Local vs. Expat - who knows pros/cons?

[catnixon]

I'm a resident in the US and my company has made me an offer to move to the UK as a localized hire - - not under an expat package. I know there are some pros and cons to both approaches but I'd love advice from anyone on what I should be considering or negotiating in the process. Tax implications? COLA? Thanks!

[MichelleAlison]

Hi and welcome to the forum.

I am sure there is someone who can help you with your questions.

Michelle

[jlms]

Originally Posted by catnixon

I'm a resident in the US and my company has made me an offer to move to the UK as a localized hire - - not under an expat package. I know there are some pros and cons to both approaches but I'd love advice from anyone on what I should be considering or negotiating in the process. Tax implications? COLA? Thanks!

Lets not beat around the bushes: you should be getting a salary that is the same amount in pounds as you are earning in US dollars, otherwise life would be very difficult.

The 3 main issues you want addressed are private health cover, housing and pension arrangements.

Although you will be paying for the socialized health care no matter what (NHS) serious companies should offer private health care for you and at least partial cover for you family members.

If you cn get any help with housing (normally part of an expat's package) do so. Housing is expensive and houses are in general terms much smaller than what you have in the US. Unless you are very wealthy prepare to be disappointed on this regard (and make sure you don't bring too much furniture to the UK, it is a typical mistake of new arrivals who have to put lots of stuff in storage or to sell it after realizing they don't have enough space).

You hve to make sure that a move does not affect your pension arrangements, you will need an specialist regarding this, make sure you understand the implication of a relocation....

Tax wise the situation is a muddle. The government is trying to tax people that work here but claim to reside elsewhere for their earnings outside the UK. There must be treaties between both countries regarding thee matters, so the only advice possible is to contact an adviser *before* you accept any offer.

[Bevdeforges]

Originally Posted by catnixon

I'm a resident in the US and my company has made me an offer to move to the UK as a localized hire - - not under an expat package. I know there are some pros and cons to both approaches but I'd love advice from anyone on what I should be considering or negotiating in the process. Tax implications? COLA? Thanks!

I've been on both - expat package and local payroll. Honestly it depends on what your plans are. If you are only over for a limited period of time and intend on returning to the US, you need to be extremely careful about preserving all your rights back home while you're gone: Social Security, health insurance, pension plans (401K or IRA) and job seniority/pay level and pay grade.

If this is a permanent move, with no particular intention of returning to the US, my experience is that you'll do better on the local payroll, provided you make the effort to integrate yourself into the UK system.

Tax implications: your earned income while you are overseas is excluded from your US taxes and you pay your taxes in the UK, including all their social insurances (health, pension, etc.). If you were on an expat plan, you'd most likely be maintained on the US benefits plans and probably paying US income taxes with "equalization" for any overseas benefits (like housing allowances and tax preparation services). It can get very complicated (and very expensive for your employer) very quickly. On local payroll, you establish residence and pay taxes like a local.

On the local payroll, your salary is denominated in sterling (i.e. pounds). If the dollar rises or falls, your pay remains the same in pounds. Which is a good thing, actually, as those paid in dollars have to worry about exchange rate differences changing their actual salary month to month. This can be a problem if you're planning on holding onto property or assets back in the US, because their value in pounds changes every time the exchange rate does.

You might want to negotiate for tax preparation assistance in the first year or two, as it can be tricky knowing how to handle things in the year you arrive. (The UK tax year runs from April 6 to April 5, for example.) Once you have a year or two of "correctly" filled in forms to go by, you can probably do things yourself.

There are other considerations - but the key one is how long you plan on staying and making sure you are prepared for your eventual return to the US.
Cheers,
Bev

[thaumata]

Get paid in pounds, and make sure that you get paid ENOUGH pounds to support you in the english economy. While £20k is mathematically equivalent to about $40k, £20k will not get you very far here at all. if you are making $40k/yr, I would almost not think it unreasonable to expect to make about £40k/yr in the UK.. not if you are living in the UK. It's easy to assume that a product that costs $20 in the US will cost £10 here in the UK, but most things are more like £20 instead. After I'd been here about four months, I stopped converting things back to dollars because I was making myself insane with the idea that I'd just spent about $6 on a 20 minute bus fare or $8 on a milkshake.


Also, depending on how you are paid and where you bank, remember that it can be very costly to get money wired overseas. I used to live in Spain and work for an american company, and to receive my wired paycheck to my american account cost me about $30 each pay period, plus whatever fees I incurred to exchange the money to euros. (I would have demanded to be paid in euros, but I was only staying half a year and they were picking up my rent instead.)

[catnixon]

Thanks so much to everyone for their great insight and info!
Catherine

[chinglish]

Either way you'll have a tax obligation in the US so I don't think that is the key difference. Tax equalisation would mean you only have to pay 1 lot of tax equivalent to your current US obligation, a local package would mean you personally have to pay US obligations AND UK taxes.

The things you might get from an Ex-pat package might include the below, so if you're going on a local package, you should consider if you can live without these items, or you're willing to pay for them yourself, or the UK salary makes up for it :

- shipping and repatriation : an individual might pack and unpack their own boxes and have to wait around the home for the delivery, a corporate shipping service would be like a hotel concierge service handling everything for you. Personal belongings are cheap, but furniture is v expensive.
- temporary accomodation - where will you live when you arrive before you find an apartment and who will pay for it?
- most local contracts with big companies do provide medical, dental benefits anyway so should be ok. some even provide gym allowances
- ex-pats usually get 1-2 return flights home every year, some get the public holidays in their own country in addition to the holidays of the new country
- assume you don't need language lessons which ex-pats in foreign countries get
- housing allowance, utilities, education allowance for kids, company-guarantee on housing rental, company car

etc etc
Basically, I usually tell candidates that if you like the company and the role that is offered, so long as you are not nett worse off, you should do it and not be too greedy that suddenly you want a free house and free kids tuition. I don't know any good companies that make offers that are nett worse off but I know lots of people that have gone abroad and had great experiences and learnt to adapt well to local life, culture due to having to carefully consider how they apply their finances rather than just expensing everything. good luck !