The new reality for today’s employees who are asked to move and offered scaled-down relocation packages, is that the relocation package may barely scratch the surface of the full cost of the move. This presents a tremendous dilemma. The employee may swiftly accept the transfer to keep the job or he/she may want to relocate to the new location. However, once the economy improves, employees who had scaled-down, company-initiated relocations, may leave a company.
Companies should recognize that there are a number of overlooked effects to consider, including:
- If the transferring employee has relocated with the company before, he/she is likely familiar with (or may expect) a standard relocation package which was offered on a prior move. This may lead to a lower acceptance rate, disgruntled employees, or both.
- An employee with a family who owns a home may not be able to afford the move on a limited relocation package. The cost of moving household goods or selling a home may exceed the company-offered relocation package.
What is the alternative? Stay in touch with the new reality and be more innovative!
For example, employees may not be able to sell their home with current market pricing so packages can offer other services such as property management instead.
Another good idea is to focus on the move’s bare-essentials (IRS non-taxable items) such as the movement of household goods and final move expenses. These components maximize the net benefit to the employee and will save both on tax gross-up or withholding costs, which are due on other, taxable benefits.