Corporate relocation plans have come a long way. Today, employers have more plan design options than ever, including two popular options: managed budget plans and fully-covered relocation benefits.
Admittedly, there’s no single “right” or “wrong” relocation plan; each employer has its own priorities. However, for most companies, the objective is to balance program costs with employee satisfaction—i.e., to deliver a great relocation experience as cost-effectively as possible.
Both managed budget and fully-covered plans are structured to deliver a positive relocation experience. However, cost—and cost-effectiveness—is a different story. For employers who want to conserve costs, it’s essential to understand the difference.
As the name implies, fully-recovered relocation benefits cover 100% of an employee’s relocation costs. Also known as “traditional” or “white glove” relocation policies, this is the most generous, most expensive relocation plan option.
Obviously, fully-covered relocation plans pay for the standard services most plans address—moving costs, travel expenses, a house-hunting trip or two, perhaps short-term housing. In addition, they generally cover services more modest plans often exclude, including:
In addition, fully-covered relocation benefits include the services of a relocation consultant, who helps employees make arrangements and guides them through the process—often at a granular level.
At one time, fully-covered plans were the industry standard—back when relocation plans were reserved primarily for senior management. However, once talent-strapped employers realized that offering relocation benefits was an effective way to attract much-needed but not-so-senior level employees, the relocation industry began introducing more limited, cost-effective plans, now the industry norm.
The Tax Cuts and Jobs Act of 2017 further contributed to the waning popular of fully-covered relocation benefits by inflating costs. Up until then, relocation expenses were tax-deductible to employers; nor were benefits taxable to employees. Now, the reverse is true. Employers can no longer deduct relocation costs, and may in fact elect to pay their employees’ taxes for them, a benefit known as a relocation tax gross-up.
Today, employers still offer fully-covered relocation benefits, but to select employees, such as C-suiters and senior management. And in some ultra-competitive markets, including healthcare and technology, fully-covered relocation plans are offered as a way to attract specialized, in-demand talent such as physicians and software engineers.
For employees, the next best thing to generous relocation benefits are flexible ones—because then they can shape them to meet their needs. That’s the guiding principle behind managed benefit plans, also known as managed budget or capped allowance plans.
With managed budget plans, the employer sets a maximum amount the employee can spend—so costs are predictable, unlike fully-covered benefits. Employers also limit what services they’ll cover beyond the basics.
Employees then get to choose how they’ll spend their benefits, ensuring that the services they need most are paid for by the plan. Most managed benefit plans include the services of relocation specialists, who help employees spend their benefits wisely.
In addition, some relocation companies take additional steps to employees get the most from their benefits—and help employers save. For example, at UrbanBound, we: