Going Somewhere? Navigating Employee Relocation Programs and Their Tax Ramifications

Employers often relocate employees to meet their business needs, respond to trends, and remain competitive. Many employers have corporate mobility programs and policies that allow them to identify top talent, place them strategically throughout the organization, and offer relocation incentives. To protect their sizeable investment, employers often require employees to sign relocation agreements in which the employee agrees to pay back all or a portion of the employer's expenses if they resign within the time frame set forth in the agreement. Learn more about this common benefit which can have a sizable tax impact on the relocating employee.

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• Relocation Benefits and Tax Gross-Up
  Recognize that, without a clear promise of company support, financial stress can add to the uncertainty of an employee’s being asked to relocate. A clear and comprehensive relocation package should cover travel expenses, storage, temporary housing costs, the costs of finding permanent housing, and the cost of moving services. Companies may offer a lump sum benefit or provide a customized plan based on the employee's unique needs and specific costs. Providing a tax gross-up to the employee is paramount in keeping the employee whole on receiving benefits, whether paid directly to or on behalf of the employee.
• Employee Relocation Agreement
  Consider whether the relocation benefits should come with a service requirement. This is more common where the employee is provided a bonus as a relocation incentive. The length of the required term of service can vary and is usually long enough for the employer to obtain an acceptable return on its investment. Typical terms of service range from one to three years.

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