What Companies Pay For Relocation - More than 60 percent of workers said they would consider relocating for work. But moving from one place to another — whether it's a new city or country — can get expensive quickly. To sweeten the deal, you can offer relocation assistance.
But before you offer to help with moving expenses, you may have questions about what it covers and whether it's taxable.
What Companies Pay For Relocation
Relocation assistance is a package offered by employers to current or potential employees to cover the costs of moving for work. Employers may choose to provide relocation assistance to an employee as reimbursement, an advance, or direct payment to the appropriate parties.
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Helping with moving expenses has benefits such as attracting top talent, increasing employee retention and improving engagement. However, consider the costs of relocating employees.
According to one study, moving an employee can cost anywhere from $21,327 to $79,425, depending on whether they rent or own a home. Of course, you don't have to pay 100% of the employee's expenses. In fact, the average relocation per employee is $7,200.
Please note that relocation costs vary. Joey Sassoon, Vice President of Sales and Logistics at Moving Apt, shares his insight into the industry:
The cost of relocation assistance depends on the distance to travel, the number of people being relocated and the assistance needed. The total cost of relocation assistance can be in the thousands of dollars, with the average relocation package costing between $5,000 and $7,000 for interstate moves.
What Do Corporate Relocation Packages Include?
After all, it's about relocation assistance. Employees choose to relocate for many reasons and not receive corporate relocation packages.
Therefore, you can further strengthen your ability to attract talent by offering a competitive salary and benefits package along with growth opportunities.
Is job relocation assistance taxable? Yes, according to the IRS, employers must include moving expense reimbursements in employee wages. But that wasn't always the case.
Between tax years 2018 and 2025, thanks to the Tax Cuts and Jobs Act of 2017, the following were suspended:
How To Get Relocation Assistance For Your Candidates
Armed Forces Exception: Members of the armed forces may deduct qualified expense allowances from their income if they are on active duty and subject to a permanent relocation pursuant to a military order or event. discount
Payments for unavoidable moving expenses are a type of fringe benefit. Supplementary wages are additional payments that employees receive in addition to regular wages. Other types of supplemental pay include commissions, overtime, and back pay.
You can calculate federal income tax on additional earnings using the additional tax rate of 22%. Alternatively, you can calculate federal income tax if you pay regular wages along with the supplemental amount.
Withholding taxes on relocation benefits can significantly reduce funds available for employee relocation. If you want the employee to receive full relocation assistance, you can charge the tax amount.
Employer Paid Moving Expenses: Are They Taxable?
What is gross tax? A gross increase is an increase in the gross amount of tax payments. With a gross increase, the employee receives a specified payment amount (eg, $5,000 in relocation assistance) after taxes.
Let's say you want to provide an employee with $5,000 in relocation assistance. The total tax rate applicable to the employee is 29.65% (22% additional earnings rate + 6.2% social security tax + 1.45% health care tax). Subtract the decimal form of 29.65% from 1 (1 - 0.2965) to get 0.7035. Now, divide the required amount of relocation assistance ($5,000) by 0.7035 ($5,000 / 0.7035). Your total is $7,107.32. To pay an employee $5,000 after tax, the total amount of relocation assistance must be $7,107.32.
Is the employee exempt from the armed forces? Did you pay qualified moving expenses directly to the employee? If you answered yes to both questions, report the payment using code P in box 12 of Form V-2. Again, this money is not subject to tax.
For more information on V-2 reporting for relocation assistance, see IRS General Instructions for Forms V-2 and V-3.
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Ready to create a relocation assistance program? Draft the terms and conditions of your company's first order of assistance.
A relocation assistance agreement can cover all the details of your package and get the employee's signature. If you have a standard relocation package that you offer to existing employees, you can also include it in your employee handbook.
If you plan to pay workers a standard amount, enter the amount here. Or if you plan to pay a relocation stipend based on each employee's specific expenses, include the reimbursement maximum.
From bubble wrap to moving trucks, there are countless costs associated with moving. But you don't have to pay
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Among them. Define and detail the eligible expenses covered by your relocation assistance plan. For example, you may choose to cover only the cost of hiring a mover.
Some employers include a repayment clause in their relocation assistance agreement. A restitution clause states that an employee must return all or part of their compensation (eg, vesting schedule) if they leave their job before a certain time.
For example, if an employee leaves their job before 18 months under your repayment clause, they may have to repay a relocation allowance.
Adding a reimbursement clause can help you cover the cost of replacing an employee who leaves your business earlier than expected.
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If you're collecting relocation assistance bonuses for your taxes, don't forget to calculate your net gross payroll. Again, you can streamline this process with payroll software.
Determine whether you will provide assistance to new or existing employees. Also, decide whether you want to provide assistance to someone who is traveling across the state or across the country.
Get started with free payroll setup and enjoy free expert support. Try our payroll software on a free, no-obligation 30-day trial. We agree. It's no longer a hidden secret that a comprehensive employee relocation package can win the best talent in your business around the world. Everyone does, and so does your company — or at least, it's something you should definitely consider to stay competitive. A lavish perk once reserved for senior management, relocation packages are now commonplace. From the C-suite to entry-level, organizations offer customized relocation packages to secure and retain qualified employees.
At a higher level, employee relocation packages cover moving and other work-related expenses. But, of course, there are nuances and each company's view of what should be included in these packages is quite different. By offering relocation packages, employers provide financial and other forms of assistance to ease the costly inconvenience of employees and their families. Relocation. When offering a relocation package to your employees, it is essential that you meet their needs. A recent study showed that more than 70 percent of employees see mobility as an opportunity for career development. What's more, with 20 percent of employees saying they quit after being denied the opportunity to relocate, a substandard relocation offer can turn away your potential job candidates, resulting in the loss of top talent at your company. The goal of a relocation package should be to give your employee peace of mind while convincing them to accept your job offer. A great relocation experience will attract top talent and boost your company's reputation—the Holy Grail!
What Should A Relocation Package Include?
Relocation package coverage varies from person to person and must meet the needs of your employees. With that in mind, a typical relocation package might include:
When making a policy, you need to consider what is best for your business. However, it is ideal if you keep in mind how diverse the needs of your employees will be. No one package is right for all your employees. Especially when it comes to the next generation of workers dominated by millennials.
Technology employees in leadership positions are advised to switch companies that are unwilling to extend generous relocation packages that meet their family's needs. No one wants to miss out on that perfect candidate!
Not surprisingly, 94 percent of HR executives agree that mobility is vital to increasing diversity, attracting new talent and retaining valuable employees.
Federal Register :: Uniform Relocation Assistance And Real Property Acquisition For Federal And Federally Assisted Programs
Offering a comprehensive relocation package and managing it properly is essential to your business. Next, we'll look at the main ways businesses offer relocation packages to employees. How organizations manage relocation packages:
Lump sum (most popular) – a fixed, one-time payment directly to the employee to cover all moving costs.PRO
The best solution for every employee. The employee has ownership and controls how the money is spent for maximum benefit. There are no hidden or unexpected fees for the job. A simple and quick solution.
Employers are usually not very supportive of a lump sum transfer. This can be difficult for displaced persons to handle on their own.
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Reimbursement – The employee pays all expenses out of pocket and is then reimbursed by the company. Also, employers will set a limit above which they will not compensate.PRO
Tedious record keeping (tracking accounts) is necessary for an employee at an already stressful time. The employee cannot
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