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Dear Workforce What Constitutes An Appropriate Relocation Package Today

For executives, expect to pay more than $45,000.
April 15, 2001
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Related Topics: Relocation Management, Dear Workforce
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QDear Workforce:

    Our Montana-basedcompany is opening an East Coast office and is trying to convince some of ouremployees to relocate to Virginia. We also will be hiring some people inVirginia who will need to train for six months in Montana. Therefore we need todevelop both permanent and temporary relocation packages. The average pay forthe employees relocating will be about 60K. In this day and age, whatconstitutes an appropriate package?

- Lucy, Human Resources Manager,liability protection company, Missoula, MT

Dear Lucy:

    For executive-levelemployees it is not uncommon to spend in excess of $45,000. Gross-up calculationwould probably add another $15,000 or so to that number, depending on criteria.Interim living, home finding and day(s) of move are generally handled in a lumpsum.

    Typical calculationsinclude 30 days of interim living for homeowners with a seven-day house huntingtrip and two days for final move and 15 days of interim living, a three-dayhouse hunting trip and two days of move for renters. This figure is calculatedby taking an average of the mid- to higher-range hotel/apartment costs in theproposed destination - probably somewhere around $90 per night in Virginia.

    Meals are calculatedon a per diem of $25 per day per person. During house hunting and day(s) ofmove, meals' per diem would expand to include the number of people affected.Generally included in the lump sum is 10 days of car rental at approximately $44per day for homeowners and five days for renters. Transportation costs for househunting, interim living trips home and day(s) of move should be paid separatelyfrom the lump sum because airfares fluctuate and would make it impossible to befair to the employee or the company. All expenses associated with interimliving, house hunting and day(s) of move are considered taxable income to theemployee and must be grossed-up.

    Household-goodsshipment will vary depending on the size of the home and also should be handledseparately. This is not considered taxable income to the employee and will notaffect gross-up.

    It is probablyunnecessary to include Guaranteed Purchase Offers on employee's homes. Thecurrent trend is to require employees to sell their homes on the open market.The homes will then be closed as Amended Value Sales, which will eliminate anygross-up since payment of closing costs no longer would be considered taxableincome to the employee.

    Finally, for the toptier, it is customary to include one month's salary as a miscellaneousrelocation allowance to be used at the employee's discretion in the newlocation. This is typically taxed at time of payment and, therefore, does notrequire gross-up.

SOURCE: Linzi Eisemann of Directmoving,St. Petersburg, Fla., and Margaret McCurdy of AmeriCorpGlobal Relocation, Dallas, Texas, Feb. 7.

The information contained within this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or legal opinion. Also, remember that state law may differ from federal law.

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 The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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