Relocation Policy - Lump Sum

Providing your employee with a lump sum for relocation purposes is one of the easiest ways to manage a relocation. At first glance it seems simple: 1. Cut a Check to the employee 2. Send it to them. Sounds pretty simple but it is truly penalizing the relocating employee.

How are you penalizing the employee? When providing a lump sum to an employee the IRS requires that you withold at minimum the supplemental rate for taxes. When adding up Federal, OASDI, Medicare and State Taxes this amount is going to average around 38% depending on what state and city that you are in. At 38%, if your employee was going to be given $5000.00 for a lump sum they will only realize after taxes about $3013. Plus your company has to match the Social Security portion (OASDI), another 6.2%.

Is there a better way? Absolutely! Some relocation expenses are taxable and some are not. In most cases employees need their lump sum to assist with household goods moving. Well household goods moving is a non-taxable expense as long as the employee is meeting the IRS 50 mile rule. Therefore if your company pays for the invoice directly or if you have the employee front the money and submit the invoice for reimbursement, your company and the employee save tax dollars.

Some people will pose the question that the employee needs the money up front to do other things besides household goods moving or the employee does not have enough room on their credit card to pay for the household goods move. Or even some companies do not want the burden of trying to manage several payments.

So what is the solution. Relocation Benefits offers Expense Management. Through our expense management process we pay the vendors invoices directly up to the approved amount providing tax guidance to the employee throughout the entire process. If there is money left over and you elect to give the employee the difference, we will process a net check amount for withholding and submit the numbers to your payroll processing department and even send the check to the employee based on how you elect for us to handle this.

So what does this accomplish, this gives your employee an extra $2000 in buying power. This gives your employee a process for managing their funds and it gives your employee a counselor or moving coach to help with the organization of the move process.

So what does this cost? Based on your company doing less than 25 moves a year, this service will cost you $140.00 more than you are currently spending on a $5000.00 lump sum. If you are giving the employee $10,000.00 for a lump sum, your company will be saving money.

For more information call me today: 877-396-0132 or Andy@relocationbenefits.com