Raise, Bonus, Compensation Archives

Did You Know That . . . Employer-Paid Moving Expenses are Now Taxed as Employee Income?

Published on May 8th, 2019 by Alan L. Sklover

Sklover Working Wisdom Tax Relocation Expense Reimbursement

. . . Yes, the 2018 “Tax Reform” law in the U.S. made employer-paid and employer-reimbursed relocation costs – even when your moving is requested by the employer – income to the employee, and thus taxed to the employee? Yikes!

We all should know that wages, salary, bonuses and employer-granted grants of stock are “income” to the employee, and thus subject to taxes to be paid by the employee.

Some of that changed in the U.S. this year due to our “friends” in Congress, and their so-called “Tax Reform” law that lowered taxes on the wealthy.

Under previous tax law, payment OR reimbursement of most of an employee’s job-related moving expenses were not subject to income taxes or employment taxes (such as Medicare or Social Security.)

However, under last year’s so-called “tax reform” legislation, employers now must include all moving expenses – whether paid by the employer OR reimbursed by the employer – in the employee’s income that they report annually to the IRS.

Employees are warned to take this change into account when considering whether to accept a relocation request, as moving oneself, or an entire family, can be awfully expensive, and doubly so when the amount paid or reimbursed by the employer is also subject to taxes.

You may want to request that your employer (or prospective employer) not only pay for or reimburse you for your relocation costs, but also agree to “Gross Up” that amount that is, also pay you what you will need to pay in taxes, to make up that “tax difference” to you. Alternatively, to “repay” you in some way to address this new tax burden on you.

If you are not familiar with the concept of “Tax Gross Up,” look for our upcoming newsletter to be entitled “Tax Gross Up: What Does That Mean?”

“Knowledge is leverage. Forewarned is forearmed. Look before you leap.” That’s our motto at SkloverWorkingWisdom.com.

[Written and transmitted May 8, 2019.]

(Please note: This email newsletter does not constitute legal or tax advice; for such advice or counsel, you need to consult a lawyer or tax adviser. In addition, laws change, and that includes the present tax law noted above, and, so, reliance upon this email newsletter must take these warnings into account.)

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© 2019 Alan L. Sklover. All Rights Reserved and Strictly Enforced.

Voluntary – Key Words & Phrases

Published on February 19th, 2019 by Alan L. Sklover

Sklover Working Wisdom keywords and phrases

Be on the lookout for . . .

“Voluntary,” as in “Voluntary Departure,” “Voluntary Resignation”
or “Voluntary Waiver”

You’re quite likely to find the word “voluntary” in several work-related legal documents. If you do notice it, that word may be very advantageous to you.

Generally speaking, “voluntary” means “done on one’s own free will.” It is synonymous with discretionary, unforced and optional. In legal documents, it often suggests that the act described was not required, not coerced, and not demanded.

Let’s say that, according to your employer’s Annual Bonus Plan, you are not entitled to your annual bonus if you “voluntarily” resign before the day it is paid. What if, two weeks before bonus payment date, you resigned and left your job in fear that your boss might beat you up in one of his infamous uncontrolled rages?

Was your departure “voluntary?” I’d say no. Are you entitled to your annual bonus? I’d say yes, although I’m confident that most employers would disagree.

You have a strong, reasonable and likely winning argument that the bonus is yours, so long as you spot, appreciate and point to the word “voluntary.”

In Repayment Agreements, you might promise to repay your employer in, as examples, a Sign-on Bonus Agreement, a Relocation Expenses Policy, or a Tuition Assistance Plan if you “voluntarily” leave before two years of service. What if you left earlier than that because, all of a sudden, your salary was reduced by 40%, and your family likes to eat three meals a day? (Some kids demand 4 or 5!!)

Is feeding your hungry family “voluntary?” I’d say No. Was your departure to take a better paying job truly “voluntary?” I’d say No. For this reason, you have a very good, and probably winning, basis to argue, with likely success, that your repayment is not required.

So, in this circumstance, too, you may very well not have to repay any sign-on bonus, educational assistance, etc., so long, that is, as you spot, appreciate and raise in your defense the word “voluntary.”

The same goes for whether a Non-Compete Agreement is valid or void, according to its own words. If the non-compete says it is valid if you “voluntarily” leave your job, and you can show that you are allergic to the new paint used throughout the office, then it is void as to you, so long, that is, as you spot, appreciate and raise the word “voluntary.”

There are many other legal documents that may contain the word “voluntary.” Look for “voluntary” in any and every workplace document, whether in an agreement, a company policy, an Employee Handbook, Stock Award, or other document.

You may be VERY GLAD you did.

Need a model memo or letter to transmit a request or complaint? A good checklist or form agreement? For a complete list of our Model Letters, Memos, Checklists and Sample Agreements, Just [click here.]

Interested in Membership? It’s free, and has advantages, including discounts on our products. Just [click here.]

Need a private telephone consultation? Just [click here.] Evenings and weekends can usually be accommodated.

Your Path to Dignity at Work”™

© 2019 Alan L. Sklover All Rights Reserved and Strictly Enforced.

Offer Letter or Company Plan – Which One Governs?

Published on October 10th, 2017 by Alan L. Sklover

 
“Whoever is careless with the truth in small matters
cannot be trusted with important matters.”

– Albert Einstein

ACTUAL CASE HISTORIES: Case History 1: Joseph signed an Offer Letter that said the following: “The Company will provide you and your family with health insurance coverage, subject to the terms provisions and conditions of the Company Health Insurance Plan.” Sounded good to Joseph.

After starting the job, though, Joseph found out that the terms of the Company Health Insurance Plan provided that “New employees and their families are not eligible for paid health insurance coverage until the employee has been on the job for six months.” So, the “terms and provisions” of the Plan essentially took away what the Offer Letter had seemed to provide Joseph and his family. Big disappointment, to say the least. In this case history, the Plan “overcame” or “superseded” what was in Joseph’s Offer Letter, or at least modified it to his and his family’s significant detriment. Ouch!

Case History 2: When Lemuel started his job, he was very interested in the company’s willingness to offer stock options to its employees. For this reason, he carefully reviewed the terms of his employer’s Stock Option Plan. It said quite clearly that “Company employees will receive a minimum of 1,000 stock options for each twelve months on the job, unless agreed otherwise.” Sounded great to Lemuel.

After a year on the job, Lemuel asked his Human Resources representative if he could get a written statement of how many stock options he had been awarded. To his surprise, he was told “You don’t have any.” When Lemuel insisted on an explanation, she responded, “Your Offer Letter stated clearly ‘Your compensation consists of a base salary, an annual bonus and health care coverage. No other compensation is being offered to you. To receive any additional form of compensation, you and an authorized representative of the Company and you must sign another document that provides that to you.”

So, the “terms and provisions” of Lemuel’s Offer Letter essentially took away what the Stock Option Plan had seemed to provide Lemuel and his family. In this case history, the Offer Letter “overcame” or “superseded” the Company’s Stock Option Plan. Ouch! Big disappointment, to say the least. Seems that the Offer Letter took away what the Stock Option Plan seemed to provide, by “overcoming” or “superseding” what was in the company’s Stock Option Plan.

Does your Offer Letter (or employment agreement) overcome everything that is said in any of the employer’s compensation and benefit Plans? Or do your employer’s compensation and benefit Plans overcome your Offer Letter (or employment agreement)? How can you tell? Perhaps, more importantly, what can you do?

LESSON TO LEARN: If they differ, which one – your offer letter or your employer’s plans – “govern and control?” It all depends, of course, on the wording of the documents – both offer letter and plan – and your willingness to take the time and effort to (a) read them carefully, and (b) ask for clarification, either on your own or, perhaps, with the guidance of an experienced employment attorney.

These days, with employers trying their very best to lower their “employment-related overhead costs,” we are seeing more and more of these issues, and sadly, most often only after someone has lost out on what they deserve.

But you can protect yourself, if only you are willing to try to do so by (i) reading carefully, (ii) thinking carefully and (iii) requesting clarification that even a 10-year old could understand.

That’s what we call wise “navigation and negotiation” of your employment relation, to ensure you get all you deserve, and don’t miss out on anything you do deserve.

Take it from me: unless you act to protect yourself, no one else will, especially your employer.

WHAT YOU CAN DO: Have you received an offer letter, or are you expecting to receive one soon? Do you believe you are entitled to any compensation or benefit that is provided under a company Plan, such as stock, stock options, severance, health care, disability insurance, life insurance, educational benefits, or otherwise? To avoid being deeply disappointed, here are seven things you can – and should – do to protect yourself:
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Job Change? Ten Tax Tips – Things to discuss with your tax advisor

Published on June 27th, 2017 by Alan L. Sklover

 
“When the devil loses his job, he becomes a tax collector.”

– Greek Proverb

ACTUAL CASE HISTORIES: It goes without saying: just as it is wise to look before you leap, when changing jobs, so too is it wise to consider the many steps you can legally take to minimize your future tax liabilities. Taxes are part of every employee’s life, but that does not mean that you must pay more than you need to. To the contrary, you can take into account the tax issues of a job change when (i) planning for it, (ii) negotiating it, (iii) taking steps during it, and (iv) even when completing your tax return.

Because I am not educated or experienced in tax matters, I cannot give tax advice or counsel on tax matters. That said, I can make certain suggestions regarding tax thoughts, and suggest – as I do with my clients – that employees consult with qualified tax counsel or tax advisor in contemplation, navigation and negotiation of job changes.

LESSON TO LEARN: Taxes are inevitable, but the amount you owe is capable of being legally reduced by taking appropriate steps to do so. But first, you must know what they are, and only then can you wisely navigate and negotiate to that end, after consultation with your personal tax advisor.

Note that, as I am not a tax law practitioner, this blog post cannot be considered tax advice. Additionally, this blog post is written and published in June, 2017. As tax-related laws change over time, you might want to ask your tax advisor whether the law has changed since this blog post was published.

WHAT YOU CAN DO: Paying taxes is required by law, but there is no law that requires you pay more taxes than you are required. Here are ten “tax thoughts” to consider, and to share with your tax advisor, when expecting, planning, and in the midst of a change of jobs:
Read the rest of this blog post »

Malus Payment – Key Words & Phrases

Published on October 6th, 2016 by Alan L. Sklover

Key Words

What is the meaning of:

Malus Payment?

In many areas of business, contracts commonly include what is called a “bonus-malus” provision.

This means that, if future results of an effort, a joint venture, or a sold business exceed a specified performance goal, one side may get an extra payment (that is, a “bonus” payment).

A “bonus-malus” provision would also provide that, if results fell below that same specified performance goal, or another specified performance goal, that same party might have to pay back money previously received from the other (that is, a “malus” payment).

“Bonus-malus” provisions serve to limit both the upside and the downside risks of unexpected events to both sides in a transaction.

Here’s an example. If party A sold a consulting business to party B, their contract might include a “bonus-malus” provision that provides (a) if the revenues in the first year exceed $10 million, then A, the seller, would be entitled to a “bonus” payment of $100,000. But (b) if the first ?year revenues were less than $8 million, then party A, the seller, would have to make a $75,000 “malus” payment to party B, the buyer.

Such “bonus-malus” provisions are starting to find their way into employment agreements and offer letters. Don’t be surprised if you see one in yours, or if such a provision is imposed upon you in coming months and years.

The keys to their negotiation are (a) careful due diligence, (b) reasonable performance goals, (c) accurate means of measurement of future performance, (d) exclusion of the effects of truly unexpected events such as changed laws, wars or natural disasters (earthquakes, etc.) and (e) proven bad faith by either party.

A “malus payment” is different from a “clawback” provision in that a “bonus-malus” provision is usually pre-negotiated into a contract, and does not suggest any misconduct, while a “clawback” provision is usually imposed by law or found in a compensation plan, and is usually imposed without a prior agreement, most often in the context of an allegation of bad conduct.

You read about it here, first.

Knowledge is power. The best things in life are free. Forewarned is forearmed.

That’s what SkloverWorkingWisdom© is all about.

© 2016 Alan L. Sklover. All Rights Reserved. Commercial Use Strictly Prohibited


Alan L. Sklover

Alan L. Sklover

Employment Attorney
and Career Strategist
for over 35 years

Job Security and Career Success now depend on knowing how to navigate and negotiate to gain the most for your skills, time and efforts. Learn the trade secrets and 'uncommon common sense' of Attorney Alan L. Sklover, the leading authority on "Negotiating for Yourself at Work™".

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