Seeking advice regarding employment contract housing subsidy

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5head
Posts: 9
Joined: Fri Jun 16, 2017 10:49 am

Seeking advice regarding employment contract housing subsidy

Post by 5head » Tue Nov 14, 2017 2:02 am

Subject: Seeking advice regarding employment contract housing subsidy

Hello –

A friend has this question and perhaps the team here may have some good advice.

An international company with US operations wants to hire friend. The friend is a US citizen. The job will be based in the US and perhaps in the future may relocate to one of the international offices.

The contract employment offer is an annual salary paid twice a month and a housing subsidy paid once a month. The housing subsidy will always be paid fully if used fully, partially or not used and there is no internal bookkeeping or requirements required/needed.

Friend is trying to determine if the offer is acceptable or is it better to modify the compensation to salary = (initial salary offer + initial housing bonus salary offer) - basically combining the two packages into a single compensation value.

We think the pros vs cons may be tied to taxes and most importantly the annual review. We think the combing option may be better.

Thoughts?

Thanks!
5head

Iridium
Posts: 96
Joined: Thu May 19, 2016 10:49 am

Re: Seeking advice regarding employment contract housing subsidy

Post by Iridium » Tue Nov 14, 2017 4:51 am

From your description, it sounds like the housing allowance will be taxable, so there really is not any tax reason to prefer one over the other. In addition, the company is unlikely to be stupid; I doubt you could trick the company into giving you a larger raise by insisting on a combined salary.

I would be a bit surprised if your friend was able to negotiate this. If your friend was successful, I wonder if s/he would get blacklisted from foreign relocations. This arrangement sounds like a way for the company to adjust pay for cost of living in the area where they relocate their employees. Under your friend's preferred scenario, if s/he was relocated to a low cost of living country, they would have to cut his/her salary, which is always awkward. When they split out the payment, they can adjust the income to reflect cost of living, while keeping clear that they value your friend just as much. If it does not seem fair that employees would have their income cut when moving to a low cost of living country, consider if the company wanted to send your friend to a high cost of living country, surely a higher income to compensate would be expected.

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