How do relocation packages work

Is this something you just get a lump sum of money upon signing the contract? If it is, then how is it different than a signing bonus?

Or is relocation package something that strictly just covers for the expenses that occur while you move E. G: gas, moving truck, hotels etc. I assume then you will be reimbursed the exact amount you spent after you've completed your move.

It's very employer, position, and distance dependent. Other perks can include millage on your car, a rental car, or airfare for one or more trips to and from your new location; along with temporary housing and money for meals while you look for a permanent home.

In either situation, pay attention to the associated terms. Many will tie a sort of 'loyalty' clause to relocation reimbursements such that if you are not employed with the company for X amount of time for example, 18 months or 2 years , they may require you to pay it back.

This can really bug you if you find that you're not happy with the company a few months down the road and will find it difficult to shoulder the burden of re-paying this relocation fee, if it's specified that you will have to do so.

There was no 'Here's the receipt for the expenses I incurred. I'd say one of the most notable differences with this pay, compared to a sign on bonus, is that it's taxed differently. When you file your taxes, you can deduct moving expenses in most situations When you clearly needed to move for the new job. As seen in:. How Do Relocation Packages Work? Relocation Package Options There exist four main types of relocation packages: Lump sum — A set amount of money is given directly to the employee to pay for moving-related expenses.

The transferee decides how to organize their relocation and what to spend the money for, but they cannot get any more relocation assistance from the company.

The relocation package amount is negotiated before the move, so it may sometimes not be enough to cover all relocation-related expenses. In such a case, the employee will have to cover the difference out of their own pocket; Reimbursement — The employee pays for everything themselves and gets reimbursed by the company after the move.

All receipts for moving-related expenses must be saved and provided as proof. Usually, the company sets a cap on the amount it will reimburse — any expenses that go over that limit are paid by the employee; Direct billing -The company hires professional movers to relocate the employee and pays them directly. This may be combined with reimbursements for other relocation-related expenses, such as travel costs, costs of temporary housing, home sale marketing, etc. Are Relocation Packages Taxable?

What to Expect with a Relocation Package? Must-read: Your job relocation guide How to Negotiate a Relocation Package As already mentioned, relocation packages are used both as a recruiting tool to attract the best candidates for a job and as a way to keep current employees happy in the event of a transfer.

The negotiated details, time-frames, amounts, and special conditions may be written directly in your employment contract or simply stated in a signed letter — what matters is to have it all in black and white in order to avoid potential conflicts and misunderstandings. Also Read. Add a comment. Cancel reply Your email address will not be published. Leave this field empty.

Before the Tax Cuts and Jobs Act of , relocation benefits were not considered taxable income for employees. Employers could also deduct relocation expenses incurred when relocating their employees — win-win for both parties.

Employers have lost the ability to use relocation as a tax deductible, and employees have to pay taxes on any relocation benefits received. To overcome this and keep relocation packages competitive, one option is to cover these additional taxes that employees incur by grossing up the benefits by the amount of extra taxes incurred. If you are relocating employees internationally, then you also need to consider any tax implications in other countries.

In particular, if you are relocating an employee outside of the US, US citizens must still file US tax returns regardless of where they are living and earning. However, the foreign earned income tax credit should minimise or eliminate the amount of tax owed. It is often considered best practice to provide tax equalization if relocating employees abroad, so that they continue to pay taxes as they usually would and the employer picks up any extra.

For more information on taxable relocation benefits, take a look at our article on the Relocation Benchmarking Policy. You may have a single employee who rents their home or you may have a family-focused employee with a mortgage and pets. Long or short term housing — an employee could also require a short-term rental before getting their long-term home.

As mentioned above, many of these can vary depending on the individual circumstances and which kind of policy is agreed upon.

We have an entire section of our website dedicated to benchmarking policies , as well as a helpful example of the policies with their approximate costs. Starting afresh in a brand new city sounds challenging enough but, starting a new chapter in an entirely different country is a whole other ball game. The United Kingdom! A mix of culture shock and not acclimatizing can be held accountable for this.

You will have to consider the following for an employee needing an international relocation:. We live in a world where there are many different social and cultural practices, having a policy in place to support an international colleague during their move can help to minimize the risk of failure. We offer full guidance and an abundance of options when it comes to relocating an international employee.

You can find full details of this on our Global Relocation Section. As an employer, you need to be prepared to answer any questions your new recruit may have. Some of the most popular questions — and answers — that they may have are:.

The new employer or existing if it is a location move will talk you through the types of relocation packages, policies and what is available to you. The process will then begin, it may mean that you visit your new city a couple of times to look for properties, book flights and start to pack!

Some of the common approaches with expenses include: lump sum payments, cost sharing between the employee and employer or, payments are made directly to your bank account to cover the expenses. Your new company or relocation specialist will reach out to discuss the process in full and this will include how the expenses are handled. Be sure to keep your receipts and invoices! Yes, and this can either be paid in advance or reimbursed. Packages will vary considerably.

Most companies offer a one month moving period, a long time for the employer, a bit of a squeeze for the employee! Some companies do offer an extended period based on the role and seniority level. This depends entirely on the role, skill level, type of move and contract. Once an employer has totalled up the financial costs and benefits, they will then provide you with the budget for your relocation. The benchmark figures across most industries are:.

This can be a huge savings, particularly now, with real estate prices down. In the event you must sell at a price less than what you owe, your employer may cover the loss. You and the RELO company discuss the price and options, but ultimately you choose the agent and the price.

When a buyer makes an offer, it gets negotiated verbally. Just before signing the offer, you, as the seller, will generally sign over the grant deed to the RELO company, thus making the RELO company the seller.

The RELO company, and not you, signs the contract with the buyer. If you like the home, be patient. You may in fact have to do some negotiations with both the seller and the RELO company.