Corporate relocation comes with a lot more organization when compared to a personal move. One of the things to take into consideration is choosing between getting a relocation bonus or a relocation reimbursement. To make this decision you would first need to know what is the difference. As well as what are the pros and cons of each. This article can give you that information. But, it is important to reach out to a professional before you solidify your decisions.
Relocation bonuses can go by a variety of names with the most common being cash allowance, lump sum bonus, etc. What it means is that the company can provide a fixed sum of money for relocation. This sum can be based on the following factors:
This sum of money is given to the relocating employee up front. Plus, they are in charge of how it is spent. However, the company can aid them when it comes to helping them find affordable moving companies as well as temporary accommodation. But, overall, the employee has to figure out how much goes where. This can be tricky for the employer if the employee is inexperienced with the moving process. And/or does not know how to handle the relocation bonus wisely, as in they are just “bad with money”.
Plus, there is also a relocation bonus tax that can come to play.
Relocation bonus is taxable and there are a few things that make it qualify to be so. Such as it meets criteria set by the IRS. This can be that the employee relocates at least 50 miles from their current home, they work full-time for about 39 weeks in the first year after relocating. And it is at the start of their new job.
Regardless of which type the employer chooses to use, relocation reimbursement or bonus, relocation tax gross-up and relocation taxes are things to consider to help cover the cost of the taxes so that the employee does not have to. It is best to reach out to a professional to get all the information. Figure out the figures before locking down a type. This can help the employer decide which type will be more beneficial to their company and employees.
Relocation reimbursement is different to relocation bonuses in that it requires the employee to pay for all their relocation expenses with the knowledge that they will be reimbursed by their employer. However, it may not be the full amount. The employer may cover all of the expenses if it fits within their budget, but the employee and the employer would have to have a sit-down conversation to figure out what is the fair amount for a reimbursement package.
Relocation expenses reimbursed can be moving costs, fuel, utilities (disconnecting and reconnecting) vehicle wear and tear, house hunting, breaking the lease, packing, moving costs, etc. The sit-down chat will help both parties nail down what will be reimbursed.
The issue that can come out of this method is that the employee will have to keep track of the receipts and give them to the employer. This can become confusing for the latter if they have more than one employee that is relocating. Plus, the employer would have to make sure that they are not overpaying or underpaying what was agreed upon for the relocation package.
Another bigger issue is that some employees do not have the funds out of their pockets to make the move in the first place. Since relocation reimbursement means that they would have to pay out first and then get a percentage back it becomes an issue when they cannot pay out first. This may lead to the company not being able to relocate their employees to their new office homes since the employee cannot pay for it upfront.
This is another reason to speak to a professional to make a plan that benefits both parties and gets the employee to their new work home.
And to quickly answer the question: “Is relocation reimbursement taxable?” Yes, it is.
While we are narrowing down the differences between relocation bonuses and relocation reimbursement when it comes to employee relocation, we can go deeper into the pros and cons of both methods.
As you can gather the pros and cons of relocation bonuses are interchangeable. An employee having control over the spending can be good if they are good at it. But, it can go wrong if they use the funds poorly. Therefore, it would seem that relocation bonuses would work well with employees that are move and money savvy so as not to run out of funds.
Bonuses are paid upfront while relocation reimbursements (not fully depending on the company, agreement, and move) are paid after the move. So the pros would be:
The best course of action would be for an employer to speak to a professional about which method is best for the employee. It would also not hurt to ask the employee which method they can afford: bonus: lump sum upfront or reimbursement: money afterwards? Relocation taxes also have to be considered when deciding which method to use. Furthermore, knowing how to get the funds to the employee in the first place would also be beneficial.
But, if you are an employer, take some time to go through the facts, costs, numbers, etc. And make sure that your choice not only benefits your company but helps out the employee as well. At the end of the day, you are the one asking them to relocate for work purposes.
If you are an employee, maybe you can research the costs of moving companies, house hunting, cost of living in the new place etc. to aid in your employer figuring out what to do, certainly so if they are at a standstill. Do not force anything, just merely suggest. If you do not have the funds to make the move for reimbursement, make it clear to your employee. But, be patient and kind.
Deciding between a relocation bonus or relocation reimbursement may require you to weigh up the pros and cons of both concerning your company. A standard as you can expect. Weighing up the pros and cons is not only involved in business relocation, and personal ones too. However, for the latter, you can skip past the weigh-up by working with Shyft, the world's first tech-driven moving platform. This is because there are more pros than cons since Shyft will do the whole organizing of your personal relocation for you. From finding you a moving company to making sure your utilities are set up, and more. So while you are planning your employee’s relocation, you can rest assured that Shyft has your personal move organized.
Check out our site to learn what more we do, as well as to get in touch. You can do so by filling out the short, safe, form on the front page. Or by downloading our free and secure app, Shyft Next on iOS or Android. Either way, the app is needed for the Shyft moving progress. Once we have your moving details we will send a Move Coach to reach out to you. This is done through the Shyft Next app as a video call, so they will not be coming to your current home.
Furthermore, this call happens only at the time that you state it to take place. Therefore, you would be saving your free time by not waiting around for your Move Coach to call. During this call, you will speak to them, and it is also during this initial call that they get to work.
You will be asked to give a virtual tour of your current home. This is, so they can create your inventory list right there and then without you needing them to come over. When the overall call is finished you can expect this inventory list to be sent to you via the Shyft Next app within half an hour. This list is 95% accurate and with the app, you can bring it up to 100%. You can remove items, add others, and leave notes. When your list is at 100% with your 100% satisfaction you send it to your Move Coach.
When we have your 100% inventory list we will use it and only your moving details (no personal ones) to find you a moving company. We use this information to source a few moving quotes, three or more, from our solid network of vetted, trusted, and Shyft-verified moving companies. Each quote is from a different moving company and all the quotes will be sent your way along with information about each mover.
What is more, is that all the quotes are fixed. There are no hidden costs, what you see is what you will pay even if your inventory list were to change. You can compare the quotes, services, and information from all the moving companies on the Shyft Next app to save you more time. When you have made your informed decision you can let us know. We will lock your moving company of choice right away.
Not only are we here to help create your inventory list, and help find you reliable moving companies, but we are also on call to you seven days a week. You can give us a ring or text whenever you have a concern. Or what to check in on what is happening. We want to take your whole relocation process from when you get in touch, to being in your new home.
And, we have some other services up our sleeve such as our Home & Lifestyle, online marketplace. If you are looking to buy products, then give our marketplace a chance. There is a range of items from mattresses, office supplies, and furniture that will be delivered directly to your… new home. Not the current one you are in, but the one you will be in. Not only are there products on our online store but there is also a range of services, from dog walking, storage, and mortgages, to name a few.
All that you see in our online store comes with a discount. Saving you money, time, and stress levels.
Something else we offer is corporate relocation. Sending funds to your employees while they are doing their work relocation is more safely and easily done with our Shyft Card. It lets you keep track of how the funds are going. Furthermore, you can send more funds to your employees directly. Book a demo to learn more and give it a try. Corporate relocation with relocation bonus or relocation reimbursement does not have to be a stressful event when using a Shyft Card.