Trends in Relocation

Major tax changes took place effective this year and relocation was significantly impacted. These changes are at the forefront of driving current relocation trends—and this has been verified through recent feedback and policy changes from the Relocation Center’s clients.

Although the tax impact is the most talked about current trend/change, there are other significant trends as well. Some other trends are as follows; virtual office impact, more relocations and smaller relocations, technology impact and finally, spousal employment assistance,

What are the factors impacting the design of relocation policies?

2017 Tax Reform Impact - One of the biggest occurrences in decades to impact relocation came with the recent tax reform. Here are the highlights.

• Moving and Storage costs are now taxable to the transferee

                 ▪ 50 mile plus test no longer applies

• 39 week and 1-year rules no longer apply

                 ▪ Final trip expense reimbursement
                 ▪ Relocation auto mileage reimbursement rate eliminated

Basically, Moving and Storage related costs, paid on behalf of the employee, are now taxable to that employee. Should the company gross-up those costs to bring the employee “whole”? This can be a large burden to the employee. In a recent ERC survey, over 60% of companies have already decided they will gross-up the newly taxable items. Regarding the 50-mile, 39-week and 1-year tests; should those just be scrapped? Even though these tests no longer apply for IRS deductions most companies have left them in their policy to encourage employees to complete their relocation in a timely manner. Likewise, since the mileage rate is eliminated, and any reimbursed amount would be taxable, should the company simply go with the standard business mileage reimbursement? All of these are significant factors that need to be considered by the corporation.

• Virtual Office - Twenty years ago, working from a remote or virtual office was something out of a sci-fi movie. But, today working remotely is incorporated into the business plan of many companies. It allows corporations to expand rapidly, can reduce costs and allows the organization to reach beyond borders with ease. Virtual offices also reduce the need to physically move people permanently. As this concept continues to expand it does have an impact on total relocation numbers.
• More levels of staff being relocated - A factor working to increase the number of relocations is that companies are willing to relocate all levels of employees, not just the senior executive. Today, the modern corporation is hiring employees directly out of undergraduate or graduate school and offering relocation benefits, something necessary to remain competitive and attract the best and brightest.
• Increased technology - Just think how fast technology has changed everything we do in the last ten years. Stay tuned because the next ten will bring an equal amount of technology change and relocation companies must meet the demands that will come. What does this mean for you?
• Spousal Employment Considerations - There is an increase in the need to offer Spousal Employment Benefits to employees as most families have two wage earners.
• Limited Benefit/Lump-Sum/Allowance - A growing trend is the increased volume of Limited Benefit Relocation. This has been a growing segment for nearly a decade, and the previously mentioned tax reform is expected to have a further impact. However, companies must be careful not to overburden their employees with having to select a service provider and manage the process. The typical employee relocating has little industry knowledge, price understanding, etc.

Exciting Times

Companies are facing challenging times with the tax reform and other changes in the industry. They are forced to consider alternative approaches. Given the challenges with which we’re currently faced, all stakeholders have an integral role in achieving it.

Is your Relocation Policy keeping up with the trends?

As we explore relocation trends and challenges with our clients, it’s clear that many “traditional” practices are on their way out, while some practices are just emerging. Companies and their relocating employees have little experience with them. Contact your Relocation Center representative for more details and solutions on current relocation trends.