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7/27/2019 Relocation Fact Sheet
1/4
7/27/2019 Relocation Fact Sheet
2/4
immediatelyfreeandclearoftheoldhomeandis
abletobuyanewhome,relocatethefamilyand
assumehisorhernewpositionwiththeemployer.
Thethird-partyrmassumestheresponsibilityfor
marketingthehome,sellingandclosingthedeal
andprovidingtheemployerwithdetailedprogress
reportsintheinterim.Theseservicestypicallyare
veryprofessionalandefcient.However,theycanbe
costlyandareusuallyreservedforseniorexecutives.
Relocation assistance or job-seeking assistance
for spouse. Intodayseconomy,maintainingthe
spousesincomelevelcanbeanimportant
considerationforanewhirewhoisconsidering
relocation.Manycorporationsareofferinga
spousejob-seekingassistancethroughaqualied
outplacementagencythatcanassistthespouse
withhisorhertransitiontothenewlocation.The
outplacementrmtypicallychargesaone-timefee
andprovidescounseling,rsumwritingandjob-
seekingconsultationtothetrailingspouse.This
canbeaveryvaluablerelocationbenetforthe
relocatingfamilyanditisoftenavailableatafairly
lowcosttotheemployer.Inadditiontotheeconomic
valueofthisbenet,thenewhireisusuallyvery
impressedbytheemployersempathyandcaring
attitudetowardhisorherfamily.Itisimportant,
however,thatthenewemployeravoidmakinga
commitmentofre-employmentforthespouse.The
employermustbecarefultodifferentiatebetween
offeringjob-seekingassistanceandguaranteeing
spouseemployment.
Destination assistance. Manyrelocationcompanies
andlargerrealtorsofferareacounselingand
homendingassistanceprograms.Thesehighly
personalizedprogramsareavailableforasmallatfee
oranhourlycharge.Therelocationagentestablishes
contactwiththeprospectivecandidatepriortothe
nalinterviewtrip.Theydiscussthecandidates
housingneeds,familyconsiderationsandnancial
concerns.Theagentsendsthecandidatebrochures
onthearea,schoolsystemscores,mortgagetypes
andrates,costoflivingcomparisonsandotherhelpful
information.Theagentisavailableforacustomized
areatour,includingageneralcommunityoverview
andtoursofhomesinthecandidatespricerange.
Althoughthecandidatewillnotpurchaseanewhome
onthistrip,heorshewillconcludethetripwitha
thoroughunderstandingofthenewcommunityand
thelocalhousingmarket.Thesedestinationservices
canbeinvaluableinmakingcandidatesandtheir
familiesfeelcomfortablewiththenewlocationand
canovercomethestressofrelocatingtoacommunity
withahighercostofliving.
Mortgage assistance. Amortgageassistance
programistypicallyofferedbyarelocationrmand
assistsprospectiveemployeesinpre-qualifyingfora
loanorinqualifyingforaspecialratemortgage.This
servicefast-trackstheapplication,qualication,and
closingproceduresandprovidesanexpedited
mortgageprocess.Professionalcounselingonthe
varietyofmortgagetypesavailableinthelocal
communityallowsprospectiveemployeestomake
informeddecisionsaboutaffordablehomeownership
inthenewlocation.Toensurethatprospective
employeesgettheratetheywantwhentheyare
readytobuy,theservicesofferavarietyofrate-lock,
oatandrateprotectionoptions.Pre-qualication
andrateprotectionmeansthatinasellersmarket
prospectiveemployeeswillhaveabetterchanceof
beingtheselectedbuyerbecausetheirnancingis
alreadyguaranteed.
Employer-owned housing. Inthecaseofan
extremelyexpensiverealestatemarketand/ora
marketwhereexecutivehousingisveryscarce(such
asveryasmalltownorresortcommunity),the
employermaychoosetopurchaseahomefortheuse
oftherelocatingexecutive.Inthiscase,theemployer
purchasestheproperty,usuallyclosetotheplaceof
employment,whichisownedbytheemployerandis
availablefortheuseoftheexecutiveandhisorher
New Hire RelocationTrendsandOptions
7/27/2019 Relocation Fact Sheet
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family.Theemployermaintainsownershipofthe
residenceandtheexecutivelivesthereduringhisor
heremployment,typicallyrent-free.Thecash-
equivalentofthisbenetmustbeestimatedand
declaredasincometotheexecutive.
Housing allowance. Inveryhighcostofrealestate
markets,employersmayopttogivenewly-hired
executivesanongoinghousingallowancetooffset
theincreasedcostoflivingfromthepriortonew
location.Thisgenerallyrunsfrom$1,500to$5,000
permonthandisusuallylimitedintermtotherst
onetothreeyearsofemployment.
Income tax implications. Frequentlyoverlookedis
thehiddencostofvariousrelocationoptions.The
mostcostlyoption,intermsoftaxliability,isto
simplygivethenewemployeearelocationcash
bonus.Thesecashbonusescanbesubstantialand
arefullytaxedasincomebytheIRS.Manyofthe
relocationbenetspreviouslyoutlinedarealso
viewedascashcompensationbytheIRSandwill
betaxedassuch.Theemployermuststatethese
benetsonthenewemployeestaxform1099at
year-end.Theemployeewillberesponsibleforpaying
incometaxesonthecashvalueofmanyrelocation
benets.Manyemployersarechoosingtogross-
upthenewexecutivescompensationbyproviding
aone-timereimbursementequaltotheamountof
taxesontherelocationbenets.Clients,aswellas
thenewemployeesthemselves,shouldbeadvised
toconsultwithataxcounselortodeterminethetax
impactofrelocationbenets.Certainrelocation
benetsaretaxdeductiblebytheemployee.New
employeesshouldbecounseledtoconsultatax
attorneyortaxspecialistfollowingayear
inwhichtheyhavechangedresidences.
Summary
Theserelocationbenets,standardandembellished,can
beanexpensivecommitmentfortheemployer.Theyare
agoodinvestment,however,inencouragingtopquality
candidatestoconsiderrelocating,especiallytohighcostof
housingareasorinadownrealestatemarket.Inorderto
protecttheinvestmentinthenewhire,manyemployersare
choosingtotierelocationbenetstocontinuedlongevity
inthenewposition.Languageisfrequentlyappliedto
relocationpoliciesandemploymentcontractsstatingthat
relocationbenetsarerepayableatonehundredpercentif
theemployeeleavesofhisorherownvolitionwithinthe
rstsixmonthsonthejob.Therepaymentisthenprorated
sequentiallythroughthersttwoyearsofemployment
(75percentrepayableiftheexecutiveleaveswithintherst
year;50percentrepayablewithinthersttwoyears,etc.)
Addingsuchlanguagetoarelocationpolicyprotectsthe
employersinvestmentinthenewhireandencouragesthe
newexecutivetobealong-termemployee.
Relocation in a fagging economy
Manyofourclientshavestruggledinthelastyearto
landtheircandidateofchoicebecausecandidatesare
experiencingdifcultyinsellingtheircurrentresidence
andrelocatingtoanewcommunity.Not-for-prothiring
organizationsarebecomingmorecreativeinwhatthey
candoshort-termtoassistcandidatesinrelocationefforts.
Traditionalrelocationpackagesofferingamovingallowance
withshort-termtemporaryhousingarenolongeradequate
toenablecandidatestoestablishnewresidenceswithout
sellingtheirexistinghomes.Whileorganizationstypically
havemoreexibilitywithrelocationpackagesforCEOs,
hiringorganizationstodayneedmorecreativepackages
forC-suiteandvicepresidentpositionsingeneral.The
followingoptionshavebeenusedbynot-for-prot
healthcareorganizationstomovecandidatessuccessfully
sincetheeconomicdeclineofOctober2008:
Movement of household goods. Hiringorganizations
arefootingthefullbillforrelocationcostsincluding
packing,unpackingandstorage.Mostaregrossing
uptheseallowancessothereisnonegativetax
impactontheindividual.
7/27/2019 Relocation Fact Sheet
4/4
Sign-on bonus.Sign-onbonuses,rangingfrom
$20,000to$100,000,arebecomingmuchmore
prevalent.Theseallowancesgenerallyaretiedto
longevityatthehiringorganization.Shouldthe
candidateresignvoluntarily,aproratedportion
ofthesign-onbonusisrepaidtothehiringentity.
Temporary living.Theincreaseindurationof
temporaryhousingsubsidiesisthesinglegreatest
changesincetheeconomicdownturn.Thetraditional
sixmonthsisnow12monthswithoptionsupto36
monthsbasedonboardapprovaliftheindividuals
homedoesnotsellinthattimeperiod.Intheevent
oflongertimeframes,additionaltermsareapproved
insix-monthincrements.
Travel allowances.Travelallowancesforcandidates
tovisittheirfamilieswhohaventyetrelocatedare
nowfullypaidforuptosixmonthswithoptionsup
tooneyearifthehomehasnotsold.
House-hunting trips.Thestandardallowanceistwo
familytrips,uptothreenightsandfourdays.We
haveseenthisextendedtomakeathirdtripanoption.
Ongoing housing allowances.Inhighercostoflivingareas,wehaveseenanincreaseinongoinghousing
assistanceprograms.Theseincludeasetmonthly
allowanceforuptoveyears.Inonevery
sophisticatedorganization,ahousingallowanceis
allocatedovernineyears,decliningproportionally
annuallysothattheindividualsbasecompensation
wouldincreaseduringthatsameperiodtooffsetthe
ultimatelossofadditionalhousingassistance.(This
isataxablebenettotheemployee,butdoesnot
impactestablishedbasesalaryranges.However,thetotalcompensationpaidtothenewhireusuallydoes
notexceedtheoverall90thpercentileofmarket
valuefortheposition.)
Bridge loans. Bridgeloanstoallowcandidatestobuy
andestablishthemselvesinanewprincipalresidence
areincreasing.Theseloans,generallyupto$250,000,
arerepaidinfull30daysaftertheformerresidence
issold.
Mortgage assistance programs.Longer-termloans
arealsobecomingavailablewithalowerrateof
interesttoberepaiduponthesaleofthenewhome.
Thehiringentityreceivesaproportionalshareofthe
equityappreciationandispaidinfullatthetimeof
thesalefortheinterestthathasbeendeferreduntil
thattime.Shouldanindividualleavethehiring
organization,theloanandappreciationaredue
withinsixmonthsoftermination.
Real estate commissions and closing costs. More
andmoreorganizationsarepayingfullrealestate
commissioncostssothatthefullvalueofthehome
isrealizedbytheselleronceitissold.Inaddition,
weareseeingclientspayloanoriginationfeesofup
to1percentoftheloanvalueonthenewresidence,
aswellasallothercostsassociatedwiththesaleof
theoriginalhomeandthepurchaseofanewhome,
includingappraisals,cityandcountytaxes,title
insurance,titletransfer,etc.Onceagain,thisisa
taxablebenettotheindividual.
Whilewearenotseeingnot-for-protorganizations
purchasehomesonaregularbasis,itishappeningin
someexceptionalcases.
Clientsareusingacombinationoftheoptionslisted
abovetoattractandsigntheircandidatesofchoicein
thesechallengingeconomictimes.Thoseitemsformerly
consideredembellishmentsaremoreandmorebecoming
thenorm.Wewouldbehappytodiscusstheseandother
executiverecruitmentoptions;pleasecontactElaina
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