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Relocation Benefits Compete for Talent

In an economy that values workforce mobility, relocation packages are a measure of a company’s human resource wealth.

A great relocation package can help new employees acclimate quicker, reducing their costs and increasing their productivity, so they can “hit the ground running,” says RealtySouth’s Jonathan Cohen.

Photo by Joe De Sciose

 

To recruit and retain talented workers, Alabama businesses often must help those workers relocate. For instance, Adtran, the state’s largest technology company, “recruits the most talented, creative and innovative employees across the globe,” says Joia Thompson, vice president of human resources.

To get those employees up and running, Adtran, like many organizations, offers relocation benefits customized to the employee’s position level. “We understand change can be difficult and affect not only our new employee but his or her family, as well, which is why we believe it’s our responsibility to help make the transition as smooth as possible,” Thompson says.

In addition to bringing new workers into the cities where they’ll be employed, some savvy companies also offer relocation options to keep top workers engaged. Younger workers may be especially interested in moving: 84 percent of millennials said they’re willing to relocate for a job, and 82 percent said they believe they’ll have to move to advance their careers, according to a study by relocation company Graebel.

“Some companies believe in relocating employees every now and then to keep things fresh,” says Jonathan Cohen, CRP, GMS, who recently relocated to Alabama from Utah to become director of relocation services for Birmingham-based RealtySouth. “And some organizations may be losing candidates to other companies that do offer relocation opportunities.”

But providing relocation benefits isn’t a cut and dried process. There are a number of methods for doing so. And some options provide more favorable tax advantages for employees. With the new Tax Cuts and Jobs Act of 2017 in place, it’s important for employers to understand the most beneficial ways of offering relocation benefits.

“These benefits might include housing assistance, transportation of household goods, reimbursement for travel expenses and other benefits,” Adtran’s Thompson says. The number of new hires can fluctuate in any given year. “We utilize a relocation company to help our employees and their families transition smoothly anywhere in the world.”

Relocation Benefits Crucial for Recruiting

Companies need to update relocation policies routinely so they save money, keep a great culture, follow best practices and — bottom line — retain valuable employees, says Ann Marie Watkins of Lawrence Arendall Humphries Real Estate.

 

With the current talent shortage, unique and generous benefits have become increasingly important for recruiting and retaining top talent. “Without offering relocation packages, employers may risk employees being distracted by having to deal with their own move and being less productive in their new jobs,” says Ann Marie Watkins, CRP, GRP, relocation director at Lawrence Arendall Humphries (LAH) Real Estate Inc., in Birmingham. “Companies are using relocation benefits on top of salaries and bonuses to show how their company values employees by helping them relocate to their new location, and to make an existing employee’s transition from one location to another seamless.”

By offering relocation services, an employer “shows a new employee right away what their company culture is like, that the company cares about its people,” Cohen says. “It also helps them acclimate quicker to the new place, reduces their costs and helps increase their productivity so they can hit the ground running.”

Options for Relocation Benefits

A complete relocation for a homeowner can cost between $70,000 and $110,000, and for a renter, between $10,000 and $30,000, Cohen says. However, there are a number of options for providing different types of relocation assistance, and not all employers offer full relocation services.

As the real estate market and the job market change, relocation benefits often change as well. “During the downturn in the real estate market, I was seeing more employers offer a guarantee-against-loss program and more employer-assisted home purchase programs,” Watkins says. “But the relocation packages that employers are giving to their employees are changing in many ways. Now with the upswing in the real estate market, I am seeing more lump sum, direct reimbursements, tier programs and buyer value options.”

The option that an employer chooses will have an impact on their employee’s tax liability. Traditionally, an employee could deduct the monies paid by their employer for household goods shipment, household goods storage and final move expenses, Watkins says. Now that the Tax Cuts and Jobs Act has gone into effect, the expenses reimbursement is considered taxable income for the employee. “Now employers must consider whether they will gross up their reimbursement for these expenses so it will not affect the employee as much,” she says.

According to the Worldwide Employee Relocation Council, the average cost for a household goods shipment, storage and final move is around $14,500. With an estimated gross-up cost at 63 percent, the employer would incur an additional cost of $9,136 for each domestic move to eliminate the employee’s tax liability, Watkins says.

Before the new tax law, employers had to pay the household goods benefits separately from the lump sum payment. But after the law change, employers no longer need to separate lump sum and household goods benefits. “This will make lump sum policies continue to grow in popularity because they will be easier to administer,” Watkins says.

However, those lump sum payments will continue to be considered income by the IRS and the employee will be required to pay taxes on it, Cohen says.

One area of relocation benefits that continues to enjoy tax benefits is the sale of the employee’s origin home, and “this is the most expensive part of relocation,” Cohen says. Employers can offer assistance in various ways. For instance, some employers provide a buyer value option program, which means that as soon as the employee finds a buyer, the employer’s relocation provider will cash them out and handle closing with that buyer. Another option is the guaranteed buyer option, in which the employer’s relocation provider will purchase an employee’s home if the employee is not able to find a buyer. In most cases, the relocation company pays an average of two appraisals.

Usually, employers work with national relocation companies that partner with local real estate companies’ relocation departments, such as those at RealtySouth and LAH. “We support companies directly through tax-protected programs or help employers manage a lump sum payment to employees and help employers save money,” Cohen says.

The best relocation packages are comprehensive and straightforward, Watkins adds. “They don’t distract busy employees from their work, they anticipate problems before they arise, they help tackle real estate issues, include household goods assistance and have a bonus incentive to get the move done as quickly as possible so the employee can get back to work,” she says.

By creating relocation packages, employers can help improve employee satisfaction rates about a transfer.

“Companies need to review and update their policies regularly to help save money, keep with the organizational culture, the industry’s best practices and to help retain valuable employees,” Watkins says.

Nancy Mann Jackson and Joe De Sciose are freelance contributors to Business Alabama. She is based in Huntsville and he in Birmingham.

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