You’ve analyzed all potential risks of taking your dream job hundreds of miles away. You spent two weeks on the potential location, walked the neighborhoods, talked to locals; you came to the conclusion that yes, you can see yourself and your family living there. You are fully aware of all financial and tax consequences associated with your move, not only related to your compensation but to investment income, and any potential inheritance including your own death. You fully understand any issues of double taxation in case of moving abroad. The time has come to respond to the job offer, negotiate constructively in order to ensure that you’ll be protected as much as possible from the risk of the move.
The biggest risk is that your job does not come to fruition for whatever reason and that your new location does not offer enough opportunities to find a new one. In other words, you want to be protected from the financial consequences of moving back to achieve status quo ante. Since cultural issues on the job and inflated job specs reveal themselves usually within the first few months, there is a case to be made for delaying a full move of at least your family (and ideally your own) for that amount of time. When moving abroad, you should be fully protected from any tax consequences. Instead of negotiating for plum expat packages, ensure that you are protected now and later from the web of tax issues arising out of your move. Thus, there are up to three topics for you to negotiate:
1) Delay your move, at least for your family: I’ve learned that there are more stories of major disappointment after taking on a new position in a new location, than there are success stories. Avoid giving up your old home before having successfully worked in the new city for a few months. Even more important, never uproot your family before starting your new job. Negotiate with the company a stay for you in a furnished apartment or an extended -stay hotel. Negotiate the full move to happen after 3 to 6 months. Any seasoned company will accept your request and not see this as a lack of commitment. Even if you have to pay your own trips home during that time, your investment will be worth every dollar. If the job turns out to be a successful match, you can now with some confidence change the location variable for you and your family. If the job turns out to be worse than expected, you will be very, very glad, to cut your ties and contemplate next steps from your sofa in the place of the city you luckily never really left.
2) Secure protection for the event that things don’t work out: It is a sign of maturity to talk with your (prospective) employer about what happens in the unlikely possibility that things don’t’ work out. It’s a bit like having a pre-nuptial agreement – you have the best intentions, but failure could be nobody’s fault. From negotiating a “guaranteed severance” offered for some limited time period to clauses to pay for your move “home” and all related costs, make sure you will be made whole in case things don’t work out. Be aware of HR playing all kinds of tricks to shift the employment risk to you. One example: A former colleague once asked me for advice when her company wanted her to relocate to Greece. I looked at the Standard Relocation Policy and was shocked to see that this global firm would not move an employee back home from a foreign location if the person resigned while being abroad. Since “resignation” is often negotiated or forced, such a clause is not acceptable and you should not agree to it, unless you want to be trapped abroad when things don’t go according to plan.
3) Moving abroad - get the best tax protection for a long time: Your company might offer to pay for tax preparation services during your stay abroad. If you are lucky, they’ll even offer you some kind of tax equalization for your compensation. Both are nice gestures but by far insufficient. First, consider that tax authorities have years to audit your tax return (e.g., 10 years in Germany). As a consequence, you need a guarantee that the company will pay for any future tax preparation and defense costs related to the time you are abroad….for the maximum length of time that either two tax authorities (US, foreign) can reopen your case. Second, tax equalization of your compensation might not be sufficient if you have lots of other assets or investment income. You need this to be equalized as well. Be prepared for your company to bark at this demand unless you are sufficiently high up the food chain. Then there are income taxes to be paid on housing allowances and other living costs adjustments, same goes for the taxable event of tax equalization itself; will your company reimburse you for these taxes or are you on the hook? Ensure you are sufficiently covered.
Congrats! You are now ready to go and focus on the many benefits of your new job in the new location. You know that your family will only be uprooted if things on the ground seem to be working out after the first crucial months. You can breathe easily since you know that if things fall apart later your company will make you financially whole for the “round trip”. And should you work in foreign lands, you will be able to sleep soundly the next few years as you won’t have to fear paying for any tax man chasing you long after your foreign stay is over.