1. Many companies believe a relocating
employee’s morale is improved when
the company chooses to provide tax
assistance, commonly known as “gross
up.” Helping a relocating employee
to avoid taking a “tax hit” for taxable
moving expenses can go a long way to
provide a positive relocation experience.
Gross up methodologies vary by company
philosophy and application – some
use flat gross up rates, such as the
supplemental rate, while others use both
supplemental rates for most employees
and marginal rates for highly compensated employees. Others do “true-up” tax calculations at
year-end to match an employee’s exact tax rate with the percentage of tax protection provided.
Regarding lump sum cash payments, most companies with a U.S. Domestic relocation program
provide tax assistance on lump sums, even for those considered in the new hire/graduate tier. Graebel
Worldwide Consulting Services studied Lump Sum policies in 2015 by reviewing ten LS programs,
revealing that only 20% expressly stated in the policy the LS was not grossed up.
Not providing tax assistance for lump sum-only programs can drastically reduce the overall amount of
cash at the employee’s disposal. Federal, state, and, in some cases, local tax obligations can undercut
the buying power of employees’ sole relocation benefit, requiring
them to be even more resourceful with their funds, often creating additional stress during an already-
stressful time.
Graebel believes the benefits of including gross up features in a domestic relocation program are
numerous with a relatively negligible downside.
inMOTIONSM
: THE BENEFITS OF GROSSING UP
RELOCATION EXPENSES
U.S. Domestic relocation
programs are an important
feature of a company’s
workforce planning strategy,
providing organizations with
the tools and incentives to
transfer employees to new
locations, hire candidates
and balance ever-shifting
workforce priorities that all
companies face.
Corporate relocation
programs are often a
blend of services and
cash allowances, and the
taxability of these benefits
is a crucial consideration
for all corporate relocation
programs. Some of these
benefits – most notably
compliant homesale
programs and the shipment
and storage of household
goods – are considered
non-taxable in the eyes
of the IRS, reducing the
overall tax burdens for
domestic moves.
TAKE ACTION
• Review your company’s approach to grossing up taxable expenses and ensure it’s in line with
your relocation program’s philosophy
• Discuss gross up methodologies with your payroll provider and tax consultants and weigh
alternatives to your current approach
• Consider polling your relocating employees to gauge the value of providing (or not providing)
tax protection for taxable relocation expenses
BUT WHAT ABOUT THOSE RELOCATION BENEFITS THAT
ARE TAXABLE? WHO PAYS THOSE TAXES AND WHAT’S
CONSIDERED BEST PRACTICE?
WORLDWIDE CONSULTING SERVICES
First of Two Issues – U.S. Gross Up Approaches
Watch for Part 2 Detailing Flat, Supplemental, Marginal Rates
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