Relocation Packages

Leslie

Our company is asking HR to put together a relocation package, which is fine. However, they want it to be part of our policy and procedures. I didn't think that's where it belongs - more like part of a contractual agreement. Any ideas on the package or where it goes?

Margaret Morford

Leslie,

Your sense is correct that you do not want to publicize your relocation policy. Your organization may not wish to pay relocation for everyone. It should be on a case-by-case basis with HR being in charge of drafting guidelines. Your guidelines should read, "If the organization determines that it will pay for relocation, the following expenses will be covered..."

Most organizations have a tiered plan. They pay more for officer level positions than middle level managers, etc. You probably want three tiers. The richest plan that an organization will usually have is to pay all moving expenses and closing costs on the sale and purchase of a home. Limit the amount of points the company will pay to not more than two, so that the buying employee can't raise the points to get a lower than normal interest rate. You pay only closing costs related to the sale/purchase of a house (Attorney fees, title search, etc. No deposits or escrows. The employee would have to pay these anyway.) You may want to include a house hunting trip for the employee and spouse to start things off on the right foot and maybe some temporary living expenses (I'd limit it to no more than 30 days) Exclude cars and boats from moving expenses paid because that will drive the moving costs up astronomically! Pay mileage to move no more than two cars. One caution, do not buy their house. More company's take a bath on that. Your relocating employee can move into an apartment if he/she doesn't want to buy immediately and that will give them time to sell their home in the city from which they are relocating.

The next tier will usually pay moving expenses and a set amount of closing costs.

The bottom tier pays a set dollar amount that the employee can use to hire a mover or move themselves and pocket the difference.

If you have a middle level manager that you really want to recruit, you can bump them up to the officer plan as part of the negotiations.

You also need to decide whether you are going to "gross up" the relocation expenses. Some relocation expenses are taxable to the employee. If you gross them up, you pay the tax into the employee's witholding to cover the tax liability the employee incurs.

These are all the issues I can think of off the top of my head. Feel free to call me if you have other questions.

Margaret Morford
theHRedge
615-371-8200
[email]mmorford@mleesmith.com[/email]
[url]http://www.thehredge.net[/url]

Leslie

Thanks so much. This is very helpful. I may be getting back to you with some other questions.

franfields

Does the plan outlined apply to existing employees relocating to another site or employees being hired in to the company?

Margaret Morford

It can be used for both. If an organization relocates an existing employee, I have recommended that it bump the employee up a tier because it knows what it's getting rather than gambling on a brand new employee. The employer is familar with the employee's work record and the employee is already trained. If an employer moves a plant or location and offers all the displaced employees a chance to work at the new location, I usually recommend that it set a lump sum dollar limit on what it will pay rather than use the guidelines because in most cases, those workers would easily be replaced at the new location.

Margaret Morford
theHRedge
615-371-8200
[email]mmorford@mleesmith.com[/email]
[url]http://www.thehredge.net[/url]