3 Ways You Can Reduce Relocation-Related Burdens for Your Payroll Team

Posted by Lauren Decker on Aug 25, 2016 10:39:32 AM

3 Ways to Reduce Administrative Burdens for PayrollPayroll teams are the unsung heroes of your relocation program.

They are the co-workers who manage the reporting of relocating expenses and are responsible for coding and reporting each expense within a reasonable amount of time in order to keep the company in compliance with the IRS.

While this responsibility does sit squarely within their job description, they often face obstacles when it comes to things like understanding the relocation benefits offered, obtaining the appropriate expense information, or ensuring different teams turn in their information on time.

As the administrator of your company’s relocation program, you can’t fix every relocation-related challenge your payroll team faces, but there are steps you can take to help them accomplish their work more efficiently. Helping your payroll team create efficiency not only benefits them, but it can also save you time, and most important, contribute to a more scalable relocation program.

Here are three ways you can reduce the relocation-related administrative burdens of your payroll team.

1. Consider offering direct bill benefits to relocating employees

The type of relocation benefits you choose to offer can have a large impact on the amount of time and effort your payroll team dedicates to relocation expenses. The administrative impact on your payroll team will vary by the taxability of each relocation benefit you offer, as well as how that benefit is administered.

For example, lump sum benefits are considered taxable income to relocating employees. While this may seem like the most straightforward process, it can actually cause additional work for your payroll team. Because the benefit is taxable, your company will need to decide how to handle the tax treatment. You will either need to withhold taxes from the lump sum payment, or gross-up the liability on behalf of the employee. This process of withholding or grossing up is owned by payroll.

When administering direct bill benefits, there’s an opportunity to take advantage of tax savings. Administering a direct bill benefit ] means your company pays suppliers on behalf of the employee for relocation services. When certain relocation expenses are covered by direct bill, they are considered tax excludable non-reportable — meaning these expenses aren’t reported on the employee’s W-2, which creates additional time savings for your ayroll team.

Several factors go into the decision of what relocation benefits to offer your relocating employees. You will need to decide what works best for your company, but don’t forget that the there are implication for your payroll team, as well as for you and your relocating employees.

2. Utilize relocation technology to administer relocation benefits

Technology can help streamline the reporting process of relocation benefits — no matter which option you choose to provide to employees.

In the past, reporting on relocation expenses was a very manual, time consuming process. Expenses are typically tracked in a spreadsheet or offline format that must be managed and updated manually.

Administering benefits online through relocation technology means that expense data can also be tracked online, making it easier for you and your payroll team to access information. Instead of emailing files back and forth or waiting individual to input data, your payroll team can have one place to reference cost and expense data.

Technology, like Relocation Management Software, allows different team members to view and build relocation cost reports. As a result, your HR team can review the information that’s most important to them while your payroll team can also have regular access to a report of the data they need effectively and efficiently reporting on expenses.

Consider exploring different types or technology or software that can alleviate the time spent manually collecting and compiling relocation expenses. Solutions like these can reduce administrative burdens for both your team and your payroll team.

3. Agree on the standard reporting process and stick to it

Once you’ve decided which benefits to offer relocating employees, and how technology will play a role in that distribution, the last way to reduce the burden of your payroll team is to put a reporting process in place. This process needs to be created with input from payroll, as well as any stakeholders who plays a role in the collection or distribution of the benefits.

For example, if you are working with a third party to administer direct bill benefits, you need to agree on how often the report of relocation expenses will be sent over. If this isn’t solved by online reporting, then it’s best to establish a regular frequency or cadence at which your team expects to receive the report. Your payroll team may want to identify other important dates, such as end of the year cut-offs, and other reports they will need, such as end of the year reporting.

Addressing these needs and key dates up-front can help reduce payroll’s workload throughout the year. If everyone is aligned, there’s less risk that payroll will have to track down information last minute. Establishing this process up front helps reduce your payroll team’s workload, but can also help reduce your workload. If payroll needs to gather information last minute, they will likely be reaching out to the person who administers the company’s relocation program.

As you create your relocation program, or make updates to an existing program, consider how you can reduce time spent on relocation-related tasks by your payroll team. Creating a more efficient process for administering and tracking relocation benefits helps you save time and money, and even reduces the risk the being out of compliance with the IRS. Use these tips as a starting point to make changes that positively impact your team and your payroll team!

lump sum for relocation

Topics: Relocation Policy, Relocation Taxes

Why You Should Leverage Payroll When Building Your Relocation Program

Posted by Lauren Decker on Aug 18, 2016 11:58:09 AM

Leverage Payroll When Building Your Relocation ProgramWhen crafting your relocation program, there are a number of stakeholders you may choose to incorporate. A few obvious groups come to mind, such as recruiters and hiring managers. These teams will need to be familiar with the program you’re putting in place so they can properly manage the expectations of internal transfers and new hires.

One group you may not have thought to invite to the table is also arguably the most important: Payroll.

You may be thinking, “I’ve already received budget approval for relocation benefits. Why would I need to seek input from payroll?”

Payroll plays a key role in both the creation and execution of your relocation program. Payroll offers valuable insight into how relocation expenses should be tracked and bringing them into the conversation can help you avoid potential roadblocks down the road.

Let’s talk about when to bring payroll in, what information they will need from you, and lastly, tips for maintaining that relationship beyond the initial implementation.

Seek Payroll Input Early

Your company’s relocation policy is the core of your relocation program. Determining what benefits to offer employees impacts what you communicate to employees, how you deliver the benefits, and lastly what reporting is needed. Once you decide what benefits you want to offer, you should consult with your payroll team.

Relocation benefits are considered compensation for your employees and therefore have tax implications. This is where your payroll team comes in.

Before you meet with this group, educate yourself on the tax implications of the benefits you’re considering. You don’t have to know the exact ins and outs, but you should have a basic understanding of whether the benefits you’re considering are taxable or excludable. These tax implications may even impact your decision of which benefits to offer.

For example, let’s compare a lump sum benefit to a direct bill benefit. A lump sum benefit is considered taxable income to the employee, meaning the employee will owe taxes on whatever amount they’ve received to help with relocation expenses.

On the other hand, direct bill benefits offer opportunities to take advantage of tax exclusions. When employers pay suppliers directly, certain relocation expenses are considered tax excludable (if the employee meets certain criteria). Categories that are considered eligible for deductions include shipment of household goods and personal effects, storage of household goods, and final travel to new home. For complete details on excludable tax categories, please visit the IRS website.

For your meeting with payroll, come prepared with this basic understanding of whether the benefits you’re considering are excludable or taxable. Your payroll team can then help you understand the options for handling those tax implications.

Ask These Questions

When you meet with payroll, you should come prepared with an overview of the benefits you’re considering, the reasons you’ve chosen these benefits, and the desired timeline for implementing them. Offering new relocation benefits may result in a change to your payroll team’s process, so providing reasons for why these changes are needed will be key to obtaining support from the payroll team.

For example, let’s say you want to start offering direct bill benefits to relocating, full-time employees. In the proposed plan, relocating employees will be given an allowance that can be spent on shipment of household goods, final travel air fare, and short term-housing. You chose this approach to take advantage of tax savings on household goods and final travel expenses.

When you meet with your payroll team, you’ll want to ask them what information they need to properly report on these expenses and how they want to handle tax treatment for the taxable category (short-term  housing). If you’re working with a third party to administer these direct bill benefits, come prepared with their standard reporting.

At a minimum, your payroll team will likely need a report of which employee expenses are taxable vs. excludable. When it comes to tax treatment for taxable relocation expenses, the response will vary from company to company. Your payroll team will be able to help guide this decision to put a solution in place that makes sense for your employees and internal teams.

Covering this information with your payroll team before you begin administering relocation benefits will save you a tremendous amount of time in the long run and help ensure your relocating employees have a smooth relocation experience. If you begin administering these benefits before you determine what type of reporting your payroll team needs to properly account for the expenses or how you will handle taxable expenses, it could have sizable repercussions. The impacts range from additional time spent retroactively collecting information needed by payroll, to answering questions from employees about how the expenses affect their taxes, and even being out of compliance with the IRS.

Check in Routinely

Meeting with your payroll team early in the creation of your relocation program will help the implementation move faster. Hammering out these details will result in everyone involved more prepared to start administering relocation benefits to relocating employees.

After you’ve met with your payroll team and launched your relocation program, remember to check in routinely with your payroll team to see how the process is working. After your first few employees have relocated, follow-up with the payroll department to make sure the process you put into place is working as expected.

As you relocate more employees, you may make tweaks in your process. If you continue to grow your program and expand it to more employee groups, like campus hires, make sure you keep your payroll team in the loop. Interns, for instance, are not full-time employees and therefore aren’t eligible for tax exclusions. If you want to begin relocating interns, sync back up with payroll to make sure everyone is on the same page.

While payroll may not be the first group that comes to mind when you begin planning your relocation program, they are one of the most important stakeholders in its creation. Seeking input from this group early on ensures your company stays in compliance, ensures internal teams are aligned, and contributes to a better relocation experience for your employee.

 core/flex relocation policies

Topics: Relocation Policy, Relocation Taxes

How to Avoid the Dangers of A Last-Minute Relocation Program

Posted by Lauren Decker on May 26, 2016 8:55:39 AM

shutterstock_140612287-895357-edited.jpg

We’ve all been there—the moment when we’re handed a task that’s not that important...until it is.

Relocation can sometimes fall into this same trap. If your company isn’t currently hiring new employees from outside your local area, or doesn’t have multiple offices to transfer employees between, then having a relocation program in place probably isn’t at the top of your priority list.

However, when left unattended, some of these “non-urgent” tasks can become a high priority quickly, and possibly end up taking more of your time than they would have if you had completed the work ahead of time. Relocation also falls into this category. Without proper planning, relocations can become an enormous task with enormous impacts—for both you and your company.

Let’s say you are tasked with handling the first relocation at the company. This person is relocating from San Francisco to Los Angeles. They are a campus who is going to drive their belongings. They have simply requested some financial assistance to cover their enroute expenses. To keep things easy, you’ve decided to just provide them with a lump sum of money.

As you grow your campus recruiting program, you’ve decided to expand recruitment and are now relocating a few hires a year from across the country. Your latest group of campus hires are coming from New York, Dallas, Chicago, and San Francisco. These campus hires need more help moving their belongings and have expressed need for more funds than originally allotted because their distance is longer. You’ve decided to provide them with a larger lump sum to cover their household goods expenses, but you are also allowing them to book travel through your internal department.

Fast forward a few years, you are now relocating various positions across your company. You are offering lump sums to cover expenses, travel is booked through internal teams, and all questions from relocating employees are coming to you. Your relocation program is now supporting several relocations, you feel like you need more resources to support company moves, and on top of all that your manager has just asked you to reduce relocation costs as part of a larger company initiative to control spending.

Yikes.

This isn’t a situation anyone wants to be in, but unfortunately, it’s an easy trap to fall into. As soon as your start offering ad hoc relocation benefits, it can be a slippery slope to a program where you’re unclear of what your spending is or what type of experience your relocating employees are receiving compared to others in your industry.

As you can see, the impacts of not having a solid relocation program in place before you start relocating employees affects more than just that first relocation. It can actually affect all your subsequent relocations as well.

However, this can be avoided if you’re willing to put in a little upfront work to properly build out your relocation policies. It can be difficult to anticipate your needs 2, 5, and 10 years out, but there are some tactics you can use to help you provide appropriate benefits for your initial relocations and beyond.

First of all, start early.

Creating a relocation policy is key, even if you’re just relocating a few employees a year.  If you’re not ready to draft a detailed policy, start with guidelines that state who is eligible for relocation benefits and what those benefits include.

Putting this in writing helps set proper expectations for internal stakeholders and your employees. It also ensures that your relocation program is equitable to employees. If you don’t put these guidelines in writing, it’s easy to give employees ad hoc benefits that may or may not be equitable.

Second, consider including direct bill benefits in your relocation policy or guidelines.

Direct bill benefits are scalable, provide a proven process for employees, and help you take advantage of tax savings via IRS guidelines. Utilizing direct bill benefits means that your company, usually with help from a third party who specializes in this process, pays suppliers directly for employee relocation services.

Companies often allow employees to choose which relocation categories (shipment of household goods, final travel, temporary housing, etc.) can be booked via direct bill and provides a cap for the total amount. This allows the employees to choose how they want to use their benefits, while also helping you contain costs. As you start to scale your relocation program, you can set different caps for different populations or tiers.

Lastly, make sure you get buy-in from all relevant stakeholders.

Setting expectations internally can be just as important as setting expectations with your relocating employees. In addition to your HR team, be sure to talk to your payroll team. Some relocation expenses are considered taxable, so you’ll want to make sure your payroll team has a plan for how to handle any tax implications. If you want to instate a repayment agreement, you may want to also reach out to your legal team to help you draft or approve the agreement.

Depending on how your company uses relocation, you should also familiarize employees who are helping administer the relocation policy. For example, if you typically relocate new hires, you may want to talk to your recruiting team and make sure they understand the relocation program you’ve put in place.

With some proper preparation, you can avoid the pitfalls of creating a relocation program on the fly. Putting together a program “last minute” or right before a move will undoubtedly results in unwanted consequences for you and your relocating employees. Consider leveraging these tips to make sure your team is prepped and ready to go for your next influx of relocations! 

relocation for the smb

Topics: Relocation Policy, SMB, Relocation Taxes

Subscribe to the UrbanBound Blog

state of relocation
recruiting relocation

Recent Posts

Human Resources Today