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Relocation expenses: How to protect your business if an employee resigns shortly after relocating

by , 07 January 2014
Relocation expenses are expenses you'll incur when you move an employee to another location. Since this is quite a costly exercise with big tax implications, you need to know how to protect your business if your employee resigns shortly after relocating. Here's how to do just that...

One of the most common questions regarding relocation expenses is whether or not employers have recourse if an employee resigns resign shortly after relocation.

The short answer to this yes, there is a way to protect your company.

Here's what to do if an employee resigns after you've relocated him.

The reality is that employees often resign after you've relocated them.

To stop this, include a claw-back provision in your policy, says the Practical Tax Loose Leaf Service.

This must say that if you relocate an employee and he resigns within a certain time, he'll pay back the costs, or a portion of the amount, to you.

Keep in mind that sometimes an employee leaves because of circumstances beyond his control. For example, he leaves because of death, disability or ill-health. You can exclude these circumstances from your claw-back clause.

You should be able to enforce the agreement against the estate, unless the agreement specifically excludes death as a reason for claw-back.

To enforce the claw-back provisions, make sure your employee signs an 'Acknowledgement of Debt' form before you relocate him.

Also bear in mind that you can't expect an employee to pay you back if you retrench him. The same applies if an employee reaches normal retirement age.

Transferring the employee six months before he turns 65 and then forcing him to retire is bad planning on your part.

Important: Any amounts you get back because of claw-backs are a recoupment. You must add them to your taxable income.

Knowing what to do in an event where an employee resigns shortly after relocation will help ensure you protect your business from financial losses.

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