Relocation's hidden costs: relocation costs are rising, even as corporate profits lag. Here's how to dig into relocation benefit packages and practices to find the items that could be costing you money

Workforce, Oct, 2002 by Greg Hoover

More and more corporations are depending upon the expertise of relocation professionals to seamlessly and effectively relocate their transferring employees and new hires. The trust placed in a relocation specialist demands a great deal of responsibility. And, with the economy as it is, the need for a keener eye and higher level of fiscal responsibility has become a necessity to maintain that trust.

According to the Employee Relocation Council, its member companies moved, on average, 308 employees last year. Their average cost to move a home-owning current employee was more than $60,000, with the cost for the home-owning new hire averaging just short of $50,000. Costs are rising and corporate profits are lagging. The pressure is on--more than ever--to do more with less.

With so many variables to consider, where do we begin? Obviously, the volatility of pricing the many services provided in a complete relocation package will fluctuate with the ebbs and flows of the economy. Are our relocation policies truly effective and economical?

To answer this question, stricter attention must be paid to obvious costs. What are the gross costs of specific benefits? What are the tiered benefits programs that match employee status? Once questions like these have been answered, and the entire package of benefits is assessed and known costs have been determined, then we can dig deeper to find hidden costs and learn how to avoid them. In the short analysis, one source of hidden relocation costs lies within benefits that create tax burdens. Most benefits are considered deductible under IRS guidelines; however, some benefits are considered to be taxable compensation to the employee. In these cases, it is important to determine who will bear that tax burden. Let's look at two separate options.

We'll begin with a $2,000 reimbursement for house hunting costs. If the employee is reimbursed through a payroll disbursement, minus taxes, the employee would receive $2,000 less (at least) $700 in taxes, making the reimbursement $1,300 for $2,000 in expenses. In this scenario, the employee would bear the burden of the taxes.

Our second option would be for the employer to reimburse the employee through a "gross-up." In this example, the employer pays the tax. Using the same $2,000 example, the employee would declare $2,800 in compensation. After taxes are paid, the employee would receive the full $2,000 reimbursement for out-of-pocket house hunting expenses.

The lesson learned here is to examine all costs with a discerning eye. Dig deeply to find the hidden costs, and to identify any tax burdens or other expenses that might devalue the entire relocation package. Evaluate your relocation policies to ensure that every benefit is actually beneficial and will not result in an undue financial burden. The idea is to provide as many no-cost or tax-free benefits as possible, which, in the long run, generate greater economic efficiencies, higher levels of benefits, and secure the trust relationship between you and the employee.

Of course, some costs cannot be figured in dollar amounts. The stress from relocation is considered by some to be second only to the loss of a loved one. HR and the relocation professionals should try to abate the stress as much as possible by anticipating every obstacle to a successful transition. The cost of failing to do so is one you can't afford. The benefits of a trouble-free relocation, however, are invaluable to all parties involved.

Culture and Language Services

Society of Incentive & Travel Executives

www.site-intl.org

Destination and Services/Facilitators

Alliance Relocation

www.alliancerelo.com

Apartment Search

www.apartmentsearch.com

Auto Driveaway Co.

Auto Driveaway Co. has over 48 years of Door to Door experience relocating vehicles around the U.S. and Canada through a 60-city nationwide office network. You choose the service that best fits your needs, budget and schedule. Let us show you why ADC is your most economical choice.

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310 South Michigan Avenue

Chicago, IL 60604

312-341-1900

Leonard Tamburro: Itamburro@autodriveaway.com

Cultural Relocation Services

www.culturalawareness.com

Dependable Auto Shippers (DAS)

www.dasautoshippers.com

DFW Orlentation Services

www.relocationcentral.com

enter berlin Relocation Services GmbH

www.enter-berlin.com

Geary & Associates, Inc.

www.gearyassociates.com

Relocation America

www.relocationamerica.com

Resource Careers

www.resourcecareers.com

Suburban Lodges of America

www.suburbanlodge.com

The IMPACT Group

Providing worldwide Relocation Transition Assistance to corporate transferees and families, including research, spouse/partner job search assistance and transition support, easing acclimation to the new community. Also Recruitment Support Services to help recruitment candidates identify the resources and information they need about the new location to improve the chances of job offer acceptance.

www.the-impact-group.com

12977 N. Outer 40 Dr., Suite 300

St. Louis, MO 63141

800-420-2420

Laura Herring: info@the-impact-group.com