How do you manage incidental costs when an assignment gets cancelled?

    Jul 01, 2020 @ 04:11 PM / by Sandra De Bruyker

    frustrated young business man working on laptop computer at office

    Dealing with incidental costs after an assignment is cancelled

    In these challenging times, companies are being faced with exceptional circumstances. One of these exceptional circumstances is when the assignee is packed to go on assignment but the assignment is cancelled last minute. Companies will typically pay for the costs directly linked to the relocation, such as shipment and medical expenses, but what about incidental costs?

    Incidental costs include service disconnection fees or penalties; membership fees lost; suitcases bought, etc. Typically, these costs would be covered under the Miscellaneous Relocation Allowance [MRA] paid by the company, which, depending on the company’s approach, may only be paid once the employee has arrived in the host location.

    Assignees that incurred these home-country, pre-assignment costs are now submitting reimbursement claims, and companies are struggling with how to handle these incidental costs. Should they reimburse these costs or pay a one-time allowance to cover all or part of these costs? If the latter, what is a reasonable amount?


    What is a reasonable amount to cover for pre-assignment costs?

    As companies would normally not have a breakdown of these costs (which are typically covered under the Miscellaneous Relocation Allowance) and to reduce the administrative burden, they may consider paying a one-time sum as a percentage of the Miscellaneous Relocation Allowance. On the one hand, this allowance is meant to cover costs at home and at host, and costs covered under the Miscellaneous Relocation Allowance are largely assumed to be in the host location.

    On the other hand, due to the exceptional circumstance, there will be unusual costs as a result of the last-minute cancellation, such as disconnection fees, followed by a reconnection of utilities. As such, paying a one-time allowance up to 50% of the Miscellaneous Relocation Allowance seems reasonable.


    Guidance in an uncertain time

    Are you dealing with this issue? AIRINC is here to help. Find out more by reaching out to your client engagement representative today to discuss the current best practice approach that will fit your unique situation.

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    Sandra De Bruyker

    Written by Sandra De Bruyker

    Sandra graduated with a Master’s degree in Law from the University of Antwerp in 1997. In 1998, she also received Master’s degrees in Business Law and Tax Law. Before joining AIRINC in 2007, Sandra gained significant experience as a Tax and HR specialist. She also worked at PricewaterhouseCoopers where she was responsible for advising and assisting international clientele with respect to international mobility and setting up and implementing international employment structures. Fluent in Dutch and French, Sandra has worked for AIRINC since 2007. In her role as Associate Director Client Engagement at AIRINC, Sandra works with clients from various industry groups with respect to expatriate compensation.