How do relocation packages work?

Every single year millions of people in the United States relocate for work – companies hire new employees from out of the area, current employees are sent on long-term assignments in distant cities, staff members are transferred to branch offices across the country, etc. The prospect of moving for a new position, however, is rather daunting and may result in second thoughts about accepting the job offer. So, to ease the anxiety and to provide an incentive for job transfers, companies usually offer relocation assistance to their employees – relocation packages meant to relieve the financial burden of moving.

The types of relocation packages offered by different companies differ considerably depending on a number of factors. So, if you are required to move to more than 50 miles away for work, you need to research the available options and to successfully negotiate the most beneficial relocation assistance for your particular circumstances. Your first step is to find out everything there is to be known about relocation packages.

What do relocation packages usually include?

Standard relocation packages cover moving costs and temporary living expenses, as well as certain miscellaneous expenses directly or indirectly related to the relocation process, such as home-hunting, updating important documents, or getting your new place ready to live in. However, your employer may be willing to provide additional assistance, especially if you are a valuable asset to the company. If offered a full relocation package, you can expect reimbursement for:

  • Home hunting – your employer will cover the expenses for two trips to your new city (including airfare, hotel, meals and a rental car), so that you can search for an appropriate new home in the area;
  • Home sale and home buying services – the company will pay the closing costs and commissions on the sale of your old home. They may even compensate you if you have to sell your property at a loss. If you are leaving a rental ahead of time, any penalty charges for breaking the lease will be covered. You will also get help buying a new home close to your workplace – the company will not only pay the closing costs and the various fees on the purchase of the property, but may even buy down the interest rate on your new home’s mortgage or give you a loan at a very low rate;
  • Moving and storage expenses – you can choose the moving option that best suits your particular needs and requirements, but your best bet is to hire full-service movers for your job relocation – they will take care of all the arduous moving tasks in a quick, safe, and efficient manner, leaving you enough time to deal with other important issues. Your employer will pay for the moving services (packing, shipment of your household goods, and unpacking), as well as for the insurance of your belongings while in transit and even for temporary storage (if necessary);
  • Shipment of vehicle – unless you prefer to drive your car to your new home, your vehicle will be transferred to your new location at your employer’s expense;
  • Travel expenses – your employer will pay for airline (or bus or train) tickets for you and your family. Meals and lodging on the way will also be provided for;
  • Temporary housing – you will be provided with temporary accommodation for the period while searching for a permanent residence in the area or getting your new home ready to move in;
  • Miscellaneous expenses – in addition to the moving costs, you will be reimbursed for various other relocation-related expenses, such as necessary repair works, professional cleaning, utility hook-ups, updating licenses and registrations, etc.

Childcare assistance, spousal job support, and other special benefits may also be included in your relocation package.

What to know about relocation packages

Before you start negotiating with your employer, you need to find the answers to several fundamental questions about relocation packages:

1)   What are typical relocation packages?

The types of relocation packages offered by different companies and the services included in them can vary considerably depending on several factors – the size and the current financial situation of the company; the level of your position within the company; how long you’ve been working for them; whether you’re an owner or renter; whether you are moving alone or with your family, etc. Relocation package options include a lump sum, reimbursement, direct bill, or third party relocation:

  • If the company provides a lump sum, you will receive a set amount of money you can use the way you want in order to relocate for your job;
  • A reimbursement is when the company pays you back for your moving-related expenses. You need to keep all the receipts for expenses incurred during your relocation in order to get your money back. Be careful though not to exceed the set limit your company is willing to reimburse;
  • In a direct billing arrangement, your employer will hire professional movers to relocate you to your new city and will pay the moving costs directly to the moving company;
  • In the event of a third-party relocation, your company will outsource all moving logistics and real estate dealings to a third company that provides comprehensive coordination for all services – home sale marketing assistance, moving and storage services, rental assistance, spouse employment assistance, etc.

2)   What to expect with relocation packages?

When corporate relocation packages come into play, you may have little choice concerning the moving companies and the real estate agents you can work with (many firms will reimburse you for your relocation-related expenses only if you use the services of specific movers and real estate agents that pay them hefty referral fees). Besides, the process of selling your old home and buying a new one may be more complicated and may take longer when a third-party company is involved. You will have to negotiate all the details of your sale and your purchase twice – once with the company and once with the potential buyer/seller. What’s more, there will be more paperwork to take care of and specific conditions to comply with.

3)   Are relocation packages taxable?

When negotiating your relocation package, have in mind that lump sum payments are fully taxable as earnings – you’ll have to report them and pay the due taxes at the end of the year. To avoid paying out of your own pocket, you need to negotiate a larger gross amount so that the net benefit (after taxes) will be equal to the expenses incurred during the moving process. It is also a good idea to ask your employer to bill directly for moving services, as payments made directly to the moving company are not taxable. Also, remember that moving costs and travel expenses are eligible for tax deductions if they meet certain IRS standards regarding the distance to your new home and the time you’ve worked after the move. Just make sure you keep all the receipts for your moving expenses, as well as receipts from charity organizations for donations you have made prior to your move.

SEE ALSO: What to consider when relocating for a job

How to negotiate relocation packages

There are several tricks you can take advantage of in order to negotiate the best relocation package for your circumstances:

  • Estimate your moving expenses in advance – assess your specific needs and get an accurate estimate of your moving expenses to know exactly what to ask for when negotiating relocation packages;
  • Research your new area – find out the cost of living in your new city, explore the neighborhoods, and get familiar with the transportation options in the area to know exactly where you want your new home to be located and what type of residence will best suit your needs and your available budget;
  • Make your case – prepare a detailed list of your expenses, your requests, and your preferences (a higher mortgage cost allowance, a higher cost-of-living subsidy, childcare assistance, etc.) and explain why getting what you want will benefit the company as well (you’ll be able to start work sooner, to dedicate more time and energy to your work, etc.);
  • Sign an agreement – once you have come to an agreement about the type and the amount of relocation assistance your company is going to provide you with, get it in writing (make sure all the negotiated details, time-frames, amounts, and extra conditions are explicitly stated) to avoid possible conflicts and misunderstandings.

Having ensured adequate relocation assistance for your move, you will be able to concentrate on your new job and make the most out of your new career opportunity. Good luck!

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