Simone Lawson
Employee relocation, also known as global mobility or corporate relocation, is an important part of a company's growth and expansion strategy. While it can be a complex process, it can also provide benefits to both the employer and the employee. For employers, it can be a way to retain top talent, unlock internal talent, and support business growth. For employees, it can mean promotions, diverse growth opportunities, and financial incentives. However, it's important to note that employers must navigate legal frameworks and contractual obligations when relocating employees, especially when it comes to employee consent, discrimination laws, and reimbursement of moving expenses.
| Characteristics | Values |
|---|---|
| Employee relocation package | Financial support for departure, travel and arrival, pre-decision counseling, assistance with transition procedures, help with transportation of personal property, relocation compensation, moving cost reimbursements, and other relocation payments |
| Employee transfer | Moving an employee to a different role, department, or location within the same company |
| TUPE transfers | Transfers triggered by a change in ownership or service provider, with strict legal obligations |
| Moving expenses | Moving expense reimbursements, which cannot be deducted by employees or excluded from tax, but can be deducted by employers as business expenses |
| Accountable plan | Employees provide proof of expenses through receipts and return any excess to employers; moving reimbursements are exempt from tax |
| Non-accountable plan | Payments are treated as taxable compensation and are subject to income and payroll taxes |
| Salaried employees | Receive a fixed amount of pay each pay period, regardless of the number of hours or days worked |
| Hourly employees | Paid for the exact amount of hours worked; part-time employees are often paid on an hourly basis |
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What You'll Learn
Employee relocation packages
The extent of financial support provided in relocation packages varies across companies. Some companies offer comprehensive packages that cover a wide range of expenses, while others provide a more limited budget that requires employees to cover certain costs themselves. At a minimum, companies are expected to cover transportation and travel expenses for the employee and their household, as well as the cost of relocating the employee's belongings.
Other common components of relocation packages include temporary housing, packing and unpacking services, home-finding services, and assistance with ending leases early. Some companies also offer a temporary or permanent cost of living allowance to help employees adjust to the potentially higher cost of living in their new location.
When designing relocation packages, companies should consider the unique needs of each employee and ask them how much time and financial support they require. Open communication is essential to establishing a realistic timeframe and budget for the relocation. By providing comprehensive relocation packages, companies can attract top talent, boost retention rates, and support their employees during a significant transition in their lives.
In terms of taxation, the value of relocation benefits is generally subject to taxation for employees. To alleviate this financial burden, companies may include a tax gross-up provision in their packages, which covers the estimated taxes owed on the value of the benefits. Employers can also deduct these payments as "ordinary and necessary" business expenses.
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Employee transfer processes
An employee transfer is the process of moving an employee to a different department, role, or location within the same organisation. Employee transfers are usually initiated by the employer or employee and are often carried out to fill vacancies, provide employees with new opportunities and experiences, or meet changing business needs.
A clear and consistent employee transfer policy is essential to ensure fairness and transparency in the transfer process. This policy should outline the types of transfers, eligibility criteria, request process, timeline, and support provided during the transfer. The policy should be communicated to all employees and stakeholders to ensure a smooth transition.
The transfer process typically involves discussions between managers and the HR department, creating a detailed transfer plan that addresses new job duties, training, and timelines, with the employee actively involved. In cases of international transfers, employers should provide relocation assistance, including visa and work permit arrangements, moving cost coverage, and support with adjusting to the new role and responsibilities.
It is important to note that employee transfers can be complex, especially when crossing borders or involving multiple legal frameworks. Compliance with local laws and regulations in the target country is crucial to ensure a seamless transition. Additionally, employee consent may be required for the transfer to proceed, and employers should provide adequate information about the reasons for the transfer, changes to job roles, and potential impact.
Overall, effective employee transfer processes can boost retention, unlock internal talent, and support business growth. By providing clear guidelines, managing expectations, and offering necessary support, organisations can ensure a positive transfer experience for employees.
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Moving expenses
In the past, employees who moved for their jobs could write off unreimbursed moving expenses on their income tax returns. However, the Tax Cuts and Jobs Act (TCJA) suspended personal deductions for moving expenses. Despite this, employers can still deduct moving expense reimbursements as business expenses, providing an incentive to offer relocation packages.
There are various ways to structure these reimbursements. One option is to use an accountable plan, where employees provide proof of expenses through receipts and return any excess funds. Under this plan, reimbursements are exempt from tax and there is no dollar limit on the exemption. Alternatively, employers can make moving cost payments using a nonaccountable plan, which is taxable compensation. To incentivise employees to move, employers can "gross up" compensation, increase salaries, or provide bonuses to offset the tax applied to moving cost reimbursements.
Employee transfers and relocations are significant moments of transition and can be prompted by promotions, relocations, restructuring, or business needs. A clear and consistent process is important to ensure these moves are handled well, boosting retention and supporting business growth.
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Salaried vs. hourly pay
Salaried and hourly pay structures each have their own advantages and disadvantages for both employers and employees.
Salaried employees are paid a fixed annual amount distributed on a set schedule, such as bi-monthly or monthly. This provides employees with the stability of a regular, predictable paycheck, and the ability to qualify for additional employer benefits like health insurance, retirement plans, and paid time off. Salaried roles often come with greater potential for career advancement. Employers may prefer salaried pay structures as they incentivise employees to work beyond the standard 40-hour workweek without additional compensation. However, it is important to note that salaried employees are not inherently exempt from overtime pay. Under the Fair Labor Standards Act (FLSA), non-exempt employees must be paid overtime at a rate of at least one and one-half times their regular pay for hours worked beyond 40 hours per week. The classification of exempt and non-exempt employees is determined by factors such as salary level, salary basis, and job duties.
Hourly pay, on the other hand, provides additional compensation for hours worked beyond 40 per week. Hourly employees are paid a set amount for each hour worked, with the hourly rate depending on the job and the minimum wage requirements of the state or federal government. Hourly employees may benefit from being compensated for all of the time they work, including overtime.
When deciding between salaried and hourly pay structures, employers should consider the nature of the work, the industry, and the potential impact on the team. For employees, the decision should be based on personal factors, work hours, ability to earn overtime pay, and the value of benefits.
In the context of an employee transfer or relocation, employers may need to provide moving expense reimbursements or other relocation payments to attract job candidates or retain employees who must move. Employers can deduct these taxable amounts as business expenses. To qualify for accountable plan reimbursements, employees must provide proof of expenses through receipts and return any excess amounts. Payments made under a nonaccountable plan or excess reimbursements that are not returned are treated as taxable compensation.
Whether an employee must move or not, they may be entitled to certain benefits, such as redundancy pay or paid time off to seek another job if the relocation or refusal results in their departure from the company. Additionally, employers must provide adequate information about the reasons for the transfer, changes to job roles or responsibilities, and the potential impact on employees to avoid uncertainty, anxiety, and resistance.
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Legal compliance
An employee transfer or relocation involves moving a worker to a different role, department, or location within the same company. These transfers are common throughout an employee's career and can be prompted by promotions, relocations, restructuring, or business needs. While employee relocation packages are not generally a legal requirement, they are important for compliance and employee retention.
In the UK, employees have certain rights with respect to relocation. This may be stipulated in their contract, as a "mobility clause" that mandates that they move if their company does, as long as the logistics are reasonable. If an employee's relocation results in their departure from the company, they may be entitled to redundancy pay or other benefits.
In the US, an employer has a great deal of discretion to manage its operation and workforce, including the power to transfer an employee to a different work site. However, employers cannot make employment decisions based on discriminatory reasons, such as an employee's race, sex, age, or disability. An employer may not take adverse action against an employee, such as demotion, termination, or undesired transfer, because of a protected characteristic or protected activity.
To assist with employee relocation, employers can offer moving expense reimbursements or other relocation payments. Under current US law, moving expense payments cannot be deducted by employees or excluded from tax. However, employers can deduct these taxable amounts as business expenses. Employers can also provide payments for employee moving expenses with an accountable plan, where employees must provide proof of expenses through receipts and return any excess. Moving reimbursements under these plans are exempt from tax and have no specific dollar limit on the exemption.
With employee relocation packages, companies can provide financial support for departure, travel, and arrival, as well as pre-decision counselling, assistance with transition procedures, and help with transportation of personal property. These packages can be standardized or tailored to each employee's circumstances and may include relocation compensation for moving costs and personal travel expenses.
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Frequently asked questions
An employee transfer involves moving a worker to a different role, department, or location within the same company. Employee transfers can be prompted by promotions, relocations, restructuring, or business needs.
An employee relocation package is a range of benefits offered to employees to incentivize them to move to another location. These packages can be standardized or tailored to each employee's circumstances and may include financial support for departure, travel, and arrival, pre-decision counseling, assistance with home-selling and buying logistics, and help with the transportation of personal property.
Moving expense reimbursements and other relocation payments are taxable income for employees and must be reported to the IRS. Employers can deduct these payments as business expenses. Prior to the Tax Cuts and Jobs Act (TCJA), employees could write off unreimbursed moving expenses on their income tax returns, but this is no longer the case.
