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Relocation - A Necessary Inconvenience Or An Inconvenient Necessity?

Are you an owner operator with a good management candidate living hours away, or a VP of Operations in a multi plant organization thinking about promoting and transferring a successful employee? Perhaps you're contemplating moving to a different part of the country for career or family needs.    

Although most companies in our industry don't have a formal relocation policy, as the temperature increases many professionals consider relocating. Approximately 50% of moves take place during the summer to minimize family disruption with school age children, says Sanderson Doyle, of Nelson Westerberg, a Chicago Atlas agent. So now is the time to explore this topic.

Real Estate Woes
Real estate can turn a routine move into a stressful event. If the transferee is renting there may be a lease break penalty and loss of security deposit at departure, plus monies needed for deposits at the destination. But if there is a home sale it's a different process. Not only is the real estate brokers' commission an expense, but also until the home is sold there can be two monthly payments to contend with.

A $175,000 home will generate about $13,000 in sale closing costs (brokers commission and attorney fees), and about $3000 (1.5 to 2% of purchase price) in purchase closing costs. A common question regarding the relocation of a home owning new hire is "who (employer or candidate) pays the closing costs?

Like most ambiguous negotiable questions, "it depends". Does the candidate need to move for family reasons; does the employer need a general manager who can turnaround an unprofitable plant; does the employer need a plant manager who can reduce productive labor a few points?

Financial Options
There are some financial options that can be considered to make the move an economic win-win. 

  • The employer reimburses the real estate commission while the transferee accepts the tax liability for the reimbursement.
  • Employees can forfeit an arbitrary portion of first year bonus opportunity to off set any reimbursement of closing costs.
  • The employer and candidate could split the closing costs, however, the candidate should negotiate for a 6% broker's commission.
  • Consider using a third party relocation company to orchestrate the process. They can restructure the broker's commission, monitor the agent selling activity, and even use an I.R.S. allowable procedure that can eliminate the need to "gross up" the reimbursement.

Relocation Tips
Following is a list of common terms, their meanings and/or things to consider when making a move for both the moving employee and the company moving them.

  • Offer (or promotion) letter
    Spell out the basic details in a letter. There should be some language regarding repayment of the expenses incurred by the employer should the transferee resign within the first twelve months following the move.
  • Lease break penalty
    Instruct your key employees to include a "transfer clause" into their lease when they move, renew a lease or get transferred by your company.
  • Pricing a home
    Susan Levy, president of Relocation Connection, an Atlanta relocation company recommends having several real estate brokers provide a market analysis. Listen to the selected agent's suggestions on improvements, giving allowances to a buyer, and elimination of clutter in and around the home.
  • Household goods transportation
    This is a non-taxable item if the employer pays the mover directly. Get three estimates and consider a moving company that lets you pack the goods, charging only for the move itself. If the transferee has minimal goods, orchestrate a rental truck or trailer -
    perhaps some plant employees can be hired for the unloading stage.
  • Temporary lodging
    A home renter may only need a motel for a week, but a homeowner will probably need at least two months. Kitchenettes minimize food expenses. If the laundry has lodging accounts perhaps a trade-out is available. Funds provided the transferee for this expense are considered income (taxable).
  • Day of travel
    If a third party mover is chosen for the final move, their timetable of travel may be longer than the transferee since they typically fit two or three customers into the same truck.
  • Goods in storage
    A moving company will assess an additional charge to store goods - then deliver them.
  • Return trips home
    A home selling transferee will need to return home about twice a month to see the family (a happy employee is a productive employee) and monitor the home sale. If distance prevents driving, research the best airfares - "back to back" ticketing, creative airport locations and advance ticketing.
  • Spouse income
    Often the ideal transition is a temporary part time job for an employee's spouse while they get acclimated to the new location. The hiring employer should inquire about their needs and provide a list of contacts.
  • Lump sum payment
    Many employers prefer to provide an arbitrary amount of funds, sometimes in two or three installments. They can be used for a portion or for all related expenses. The figures committed to should be in "net" terms as the government considers this taxable income.

When all else fails remember to put yourself in the other person's shoes. As the employer, think about the emotional stress of moving and, as the candidate, spend your employer's "money" as if it were your own.

Craig Lloyd represents, a management search firm specializing in the industrial / institutional laundry industry.  He holds a degree in Industrial Relations from Rider University and has been a Certified Personnel Consultant since 1979.

Quick Rinse - News From Around The World

Image First Picks Garment Tracking For Clearwater Facility

CLEARWATER, Fla. — Healthcare supplier of textile rental and laundry services, ImageFIRST™ Healthcare Laundry Specialists, has selected the Fujitsu WT-A511 Ultra High Frequency (UHF) RFID tags and Positek RFID to provide garment tracking solution at its Clearwater facility.