We can all agree that communicating relocation benefits to employees is important. It’s critical for a relocating employee to understand if they’re eligible for relocation benefits, what benefits they qualify for, and how to use them.
How we communicate those benefits and what exactly we communicate is the difficult part.
Deciding how and what to communicate is even harder if you’re writing an employee relocation policy for the first time. Most companies start by communicating relocation benefits in an informal way, such as in an offer letter, and eventually move to a formalized document as they grow (and subsequently administer more relocations). If your company is moving toward more formalized documentation, even knowing where to start writing a relocation policy can be challenging.
Even if you already have a relocation policy, reviewing it periodically is critical to ensure the language is clear and effective. Sometimes small changes get added to a relocation policy over time and, without reviewing it frequently, can turn into a lengthy, hard to understand document that creates confusion for transferees.
Whether you are just starting to write a relocation policy or are re-evaluating your current policy, keep in mind that every relocation policy should answer: who is eligible for relocation benefits, what relocation benefits are offered, and what are the tax implications. Let’s take a look at each of these components!
Eligibility Requirements for Benefits in an Employee Relocation Policy
Clearly defining who is eligible for relocation benefits is the first step to creating an effective relocation policy or document. New hires and employees offered an internal transfer want to know the answers to these two questions:
“Am I eligible for relocation benefits?”
“Are my family members eligible for relocation benefits?”
Establishing eligibility parameters requires your company to define the criteria that qualifies an employee for relocation benefits. The criteria may take several factors into account including, employment status, relocation distance, and employee position. Clearly defining this criteria helps you set proper expectations with employees and reduce the number of questions back to your team.
For example, a company may decide that full-time employees and full-time new hires are eligible for relocation benefits if the new work location is at least 50 miles farther from their home than their former work location. Employee and qualified dependents are eligible to receive benefits. A dependent is defined as a person who is claimed on the employee’s income tax form.
You can see that this defines the required employment status (full-time employees) and the move distance required (50 miles). It also notes that employee dependents are eligible for relocation benefits and clearly defines what a “dependent” means.
Whether you are providing relocation benefits to only internal transfers or to anyone who is relocating on behalf of the company, defining this in your employee or corporate relocation policy will ensure that everyone can find the answer to “Am I eligible for relocation benefits?”
Definition of Employee and Corporate Relocation Policy Benefits and How to Claim Them
Once you’ve established who is eligible for benefits, you need to define what the benefits include. This section will likely be the bulk of your policy. A relocation policy needs to clearly articulate what relocation benefits are offered and how employees can take advantage of them.
Like the eligibility section, this portion of the policy should help set proper expectations for employees and reduce questions. When you’re creating this section, remember that the more direct you can be, the better. If you use company or industry-specific language, you may create confusion for your relocating employees. This is especially true if many of your employees are first time movers. They may not know what common relocation terms like “household goods shipment” or “gross-up” means.
It’s also critical to include how an employee should use these benefits. Will a third party administer the benefits and facilitate their use? Is the employee responsible for finding their own relocation suppliers? Including these specifics make it easier for the employee to understand what exactly their role is in the relocation process.
For example, let’s take a look at what a benefit description might look like for Acme Corporation who is offering direct bill benefits to relocating employees:
You will receive an allowance of up to $10,000 for shipment of household goods, which includes truck rental, packing labor, and unpacking labor. Acme Corporation will pay suppliers directly for these services. A representative from Acme Corporation’s relocation management company will reach out to help you initiate this process and connect you to a pre-approved network of suppliers.
In this example, you can see that Acme Corporation has clearly defined the benefit offered (shipment of household goods to be paid for by Acme), the benefit cap ($10,000), and instructions on how to claim this benefit (a representative from Acme’s relocation management company will reach out).
This is just one example of what a benefit description may look like. Whether you use this format or another, be sure your policy answers the questions of “What benefits will I receive?” and “How do I claim those benefits?”
Tax Implications in an Employee Relocation Policy
The third component that should be included in every relocation policy is related to taxes. Whether you are providing tax assistance or not, it’s crucial to let your relocating employees know. Depending on your policy, you may choose to provide tax assistance for all relocation benefits, some relocation benefits, or no relocation benefits. Whichever path you choose, the relocating employee should be aware, so they can plan appropriately.
If your company has taken an “all or none” approach and will be providing tax assistance for either all benefits or no benefits, communicating this can be achieved by adding one section that describes benefit tax implications. For example, this section may include one or two sentences letting employees know that their employer will provide tax assistance on taxable relocation benefits.
If your company only provides tax assistance for certain relocation benefits, tax implications may need to be listed individually for each benefit. You can add a sentence to each benefit description letting employees know if it’s tax assisted or if the employee is responsible for tax liability. Another option may be to include a grid that lists each benefit and who (company or employee) is responsible for the tax implications.
Whether you are writing your company’s first relocation policy or evaluating your current policy, make sure these components are included. There are a number of things you can include when communicating to employees about relocation benefits, but these three items are crucial to ensuring your employees (and your team) experience successful relocations.