What Are The Biggest Challenges to Relocating an Employee? Avoid These Six Relocation Program Problems!

Your strategic talent management plan can address many challenges with good recruitment and hiring. However, relocating both the new hire and existing employees may be necessary to maximize your talent management strategy. Having a professionally managed employee relocation experience is one of the hallmarks of a human resources function fully supported by upper management. But still relocating and moving employees between offices can be difficult. So how do you make sure you have a professional relocation management program? 

The first essential steps are identifying the problems with your current approach and addressing your program as needed to make improvements. Keep reading to learn more about the most common challenges to relocating employees and how to avoid them…

What are the biggest problems that companies face when relocating an employee?

1. Low Acceptance Rate - What do I do if an employee does not want to relocate?

Low acceptance rates can be common when your employee or candidate has an existing mortgage and or their spouse or partner has a locally based career of their own. That is not to mention local family commitments such as kids in school and other extracurricular activities. That is why it is necessary to make the relocation as enticing and easy as possible for your staff members (and their family).

You will need to consider supplying some good relocation benefits if your business will successfully recruit an employee to move to a new location for work.

Here are some questions to ask if your employee relocation acceptance rate is not high enough: 

• Do you have a formalized relocation policy and program to clearly communicate to employees what the program entails?
• Are your employee relocation benefits enough to get an employee to move? 
• How will relocating to the new city improve the livelihood of the employee and family? 
• What are you offering homeowners who you want to move? 
• Are homeowners able to buy in the new location? 
• Will the employee be able to replicate or improve upon their living arrangements in the new city? 
• If not, what will the company offer to overcome this objection to moving?
• What are you offering spouses/partners who might have to give a career of their own to move? 
• What will the company do to help them find new employment in the new city?
• What is family life like in the new city? 
• Where are the best schools, and how do they compare to the schools the current employee's kids attend? 

The above questions are intended to help you get into the mindset of the employee. If you are considering these questions all for the first time, I am sure it can be overwhelming. However, do not worry. We are here to help guide you with the answers to all these questions in an easy-to-understand way. If you would like custom-tailored advice, we have an outstanding Relocation Program Consulting Services team.  They would love the opportunity to explore providing solutions that are right for your organization. Ultimately, if you shape your policy and program around doing what is best for the employee, it will yield beneficial results. In that case, you will increase your acceptance rate and decrease the number of unsatisfied employee relocations.  

2. The Lump Sum is not enough! – How do I help my employee manage their relocation lump sum budget?  

Many companies offer employees a lump sum allowance or a sign-on bonus as a reward for relocation. On the surface, lump-sum allowances seem like a no-brainer. The hiring manager identifies the dollar amount, HR includes the amount in an offer letter, payroll includes the perk to the employee's first paycheck-- done! But in reality, this is similar to sweeping something under the rug, hoping that it only will go away if we do not think about it. 

While lump-sum allowances appear easier to administer and give workers more versatility for managing their relocation, there are many disadvantages. The biggest disadvantage of which is that employees need to manage their own relocation.

Why is it a bad idea to have employees manage their own relocation?

Having the employee manage their own relocation suggests that the employee has to figure out the very best way to move from point A to point B without going over their budget. Managing their day-to-day job while managing a move themselves for them and their family becomes nearly impossible. Usually, something loses out. It could be their work productivity, satisfaction with their employer, or both. While in reality, most workers expect that their employer will support them in the move process—providing them relocation resources and recommendations in addition to money. After all, they would not be moving if it were not for a job from your organization. 

What's worse, if the cash does not cover the full cost of the move, guess who will become aware of it? Typically, workers will reach out to HR teams or their hiring manager for support. These conversations can be both embarrassing and frustrating for employees and employers. Therefore, HR professionals wind up investigating and responding to relocation concerns on top of their day-to-day responsibilities-- making lump-sum allowances not so easy to administer after all. 

Why do employees go over their relocation lump sum allowance?

Having employees go over their budget with a lump sum only relocation plan is exceedingly common because employees tend to underestimate the cost to move to the new location. Another pitfall is that psychologically, the employee thinks of the lump sum as "their own money." As a result, they are inclined to go with the cheapest options available for moving services, for example. It is good that the employee has an incentive to reduce expenses. Still, they often end up having many false starts to their relocation experience as a result. These false starts might include: 

• Using unlicensed moving companies
• Delays in shipment pack days or destination deliveries
• Many items are not well packed and end up broken
• Employees end up moving things themselves in an ad hoc manner
• Sometimes, employees will hurt themselves while moving their own items, limiting or delaying the impact they will make on the new job

These challenges often cause the employee to waste more time and money trying to make up for not getting it right the first time. 

Instead, the better course of action is to have a formalized relocation program with policies that clearly specify the benefits offered to an employee and managed by a Relocation Management Company (RMC), like Paragon. An RMC can manage employee relocation budgets, administer and coordinate benefits and service providers, and reimburse expenses. Using an RMC to manage your lump sum program, your employees will clearly understand what is included in their relocation budget and how to best utilize the benefits. Ultimately, this benefits your bottom line because the employee is happier and more productive in the new location faster. 

3. Housing Problems – What do I do if my relocating employee is a homeowner? 

How does a homesale assistance benefit support my employee relocation program?

Real estate is one of the most substantial issues associated with an employee relocation. First of all, your employee may have a home to sell before they can relocate. According to the National Association of Home Builders, a family's primary residence is the largest asset most families own. With this in mind, it is understandable that a family might be concerned when considering selling their home as part of a relocation for the company. How do you overcome this concern? Providing the employee homesale assistance as a relocation benefit is the answer. Homesale assistance is supported by the preferred provider real estate broker network of a Relocation Management Company (RMC). The RMC will put your employee in-touch with some of the best real estate agents in their area. Plus, the RMC will manage a Home Marketing Assistance Program to benefit the employee. Home marketing assistance is a tried and tested method of selling the home faster, for more money, which generally improves the relocation experience. Having this guiding support will help them feel confident about the experience before committing to the relocation when they need to sell a home. 

How does a home finding benefit support my employee relocation program?

Suppose your employee cannot discover a home in the new location within their budget. In that case, it will be difficult for them to focus and offer it their all on their very first couple of weeks on the brand-new job. The solution to this is to help the employee to hit the ground running before they even start the new job. Consider including a home-finding assistance benefit to your relocation program. For homeowners, this will pair the employee with a great real estate agent to help guide them into a new home in their new city. Plus, in addition to helping the employee and family find a home, most relocation-trained real estate agents will provide the employee with other benefits. They will give the family essential guidance about the benefits and features of living in that new region to help them join the community sooner. Helping get settled in the new area is a unique feature provided by agents part of an RMC's preferred broker network. 

4. Moving Issues – How do I professionally move an employee to a new city? 

Employee Relocation requires staff members and their families to load up their possessions and move across the state, country, or world – the further the location, the greater prospective risk for more problems. Even in the best circumstance's belongings can get lost, damaged, or get there late. A business that makes the worker manage their move might encounter more issues, delays, and surprise expenses. A well-managed organization will work with a relocation partner to help make these decisions easy. They also handle the tactical aspects of the employee relocation process. They can link their employees with a network of quality moving providers and assist with the moving company claims process for when things go wrong.

What type of moving company should I use to relocate an employee? 

If you go on google, there is an endless sea of moving companies advertising their services to move your employee. With so many moving companies available, it can be overwhelming. So which moving company do you go with to move an employee? Here are the questions to consider when looking for the best-in-class moving companies for employee relocation: 

• Is the moving company recommended/referred by an independent RMC (like Paragon, not owned by a van line or moving company)?
• Are they are a national brand that you have heard of before?
• What are the moving company's quality scores, ratings, and reviews?
• Does the moving company background check all of their employees? 
• Do they have a clearly defined claims process to take care of missing, lost or broken items in transit? 
• How quickly do they respond to claims?
• Do they have adequate insurance coverage? 
• What technology options do they have available to the employee? 
• How quickly will they be able to provide quotes or estimates for moving services? 
• Finally, after considering the above, are they competitively priced?  

  

5. Exceptions to Policy – Why aren't our employee relocation benefits enough? 

Exceptions to the policy are relocation benefits not included in the standard relocation policy. How do exceptions to policy take place? Exceptions occur when an employee either directly or indirectly asks for an additional benefit beyond what is included in their employee relocation policy. When exceptions to policy happen often, they are like the "check engine" light on your car turning on. It is not the end of the world, but it could be an indicator that your program is out of step with your employees' needs. How do you address exceptions to policy?

You should consider addressing exceptions to policy in the following ways: 

• Test your Policy – work with an RMC to benchmark your policy against other companies in your industry to make sure it is the right fit for your organization. 
• Trust the Data – look at what your historical data says to spot trends. It may be that one benefit can be decreased while another benefit could be increased to reduce exceptions. 
• Add a Miscellaneous Allowance – the miscellaneous allowance is a lump sum given to employees in addition to other relocation benefits. Including this allowance allows the company to use it as a catch-all for most employee expenses beyond what is offered in their relocation package. 
• Manage Expectations – clear communication with the employee upfront about what is and what is not included in the program allows you to be firm when reigning in relocation expenses. 

Once you have done the above, you should work with your RMC to ensure that your relocation expenses do not exceed 1% of the total annual relocation spend. Working with an RMC (like Paragon), you can reduce exceptions to policy while also increasing the employee (and employer!) experience. 

6. Failed Assignment or Employee Relocation - Why did my employee have a bad relocation experience? 

It is not uncommon for the employee relocation process to not go smoothly when the program is not well managed. In this case, what happens next? Typically, the employee is dissatisfied, and either moves back to their old location or leaves the company entirely. In relocation terms, this is a disaster after the company has invested so much time, energy, and resources into moving an employee to a new location. How can you avoid this? Preparation. It is like the old saying, "failing to plan, is planning to fail." Get ahead of these issues with a well-managed employee relocation program that prioritizes clear communication and high satisfaction with employees (and their families).

It can be challenging to develop a relocation program that both secures your business's bottom line and benefits your transferring workers.

At the end of the day, the happiness of your worker is essential. Starting and moving to a brand-new place takes a tremendous toll on an employee's wellness, which can impact both your worker's and your business's long-term success. For this reason, your company must think about a relocation partner that can help relieve this pressure.

Do you need help managing your Relocation Program? 

Paragon has been helping companies move employees all over the world for over 30 years. Our approach is simple. We build a program with policies that reduce costs and improve the employee experience across the board. Once we can work with your employees on their relocations, we have a philosophy that we use as a guiding principle. We work with each family, one family at a time, understanding their needs, reducing the move's stress while protecting our client's valuable time, energy, and resources. We would love the opportunity to explore helping to do the same for you. 

Please contact us today to get started with Paragon!

What Elements Should Every Relocation Policy Include?

Get the core elements of your relocation policy right from the start. You can avoid a bad employee experience and make managing your relocation program simpler if you always include the elements below in your relocation policy. A relocating staff member must understand if they're qualified for relocation benefits, what benefits they get approved for, and how to use them.

How we communicate those benefits and just what we communicate is the challenging part.

What should I communicate in my relocation policy?

The majority of companies start by communicating relocation benefits in an informal method, such as in an offer letter, and eventually move to a formalized policy document as they grow their employee relocation program. Even after relocating a handful of employees, it can be challenging knowing where to begin when writing a relocation policy. Even if you already have a relocation policy, examining it often is vital to ensure the language makes sense and clear. In some cases, small changes frequently get added to a relocation policy. With time, the document can become disjointed, difficult to administer, and confusing for employers and employees alike.

Whether you are merely beginning to write a relocation policy or are re-evaluating your present policy, remember that every relocation policy needs to address the following questions: 

• Which employees are eligible for relocation benefits? 

• What are the employee relocation benefits currently offered?

• Are all employees eligible for the same benefits?

• Are the benefits tiered according to the employee's level in the organization?

• What are the relocation tax implications for the company and for the employee being moved? 

Let us take a look at each of these components!

Which employees are eligible to receive relocation benefits?

Obviously, company-paid relocation benefits are only offered to employees who are moving on behalf of the company for business reasons. Other questions to consider when determining employee eligibility include whether the move was voluntary or if the company asks an employee to move to a different location. For example, it can make a difference if an employee raises their hand to move to a new location voluntarily instead of based on company need. An employee relocation done at the company's direction or to fulfill a business need typically warrants more benefits to successfully convince the employee to move to the new location. While voluntary moves do not need as many benefits to convince the employee to move. (However, some companies offer the same relocation benefits for employees for both types of moves.)   

Establishing eligibility parameters requires your company to specify the requirements that qualify an employee for relocation benefits. The criteria may take several factors into account such as: employee status, relocation distance, and worker position. Specifying these requirements helps you set correct expectations with employees and lower the number of exceptions to the employee's policy. 

According to the IRS, employees and new hires are qualified for relocation benefits if the brand-new work area is at least 50 miles further from their house than their former work area. This is referred to as the 50-mile rule, an IRS requirement to receive relocation-related tax benefits. Employees and qualified dependents are eligible to receive benefits. A dependent is specified as a person who is declared on the employee's annual tax return.

What are the employee relocation benefits currently offered by the company?

You need to specify what the benefits include once you've determined who is eligible for benefits. The majority of your written relocation policy document will be about the employee's benefits and how they will actually use them for their move. A relocation policy needs to clearly articulate what relocation benefits are provided and how staff members can take advantage of them.

Like the eligibility section, this portion of the policy should help set proper expectations for employees and reduce any anxieties they might experience as part of the move. Also, understandably so, the employee might not understand standard relocation terms such as "buyer value option," "household goods shipment," "gross-up," or any relocation terms. Therefore it is critical to clearly explain what each term means and point the employee to helpful resources to explain how these benefits support their move. 

It is also critical to explain how and when an employee must use these benefits during their relocation. To maximize the relocation policy's benefits, the employee needs to use their benefits at a specific time and remain consistent with tax rules. Managing the "when" and "how" of the employee's benefits will enable the employee to have a better relocation experience and remain compliant with IRS relocation standards. Other questions that should be clearly answered in the relocation policy should include:

• Is the employee responsible for finding their own moving companies and other suppliers for the move?

• Will a third-party Relocation Management Company (RMC)  administer the benefits and facilitate their usage?

• Who will the employee talk to when they have relocation-related questions? 

• How will relocation expenses be handled? 

Answering these questions will make it simple for the employee and company to manage a successful relocation experience. Keep reading to see how we address each question below. 

Is the employee responsible for finding their own moving companies and other suppliers for the move?

Yes, if the company does not have a formal policy or is primarily a flat lump sum employee relocation program. While this approach might work for a one-off move, it is not recommended for moving more employees. It is recommended for larger programs to use an RMC to make the process easier for all involved, which relates to our next question. 

Will a third-party Relocation Management Company (RMC)  administer the benefits and facilitate their usage?

If the program is managed by a Relocation Management Company (RMC), they should manage all aspects of the employee relocation from start to finish. The organization and employee would benefit from using an RMC in the following ways: 

• Policy Administration – The policy benefits would be designed based on best practice recommendations and then clearly communicated with each employee before and throughout their move.
• Moving Company and Supplier Selection – The RMC will vet, source, and monitor the quality of all relocation-related services needed by the employee, including the most critical benefits such as moving services, selling a home, and finding a new home. 
• Cost Containment – An RMC will closely monitor relocation budgets to ensure that each employee stays within budget and manage their spend for each move to make sure it complies with company policy. 
• Risk Mitigation – An RMC will reduce company IRS tax risks by ensuring the program and policies comply with the most up-to-date standards and requirements of the IRS. Managing this aspect of your program reduces the risk of being audited and causing trouble for the employee come tax season. 
• Expense Reimbursement – One of the most significant pain points of an in-house relocation program is managing the employee reimbursement of relocation benefits. They need to often be treated differently from a tax perspective. These benefits can also get intermingled with non-relocation expenses, which makes the process even more difficult. Our recommendation is to work with an RMC to let them take this complicated work off your desk and make your life easier. 
• Trend Analysis & Reporting – An RMC will be able to crunch the numbers across all of your relocating employees to ensure that the policy is adequately addressing their needs when being moved by the company. Then they will make recommendations based on trend analysis to help make your program more efficient and improve the employee experience.  

Who will the employee talk to when they have relocation-related questions? 

With an in-house program, typically, HR or the hiring manager will have to take time away from their core responsibilities to address any relocation-related questions. These answers won't always come easy for most organizations, so employees are left to their own devices to research the correct answer themselves. 

If the program is managed by an RMC, all employee questions will be directed to their RMC's assigned consultant. Unlike some RMCs, Paragon assigns a dedicated single-point-of-coordination Relocation Consultant to each employee to manage and guide their move from start to finish. We find this benefits the employee experience because they don't have to recover the ground they may have covered with other relocation-related suppliers all over again. 

Do all employees receive the same relocation benefits? Or do different employees get different benefits based on employee level or status? 

While some organizations offer a uniform relocation policy and relocation benefits to all employees, this is not the best practice. Instead, we recommend developing a tiered policy approach with benefits appropriate for the employee's life stage. For example, the relocation needs and budget for an intern new hire move will differ significantly from that of a long-tenured established executive. Your relocation policy program should reflect these differences as well. Similarly, you won't pay an executive the same salary as an intern, so why would you offer them the same relocation benefits? For example, it is common to offer reserve homesale assistance benefits for executives. But however not offer homesale assistance for lower-level employees being moved by the company because typically, most lower-level employees don't have a home to sell. Finally, one other benefit of offering a tiered policy plan structure is avoiding discrimination complaints. Suppose you can demonstrate that all employees of specific employee status (i.e., salary level, management level, etc.) had the same benefit eligibility. In that case, it would shield the company from the risks of potential discrimination lawsuits. 

How will relocation expenses be handled? 

How expenses will be handled is a big question to consider. Often companies will offer an employee a relocation lump sum to manage the entire move on their own. If the company takes this approach, the company must decide how to treat the lump sum (which the IRS views the same as a bonus) from a tax perspective. Will it be "grossed-up," or if will it be fully taxable to the employee? When the lump sum is grossed up, that means the company will be providing the employee tax assistance to receive the full amount of the lump sum. Grossing up a lump sum is recommended so that the employee does not have to pay taxes on money intended to cover the costs of their relocation. 

From our perspective, a better approach is to utilize an RMC to manage your relocation expenses to make the administration of your program more efficient. Most RMC's, like Paragon, today offer seamless integration of their client's payroll with RMC apps that allow employees to submit receipts for reimbursement and policy approval. In addition to improving the employee experience, relocation expenses are not intermingled with other company expenses. Most importantly, they will be treated in an IRS tax compliant way to shield the company from risk. 

Whether you are composing your business's very first relocation policy or evaluating your present policy, make sure these elements are included. You can consider various things when communicating to employees about relocation benefits. Including these elements in your relocation policy is crucial to guaranteeing your employees (and your organization) have a well-written relocation policy. 

Do you need help writing your company's relocation policy? 

Paragon Relocation has over 30+ years of experience helping organizations of all sizes write their relocation policies and manage their relocation programs. 

Contact Paragon today to learn more! 

Brexit and Covid – lets focus on some more positives

 

Continuing my theme from last week I have decided there is far too much negativity in the world and therefore my blog this week will be focusing on some more thoughts that may assist in lightening the doom and gloom we are currently all facing.

Therefore, using the words, once again, from the late Captain Sir Tom Moore, “tomorrow will be a good day” because:

·         I will start my day with a dog walk. It does not have to be a dog walk; it could just be a walk but make it a new walk that you have not done before. Explore your local area and I bet you will find new parks and green spaces that have simply passed you by to date.

·         Take time out to be green fingered whether it be a house plant, window box or garden. The sale of house plants has skyrocketed during lockdown and then definitely make a difference in home offices. The pottering about with plants in window boxes, containers of gardens at this time of year will pay dividends in the spring.

·         Daily gesture of goodwill. Aim to do a good deed once a day as a minimum. Does not have to be drastic. It could be as simple as taking your partner a cup of tea in bed, stopping, and talking to the neighbor you have only ever said hello to in passing or treating someone to a packet of their favorite sweets.    

 Implement one or all of the above suggestions into your schedule and “tomorrow will be a good day” (Captain Sir Tom Moore).

Being Prepared…

I am reminded today as I hear and see all of the disaster happening with the arctic blasts that have ventured far into the very deep south, records and events in areas that haven’t seen anything like this in a lifetime...that yes, many things are certainly out of our control, but being prepared for the unexpected events will help you to look ahead with confidence rather than look back and regret.  Being prepared for a disaster is like being prepared for any other important event in life.

We’ve all learned that the impossible is certainly possible, so we have to be prepared for the worst.  When we fail to be prepared then we really fail.  As we go through those impossibilities in our lives, it is very important to reflect and recognize what is our take away, what are our lessons?   Having thoughtful consideration allows us the opportunity to prepare and to learn something new.

I like to journal, write things down.  For those of that are are visual learners, this helps us to focus, to plan and prepare.   Make your list and outline what makes most sense with in reason to be better prepared, stronger, for more of the impossibilities and great challenges still yet to come.  As you work through those changes to be better prepared for the future will bring about those rewards from accomplishment.

As Pat Riley stated “being ready isn’t enough you have to be prepared….” And that’s half the victory!  I’d rather have it and not need it than to need it and not have it as they say.  A positive attitude, discipline, and having good energy, will help you to be mentally prepared for anything.  Stay ready so you don’t have to get ready.  We can be better prepared for tomorrow if we are doing our best today.  Being prepared can provide you that sense of freedom, free from worry, free from shock, free from fear or better protected from something worse, and avoid the surprise!

I loved some of the many quotes I found regarding preparedness….

Confidence comes from being prepared

By failing to prepare you are preparing to fail!  (Benjamin Franklin)

Do not worry, just care and be prepared

Every problem is a gift...without problems we would not grow!  (Anthony Robbins)

A student says to his master "you talk about peace but you teach me fighting.  How do you reconcile the two?"  The master replied "It is better to be a warrior in a garden, than a gardener in a war."

Remember…it wasn’t raining when Noah built the ark…so be ready for the storm!!

If you or someone you know is preparing for a relocation, whether it’s close to home today or far away from what we know is home, no doubt adventure awaits, but being prepared will certainly provide a pleasant and successful experience.  Give Paragon Relocation a call…we are always prepared for just this time!

As Abraham Lincoln once said “I will prepare and someday my chance will come.” 

What Does a Relocation Management Company Do?

Relocation Management Companies (RMCs) provide outsourced employee relocation management services for companies of various sizes and needs. RMCs benefit companies by providing efficiencies, cost savings, and an overall better employee relocation experience than they would achieve by managing the relocation program themselves in-house. 

At some point, practically every organization requires to move an employee at the company's expense. 

Why do companies relocate employees?

Organizations relocate staff for numerous reasons: 

• to move a staff member to an office where her particular skills are required; 
• to support recruitment when current employee skill sets do not match the need in a particular region or office location; 
• to expose an employee to a specific service activity or function to build their experience; 
• and to support a business move of a headquarters or operations to a brand-new location. (When moving an entire group or office of people, this is commonly referred to as an Employee Group Move. 

For most companies, even large ones, relocation is not a daily activity. Nevertheless, when the requirement arises, it becomes essential to relocate the employee quickly, seamlessly, and efficiently to be productive at their brand-new location. While this varies considerably based on industry type, it is commonly held among relocation experts that most companies relocate about 1% of their employee population each year. 

Which type of employees are typically relocated most often? 

• Senior Executives who would be responsible for the successful management of onsite or regional employees
• Engineers whose hands-on expertise is needed to support company goals.
• Technical Employees with specializes skill sets.
• New Hire Recruits recruited from other markets to the company live and work at the headquarters location or operations center where in-person work is deemed beneficial to the organization's goals. 

How do companies relocate employees?

There are many different ways and corporate philosophies that shape how companies relocate employees—these range based on need, budget, and goal. These questions shape corporate priorities when considering relocating either current or new hire employees. 

• Is the company able to find that skillset in the current location? If yes, it might be in the organization's financial interest to actually not look to relocation as the solution. 
• What is the company willing to budget for employee relocation expenses? This can significantly affect the benefits offered to relocate employees as well as relocation acceptance rates. 
• How important is it to relocate a specific employee or skillset? Suppose it is critical to support strategic goals to have that skill set in a new location. In that case, it is critical to put the right pieces in place to either attract that skillset to the new area or convince a current employee to move there. 
• How do I convince a current employee to relocate? Put yourself in the shoes of the employee. If you can convince the employee that the experience will be mostly stress-free. That they will have a better life in the new location. You have a much better chance of getting the employee to move. 

How do companies reduce employee stress during a relocation for work? 

The short answer is to get some help. We recommend partnering with a Relocation Management Company (RMC), like Paragon.

Improving employee experience is the primary reason that corporations usually outsource the relocation procedure to RMC. In addition to reducing stress, an RMC can also reduce relocation costs, limit IRS tax audit risks, and help the employee be productive faster in the new location. These benefits go beyond the benefits of helping each employee move. They can also provide complete program management, policy benchmarking, and more to give you the confidence that you have a competitive program compared to those in your industry. 

Why do most companies outsource their relocation program today? 

Before the 1970s, employee relocation was typically handled by business HR departments. The combination of characteristics described above made relocation an excellent prospect for outsourcing. As a result, this function has actually become increasingly outsourced. The Worldwide Employee Relocation Council reports that today 61% of corporations completely contract out the relocation function. Another 30% outsource chosen elements of the process.

In the 1990s, another strong inspiration for contracting out was the business movement toward "scaling down" or "right-sizing." During this duration, corporations sought to eliminate internal functions that were staff intensive and not related to their core organization. The relocation function was one of the first to qualify.

One of the biggest reasons companies outsource their relocation programs is because of taxes. 

How do taxes affect employee relocation?

When it comes to relocating employees, taxes represent some of the most significant risks and opportunities for both employee and employer. Taxes are an important consideration when moving an employee because the IRS treats many relocation benefits differently from business expenses. If the employee reimbursement of relocation expenses is not given the appropriate tax treatment by the organization, it could cause an IRS audit. An audit could be embarrassing for the company and could ruin an employee's otherwise good relocation experience. However, the IRS also provides deductions that, if used correctly, can maximize the organization's relocation budget, increase the number of accepted employee relocations, and improve satisfaction. The best example is a tax-advantaged employee homesale assistance program as managed by a relocation management company. 

What are the benefits of using a homesale assistance program through an RMC? 

There are many benefits of using a homesale assistance program through an RMC. These benefits include: 

• Tax Savings – the IRS allows organizations who move employees certain deductions when it helps employees sell their homes to be relocated for work. RMC's are experts at maximizing these benefits. 
• Real Estate Broker Network Agents – RMC's are experts at vetting, overseeing, and managing real estate agents across the country. This helps employees sell homes faster for more money, which makes them happier. Word of advice: use an RMC that does not own or is not owned by a real estate company to make sure they always recommend the best available agents in a market.   
• Employee Satisfaction – when employees are moved and receive homesale assistance, they feel that the company is invested in helping them make the move. By working with an RMC to manage the homesale assistance program, you can be assured that the employee will receive the best experience possible.

How has the employee relocation industry changed over the years?

How do Relocation Companies help support the employee relocation process? 

Although it makes logical sense to outsource relocation to an RMC, it is not always the first instinct of many organizations. 

Why do companies try to manage employee relocation in-house? 

Many companies today often try to manage employee relocation in-house. Why is this the case? Most in-house programs begin because companies often think of relocation as expensive and will save money by going it alone. 

So in-house relocation programs are often how many relocation programs begin. In some cases, they work out pretty well. A hiring manager or HR may do some research, and they try to figure it out on their own. They then give an employee a budget and send them off to the internet to find and vet moving companies themselves with the expectation that the employee would be reimbursed for expenses after the fact.    

However, is this the best way to manage an employee relocation? In most cases, the answer is no because the company will waste valuable time and organizational resources on a task that is not part of their expertise. 

Why is it a bad idea to manage employee relocation in-house?

It is a bad idea to manage an employee relocation program in-house because company resources could be better focused on the core business goals. Suppose the company opts to use a relocation management company instead. In this case, the organization can be freed up to focus on its strategic talent management and organizational growth goals. Today's leading companies who are always competing for the best talent do not risk a bad current employee or new hire employee relocation experience. Therefore they source a trusted partner to help guide them on their journey of crafting a best in class relocation management program. 

Do you need a relocation management company? 

If yes, look no further! Paragon Relocation has been in business moving thousands of employees for companies of all shapes and sizes for 30+ years to all 50 states (in the US) and over 100 countries worldwide. If getting the employee relocation experience right the first time is essential, we can help! 

Contact Paragon today to get started! 

Brexit and Covid – lets focus on some positives

The past few weeks have, for several reasons, been a nightmare across all areas of my life but it dawned on me that even during these very testing times and as a direct result of the Covid pandemic there are some positives that we all need to consider and be grateful for. We need to take time to re-evaluate.          

My blog this week is therefore aimed at focusing on the positive impact that Covid has forced upon me but hopefully all of you as well. I am conscious that countries have differing Covid restrictions, so I am caveating that this comes from Walton on Thames, Surrey, UK.

My positives:

·         Stop and listen to the bird song. With reduced cars on the road and less planes in the sky I have had the pleasure of hearing birdsong for the first time in a long while. Stop and listen.

·         Use what would have been your commute time to do something positive either for yourself or for someone else. An hours commute to work and then back again gives you 2 extra hours in your day. Take advantage of this and volunteer to walk a rescue dog, pick up some shopping for a neighbor, clear out that chest of drawers you have been promising yourself you will do for months. I have become a telephone buddy reaching out each week to 2 ladies going through cancer treatment.

·         Make sure you stop for lunch. Working from home often sees us sitting at our home office desks for far too long. Stop and use your lunch hour to reach out to someone via phone or the old-fashioned way - write a letter! Whatever method of communication used the recipient will love it and maybe now is the time to tell someone you love them, thank them for a recent gift or simply say "hi".

·         Take advantage of working from home and cook a meal from scratch.

·         Smile at those you pass on your daily walks. Say good morning, good afternoon, good evening. Being courteous costs nothing and we often neglect this. You can still smile with your eyes if your face mask prevents your mouth from being seen.

·         Take up a new hobby. I bet you have a list of things you have always wanted to do but have always used the excuse that lack of time prevented you from acting. Now is the time so long as you are not breaching any Covid regulations.

·         Say “Thank you”. Two little words that mean so much but are so underused.

·         Step away from that desk. Dance in your home office. Nobody other than possibly the cat or dog that have taken up residency underneath your desk or on it, can see you and they will not tell.  

·         Finally, in the words of the late Captain Sir Tom Moore, “tomorrow will be a good day”. In his memory ensure your tomorrow is a good one. 

In short, life may be moving at a slightly slower pace because of Covid but take advantage while you can. When the new normal returns in whatever guise this is, we need to be able to reflect on the positives and maybe ensure we retain some, if not all, into our daily schedules.

BIGGER in Texas

 

Everyone has heard that saying…but it’s true!   Just look at the sheer size of Texas.  Texas is the 9^th largest economy in the world.  Yep I said “world”.   While Texas is definitely big in every way, there is always still that sense of community, and you’ll notice that willingness to be helpful.  Total strangers demonstrating southern hospitality; it’s an amazing thing to witness!

As so many businesses have discovered, it’s all about the talent.  We proudly boast of our highly educated, diverse, multinational workforce.   There is a wide range of economic incentives that are creatively applied, attracting many Fortune 500 companies to move their global headquarters to Texas...Oracle, Hewlett Packard, Toyota and Tesla for example.  In fact, 50 companies with headquarters located in Texas earned a place on Fortune magazine's 2020 list ranking enterprises with the 500 highest fiscal year revenues in the nation.

A recent podcast narrowed it down well to the “Three Pillars of Relocation”.   In quick summary:

1. Community…the fear of missing out…Texas is the “IN” thing, and people want to be a part of that.  There is always a lot going on in Texas!
2. Commerce…show me the money!  Companies moving here to be closer to the money to be successful.  The ability to get product to the customer quickly and efficiently.  4 major markets with a $1.6 trillion economy.
3. Culture….friendly people, quality of life, fun place to live, raising a family, low cost of living, no state income tax, very affordable housing, just to name a few.

In 2020, Texas once again led the U.S. in exports, as it has every year since 2001, according to Census Bureau data.  And Texas is consistently ranked first or among the first every year by various organizations as one of the most business friendly states.  Texas continues to gain new residents and businesses because of its no personal income tax, overall low taxes and less regulatory burdens.
 

A few Texas fun facts…

Texas was its own country from 1836-1845, when it finally agreed to join the United States

Texas is larger than any country in Western Europe

Texas is second in size only to Alaska

You can fit the island of Manhattan within the DFW airport

Every year more people move to Texas from other states than leave

The Texas State Capital is taller than the U.S. Capital by 15 feet

Texas is North America’s leading producer of crude oil

If your business is looking to relocate to Texas, give Paragon Relocation a call.  We know how to make the individual move or group move to Texas a smooth and painless transition for your employees and their families.

In Texas we like to say there’s a town for everyone, so if you’re not from Texas (like me, born and raised), well what are you waiting for.   Come on in, we’ll leave the light on for you.   Then you too will be one of those many that came before you who have said…”I’m not from Texas, but I got here as quick as I could.”  😉

Texas is more than a state…It’s a state of mind!!

Welcome Y’all!!

Educating Today's Home Buyers

 

Every publication or article we pick up is how hot the housing market is in many parts of the country.  However, it is more important than ever that we try to help educate those out there attempting to buy in this pandemic related market.  Those of us in this industry are so accustomed to the market that we forget some of the simple basics.  Three of those basics, as I was perusing articles stood out to me.

One of the most difficult obstacles for older buyers or those not comfortable with technology is touring homes virtually.  In many markets, this is the norm with social distancing orders.  One may not be able to see the home in person prior to offers being submitted.  There is the risk of losing the home to those that are comfortable with virtual technology shopping.  The positives are that real estate agents are putting more and more homes online with video tours which is now becoming a norm.

Second, as the Rocket Mortgage commercials of yesterday’s super bowl pointed out, “certain is better” and never be “pretty sure”.  Most homebuyers get pre-approval for a home loan from a mortgage lender prior to making their offer.  With a shortage of homes, a buyer wants to make sure they have pre-approval rather than just pre-qualified.  Oftentimes with multiple offers to consider, the seller will want to make sure they are looking at a buyer that can put their finances behind their offer. 

And the last simple piece of education for home buyers is to consider the time they plan to stay in the home.  With historic low rates it is a great opportunity to lock in a long term 30-year fixed mortgage.  However, if a buyer is certain that they will only be in the home a few years, it may be best to consider an adjustable mortgage, as it can be at a lower rate.  But it will readjust based on the economy.

These basics apply to first-time home buyers, move-up or right sizing buyers (up or downsizing), and those senior buyers deciding they no longer want the upkeep of a home.  Relocation buyers are also at different phases of their life process and these basics apply to relocation home buyers also.    

What is the Difference Between a Relocation Package Lump Sum and a Employee Salary Bonus? Avoid These Mistakes!

Relocation expense reimbursement, lump sums, and bonuses are often offered as part of employee relocation packages to cover the employee's costs of moving to the new location. Getting relocation expenses paid for is a welcome benefit for employees moving for work. It allows them to focus their attention on hitting the ground running in the new city and start producing more quickly. However, there are often tax implications that companies don't consider. Therefore it's essential to understand the tax differences between relocation related expenses and employee salary bonuses. 

For the employee, both bonuses and employer-paid moving expenses, such as moving company service expenses, are considered taxable income by the IRS (except for tax safe homesale assistance programs, more on this later). Since most relocation benefits are considered taxable income, this requires employers to pay standard payroll taxes such as Federal, State, and FICA. If the company forgets to factor in tax implications from relocating an employee, it could cause big problems. Both the employee and company could experience a costly and time-consuming mess come tax season thanks to our friends at the IRS. But don't worry! We are here to help. Keep reading to learn different approaches to address these concerns in a streamlined, efficient, and most importantly, tax-compliant way.  

 

Are Relocation Lump Sum Packages Taxable Income?

The short answer is yes.

In a lump sum relocation program, the employee is responsible for paying taxes on the lump sum payment. The IRS views this lump sum benefit as the same as a salary bonus.

 

Does the company or the employee pay the taxes on a Lump Sum relocation package?

 Good question! The short answer is that it depends.

 

What options are available to pay the taxes on a lump sum?

There are two primary ways that companies treat taxes when it comes to lump sum benefits when moving an employee. First, we'll talk about… 

Employee Paid Lump Sum Taxes

The company can choose to allow the employee to pay the taxes from the lump sum expense. They usually would pay the taxes themselves just like they would with an employer bonus. Having the employee pay for the taxes on the lump sum might save the company some money in the short-term but in general unecessarily burdens the employee and might lead to issues down the road. For this reason, having the employee pay for the lump sum taxes is not considered best practice by industry experts.

 

Why is it a bad idea to make the employee responsible for paying taxes on the relocation lump sum?

  

It's a bad idea to make the employee responsible for paying the lump sum's taxes because the lump sum is intended to cover reasonable expenses for a move, for work. It should not be treated as a bonus or a reward from the employee's contributions to the company. Suppose the tax implications are not clearly communicated upfront to the employee by the organization or your relocation management company. In that case, the employee may feel like they lost money when taxes come due during tax filing season. Furthermore, they may have spent the full amount of the lump sum (or likely more) just on moving expenses believing they received more money than they did. It is not uncommon for employees to rack up considerable credit card debt when relocating for work when the relocation is not managed in a professional way. This lack of planning for the employee causes stress on job performance. Even worse, the employee might be knocking on their boss' or HR's doors asking for more money months after the move is completed. Imagine how awkward and embarrassing this might be for an employee who recently joined the new office team. Keep reading to learn how to avoid these mistakes...

 

How much of my employee's personal taxes will be affected by a relocation lump sum?

The short answer is that it depends, again. This largely depends on the employees personal Federal and State tax rates.

Employee Relocation Lump Sum without Taxes Paid Example

Suppose the company gives an employee a relocation lump sum without paying the taxes (without tax "gross-up"). In that case, it could look like the below example. 

For example, the company has authorized an employee to receive a $5,000 relocation lump-sum bonus without any tax assistance. How would the IRS treat this money? As mentioned above, the IRS would treat this lump sum as a bonus that would be fully taxable for the employee. For this example, let's say the employee's Federal, State, and FICA effective tax rate is 33%. In this case, the employee would need to be responsible to pay $1,650 in taxes on this lump sum, netting the employee only $3,350 total from the $5,000 employee relocation lump sum.

 

Since it is prevalent for both companies and employees to underestimate the relocation costs and overestimate how far they will stretch that lump sum amount it is recommended to take a different course of action. Most relocation management companies would recommend getting ahead of this by creating a policy and program that maximizes the IRS's tax benefits for relocation. (Based on current tax law, this means offering a homesale assistance benefit, which allows for certain expenses to not be counted against the employee as income.) When lump sums are offered, they should be grossed up to improve the employee experience and make things easier on the whole organization.

 

Employer Paid Lump Sum Taxes

How can I pay for my employee's relocation lump sum taxes?

The short answer is something referred to in the relocation and tax world as "Tax Gross-Up."

 

What is relocation tax gross-up?

Investopedia.com puts it simply:

• A gross-up is an additional amount of money added to a payment to cover the income taxes the recipient will owe on the payment.
• Grossing up is most often done for one-time payments, such as reimbursements for relocation expenses or bonuses. 

How does a company pay the employee's taxes for a relocation lump sum?

The short answer is, it's complicated but important. (This is why it is recommended to work with a good relocation management company, like Paragon, to maximize the employee and company's tax benefits while reducing risk.)

To pay the taxes for an employee when they receive a lump sum, the company will need to gross up the money received. How does this work? The tax gross-up methodology depends on the company's philosophy and approach. The organization needs to decide what gross-up rate methodology they will use, and then implement it systematically for all relocating employees. 

Most common ways to pay for employee taxes as a result of a relocation:

• The Flat Method sets a flat tax percent amount to be paid over and above what the employee receives. For example, the company chooses to give the employee $3,000 as a lump sum but wants to assist the employee with the taxes by giving them 25% more. The company's total would be $3,000 plus 25% ($750), equating to $3,750 total received by the employee. This wouldn't always provide a dollar for dollar reimbursement on the taxes but would provide the employee some help and be simple to calculate for the organization.  

• The Inverse Method considers the employees existing taxes. It provides a custom-tailored tax gross-up so that each employee receives the full amount of their relocation lump sum. Because the IRS considers the additional gross-up amount as income, you have to pay more gross-up to cover the gross-up. The IRS almost always finds a way to get paid! Covering the taxes on the gross-up amount is referred to as paying for the "tax-on-tax" liability. The formula to calculate the inverse gross-up method is: Tax Rate / (1–Tax Rate) = Inverse Gross-Up Rate.

Most organizations that use the inverse method work with a Relocation Management Company with technology and staff dedicated to making this process seamless and easy for an overall well-run relocation program.

The company can choose to burden the employee to pay the taxes from the lump sum expense. They usually would pay the taxes themselves just like they would with an employer bonus. Having the employee pay for the taxes on the lump sum might save the company some money in the short-term but might lead to issues down the road. Thus, industry experts consider it best practice to cover the employee taxes when being moved for work. Furthermore, the company should also take advantage of the tax benefits of an IRS compliant homesale assistance program such as the Buyer Value Option and Guaranteed Buyout. These programs are a great way to increase an employee acceptance rate, improve the relocation experience, and from a tax perspective, help maximize tax benefits.

Do you need help relocating employees? Are you concerned about employee experience and tax liabilities?

Contact Paragon Relocation today for a no-obligation relocation program analysis and hear about how we have successfully reduced tax risk while improving employee experience for over 30 years.  

 

Click Here to Learn more about Paragon Relocation

Paragon's Consulting Services - Relocation and Housing Trends 2021

 

Paragon Relocation Resources Consulting Services

Over 29 years ago, Paragon formally entered the global relocation services industry as a consulting company, assisting in the development of comprehensive relocation services and global assignment management policies and programs for Fortune 1000 companies. This entrée into relocation is the foundation from which Paragon Relocation evolved into a full-service global relocation company, providing not only the guidance but the coordination, tracking and follow-up to administer programs.

Paragon’s Global consulting team is comprised of seasoned industry professionals who are trained to proactively interact with you and your team, analyze your current state and advise on how to reach your desired future state. Collaboration and “listening to understand” help us to engage with our clients in whatever capacity they need us to so that we may develop a trusted partnership, effectively strategize efficiencies and then deliver on what we promise. We recognize that global relocation services is about much more than just moving people; it’s about successfully managing a corporation’s human capital.

Real Estate & Rental Housing Forecast for 2021

In 2020, the housing market saw the highest pace of sales growth since the height of the unprecedented housing boom in 2005. Despite the negative impact of the coronavirus pandemic on the economy, the housing market has experienced a V-shaped recovery primarily due to historically low interest rates, the importance and value placed on the “home” which has been reinforced by the pandemic, and strong housing market conditions pre-COVID, which led to pent-up demand for homes. As new inventory came on to the market they quickly sold. According to NAR, unsold inventory is nationally sitting at a 2.7 month supply.

NAR Chief Economist Lawrence Yun shared a great presentation at NAR's Real Estate Forecast Summit on December 10, 2020. Below is a slide from his presentation.  Assuming the coronavirus pandemic can be controlled and ALL small and large businesses and their employees can get back to work at full capacity, we may actually experience this positive national forecast.

Rental Housing Trends

The latest numbers suggest that renters are re-evaluating their living arrangements and moving to larger apartments and homes in suburban areas. The movement trends are likely due to the economic challenges brought on by the coronavirus pandemic combined with pre-existing affordability challenges, particularly in big U.S. cities.

National Average Rent Trends

In most markets, monthly rental rates have trended up slightly.  The below chart shows the average monthly rental rates for the last 3 years. As we move into 2021 it is forecasted that rents will increase anywhere from 7% to 12% in suburban markets and hold steady or drop slightly in big city centers as renters flee to areas where they feel safe, have more space and housing is more affordable. 

For furloughed employees, there is some good news for renters and landlords hit hard by pandemic-related income loss. They may have access to some relief from the Federal Government in the form of the Federal Emergency Rental Assistance Program.

Federal Emergency Rental Assistance Program

A new law, signed December 27, 2020, provides for $25 billion in emergency rental assistance. But that money won’t be available right away.

In general, funds will be paid directly to landlords and utility service providers. If a landlord does not wish to participate, funds may be paid directly to the eligible household. These funds must be used for direct financial assistance, including rent, rent that is past due, utilities and home energy costs, utilities and home energy costs that are past due, and other expenses related to housing. For more information please go to https://home.treasury.gov/policy-issues/cares/emergency-rental-assistance-program.

CDC’s temporary eviction moratorium

Some residential evictions for nonpayment of rent can be paused through January 31, 2021, under an order issued by the Centers for Disease Control and Prevention (CDC). The CDC has announced that it will extend the moratorium until March 31, 2021.

For more information please go to: https://www.cdc.gov/coronavirus/2019-ncov/more/pdf/CDC-Eviction-Moratorium-01292021.pdf

Whether you are relocating employees who own a home or are currently renting the impact of the coronavirus pandemic will have a long-lasting effect on them and on your relocation program.

Is it time to re-evaluate your relocation policies to help address the new challenges and opportunities brought on by the worldwide coronavirus pandemic?

If yes, please contact Paragon Relocation Resources at 800-888-6060 or go to our website at www.paragonrelocationresources.com and ask for a free consultation.