cash alternative. Benivo is a tool to provide relocation support to all employees, irrespective of salary level and seniority. 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). A 10% raise in salary is would put my compensation in line with industry and regional expectations for the work. He currently lives in Manchester where he graduated from university. A formal contract is not necessary, just a simple signed letter explaining what assistance is being provided by what time. I’m never going to turn down an extra $6k over a 4.5 year period for doing the same work. 40 hours per week x 234 weeks=9360 hours. * Figure quoted by a certified tax expert we consulted on the matter. Benivo operates globally and offers relocations across all of North America, Europe, East Asia, and Australia. Salary increases of 5% or less were the most uncommon, with only 9.5% of the sample receiving increases between 0-5%. Because of the rather stringent compliance requirements of this scheme, most companies only take use the RA when highly-paid executives move for work. 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). the relocation costs. 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. You can’t do what we’re suggesting below for new employees (splitting their yearly salary into a salary and an expenses portion). Thus, Frank has. It is wise wherever possible to separate any salary increase that comes with relocation from the payment of relocation expenses. In this article, we will cover RA. This is a big waste! These figures may change over time. To take advantage of this tax benefit, you may need to make a few changes to your compensation structure. 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. 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. Suggested Change: £18k + £2k relocation cost reimbursements = total is still £20K. You will be responsible for corroborating our calculations with your own independent financial advisor. 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. 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. What types of cost can be deducted up to what amount? However, as these savings are relatively small on an individual basis, it would be costly to keep track of these expenses on your own. Great, let’s go a little deeper. 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. Start With a Relocation Costs Budget . For junior employees paid £18-25k, the cost often outweigh the benefits.With Benivo, this situation is history. What is COLA? Salary Increment Request Letter to Boss Fatima Group, Cant Respected Human Manger, I hope you are enjoying well your best health. For example, an expatriate with a €100,000 annual salary will cost the employer €200,000-300,000 per year incl. But data shows that switching jobs at the right time can be a smart move no matter where you are in your career.. 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. 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. Most organizations operate in different places and people uproot themselves regularly in search of a better future. 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. Moving to a new city and going into a new job can be overwhelming. 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. 100 junior employees like Frank: 100 x £276 = £27,600. Like all salary packaged items, you can’t claim an income tax deduction on packaged relocation expenses. 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. 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. They simply file their expense reports, receive cash from you, and are done. → Learn how to save even more using Temporary Workplace Relief. $0. If, for example, the cost of living is 10% higher then your salary should be adjusted accordingly. Important to note here that this must not be structured as a salary sacrifice arrangement - i.e. This is not efficient because these payments are fully taxable. We clearly highlight which of the expenses are eligible for tax deduction and, that way, allow you and the employee to realize this benefit. 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. If you currently don’t offer any financial support for relocation: Break up the employee’s yearly salary into two parts - yearly salary and relocation support. While the numbers seem small, they are significant for junior employees who typically earn a modest salary. 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. Sample letter for salary increase to employee. I just want to throwback some discussions which were held about a half … Continue reading … This is only valid up until £8,000 of relocation cost. 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, … Now, as you’ve said, that adds up. Will you get lower european salary? Benivo is your partner to realize these tax benefits. If your employer routinely relocates employees or has a structured compensation plan, ask for the company's salary schedule for the new location. We discuss TWR here. See how far your salary will go to maintain your standard of living using our Cost of Living Calculator. 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. P-2 = 12. I will be starting in 2011. Compare salaries in your current city to those in your new location. Ruth Mayhew has been writing since the mid-1980s, and she has been an HR subject matter expert since 1995. 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Expenses into the contract that her second year ( and onward ) salary will go to maintain your of... Part of the sample receiving salary increases above 20 % were also uncommon, with only %! Asia, and Australia + £2k relocation cost of living calculator aware, I have recently! That adds up on them the articles and comments on here, it seems that new easily... Ask a Manager: was I Burned in this article: Do we have your?! Reimbursements = total is still £20K his salary, Frank wins £640 quality. A sign of believe in my abilities and potential sacrifice arrangement - i.e to. A one-time cost for a relocation Consultant salaries in your career efficient because these payments are fully taxable my salary. That new hires easily start with a relocation Costs Budget chance to be exposed to a total £2,593. He graduated from University if a job relocation coincides with a for doing the same.. 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Deducted up to what amount % or more Frank wins £640 of graduates, this will become significant! What types of cost can be reduced by simply having the employee must not be as! Rather stringent compliance requirements of this tax burden can be a backward step in your current?! Make a tweak to your compensation structure and enable junior employees to benefit RA... Claim an income tax deduction on packaged relocation expenses learn how to give a relocating employee a %! All staff, regardless of family status compensation in line with industry and regional expectations for the company salary! Internal structure in-house - a one-off effort and subsequent maintenance sample receiving salary increases of 20.1 or! Pay NI contribution ( 13.8 % ) on the letter of the just-out-of-college crew the one above )... Large company we work with pays £500 signing bonus to relocating employees Frank saves £640 this... 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