Resist the Temptation to Manage Relocation by Way of Lump Sum

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This is a guest post by David Bradstreet, CRP, Director of International Sales for VERSA Relocation. See more from David on LinkedIn!

The recent tax reform law is having a significant impact on companies who offer relocation benefits to employees. Certain relocation expenses such as moving household belongings, moving automobiles, household goods storage and relocation travel costs were previously excludable, but are now treated as income to the employee.

According to Worldwide ERC, this will add an estimated combined $2 Billion in relocation costs to companies in the United States.

This additional tax liability expense may create the temptation for some companies to revert to managing relocation by way of a cash bonus or lump sum. There are several reasons companies should resist this temptation and continue to partner with trusted relocation providers.

Service Excellence: Employees are not seasoned consumers of relocation services. They want an employer to vet out top suppliers that will provide them with the best possible relocation services and experience.

Optimal pricing: Employees cannot obtain the same pricing on their own that an employer can negotiate on their behalf. In fact, during peak moving season, the employee may pay as much as 40% more for the same services, if purchased on their own.

Funding challenges: Employees often do not have enough disposable income on hand to cover relocation expenses, especially during a move, when they are facing numerous other personal expenses. It is easiest for employees when invoices are paid directly by the employer or the relocation management company and they do not have to be heavily involved in the funding of relocation services.

Employee Productivity: When employees are left to manage their relocation themselves, sourcing, negotiating and managing service providers can become a large distraction from the work they were hired to do. If you have trusted providers who deliver quality service and are easy to do business with, your employee can focus more on their work and less on the details of moving.

Data: Relevant data drives a great relocation program. When expenses are tracked and trends are analyzed, companies can make effective decisions about how to spend funds in the future.

Accountability and partnership: Moving is inherently stressful and challenges often arise that could negatively affect the new hire experience. Relocation partners who understand your culture and are loyal to the partnership are tremendously valuable in avoiding problems and mitigating the challenges that can arise. Ultimately, they help reduce stress and provide a great experience.

Talent acquisition considerations: Providing a professionally managed relocation is still important for attracting top talent. Lump sum offerings could create stress and candidates may worry whether they can complete the relocation within the budget offered.

The new tax laws have an unfortunate impact on employee relocation. We must accept that moving employees has become more expensive. Together, we should carefully consider how to manage the added costs and avoid shifting the burden to new hires and transferring employees.

Is this a topic you need guidance navigating? If so, let’s schedule a meeting!


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