Does your gross-up methodology work effectively with your relocation policy?

After the cost of the home sale and household goods, tax assistance, often referred to as gross-up, is generally the third-largest expense incurred by an employer in a relocation. Gross-up can best be described as an estimated tax reimbursement paid by the employer on behalf of a transferee to cover a transferee’s added tax liability incurred as a result of a relocation. Because certain relocation expenses need to be added to a transferee’s reported income, and are therefore subject to tax withholdings, a transferee’s tax liability could increase if the company is reimbursing or paying these costs on the transferee’s behalf. Tax assistance helps offset this added tax liability. While there is no law requiring a company to provide a gross-up benefit to transferring associates, typically most companies include tax assistance in their relocation policy.

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