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In recent years, a significant number of people have diverted their professional life for their career. According to Move.org research from 2021, more than seven million Americans moved for work. Although this number represented a decrease from previous years, the trend remains an important ongoing phenomenon.
When it comes to relocation, research shows that employees are often more reluctant to move due to the higher cost of living in a new location. Also, on average, employees have 30 days until they start their job at a new location. This rapid turnaround can make a move particularly expensive. Offering a relocation package for moves over 50 miles helps ease the transition by providing anything from financial assistance to temporary housing.
Here are eight essential items that a company should include in their relocation package.
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1. House sale or lease-rest
According to a survey conducted by Worldwide ERC, a non-profit organization dedicated to mobility awareness, the biggest relocation expense is often the loss on the sale of a home. With little time to find a buyer, and even less time to purchase a new residence, employees are often content to sell their property at a loss or take a financial hit by terminating a lease.
Some companies cover the difference from the initial purchase or help market the house with a competitive real estate agent. This process will be more expensive for homeowners, although tenants may also need help with a breach of lease fine.
The sale of a house or the early termination of a lease can determine how much money an employee has to finance the move. The company’s assistance in this case can make or break the employee’s decision to relocate.
2. Moving expenses
Uprooting your entire life in 30 days would be a daunting prospect for anyone. Packing up belongings and moving them to a new city is daunting and expensive. Relocation assistance supports an employee by helping to alleviate those expenses. In addition, high-quality moving insurance protects your employee from unforeseen losses and is essential for a less stressful relocation.
3. Transportation costs
Traveling from one place to another can be expensive, whether by car or plane. In addition to the actual move, the employee (possibly with her family) will need to visit the new location at least once before the move to house hunt and become familiar with the new city. Relocation packages often include some form of transportation coverage for two or three trips.
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Finding a new home can be the most daunting aspect of moving. With an employee facing a potential loss from selling a home quickly or canceling a lease, businesses spend heavily to support their employees with housing-related costs. In fact, the average cost of home care relocation packages was nearly $40,000 in 2015, according to Worldwide ERC.
Employees may need temporary housing if they cannot find a suitable home in time for the move. Buying a new home is always expensive, and it might make more sense to help your employee with rental assistance if they are likely to move again or already live in rented housing.
5. Storage fees
If you’re planning additional relocations for an employee, it might make more sense to keep some of their belongings in storage rather than moving them. Additionally, short-term or long-term storage may be required if an employee moves to a smaller home. Helping with storage fees can ease some of the financial burden of relocating these workers.
6. Tax implications
An unexpected hurdle for many relocating employees is the tax implications of relocation benefits. A relocation lump sum refers to money an employer provides to an employee to help cover the cost of relocation. Relocation lump sums are taxable and classified as additional income in addition to salary at the employee’s regular income tax rate.
For example, if an employee has a regular tax rate of 25%, a $10,000 lump sum benefit could be taxed $2,500. This may be an unexpected charge that the employee must pay. Many companies will address this problem by increasing your initial lump sum for tax purposes.
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7. Miscellaneous expenses
There are a variety of expenses that will cost your employee during relocation. Whether it’s unused vacation days, decreased spousal income due to moving, or packing services, it’s always a good idea to ask your employee what costs they expect and predict will be some of their biggest burdens. Then help your employee cover those expenses.
8. Unexpected costs/reimbursement
Some companies refuse to increase the relocation lump sum after it has been agreed upon. This can create problems for your workers if new costs arise, such as paying to repair or replace belongings that were damaged in the move. Relocation, especially within a deadline, is sure to bring with it unexpected costs. This and the fact that lump sums often arrive after the move, in the form of reimbursement, can easily deter an employee from relocating. Reimbursement requires an employee to pay all costs up front out of pocket. Both unexpected costs and the reimbursement process must be taken into account when putting together your company’s relocation package.
If your business is actively preparing to relocate employees, a strong relocation package is an integral part of the process. The right relocation assistance can be the factor that convinces your team members to move while making your business more competitive. Relocation assistance will provide your workers with the support they need while also making possible a greater degree of success for your business.
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