When hiring new employees out of the area or transferring existing workers to another office out of town, companies will often offer a relocation package. This can cover common moving expenses, assist with the sale of your home, and even pay for temporary housing in your new location. The type of relocation package--or RELO -- you are offered may depend on the type of job, the level of your position, and your seniority with the company. Before accepting any RELO offer, it is important to do your research, know what you require in your package to accept the job, and thoroughly understand the details of the agreement you make with your employer.
What's usually covered?
The extent of the benefits offered to you by any company will vary, but according to a survey by Atlas Van Lines, 65 percent of firms offer relocating employees full reimbursement, usually through a third-party RELO company that handles everything on behalf of the employer. The following are some major perks you can expect to receive:
- Moving costs. Most companies will cover all moving-related expenses, such as moving labor, boxes and materials, transportation costs, and even auto transport. This is usually the bare minimum offered in a relocation package--at the very least, you should not have to pay out of your pocket to move your family and your belongings to your new city.
- All-expense paid trip to look for housing. Companies will often pay for you to fly out or travel to your new potential city before making the move. This way, you can check out the area and find out if it is a suitable home for you and your family. During this trip, travel costs, lodgings and other incidentals should be covered.
- Paid temporary housing. If you are unable to find a permanent home right away or are only relocating for the job temporarily, your company may pay for your hotel or rental for a certain period of time.
- Paid closing costs. Some companies will offer you incentives to purchase a home in the city by paying some or all of your closing costs. Depending on your desirability as an employee, your employer could also buy down the interest rate of your new home's mortgage or offer you a loan at an exceptionally low rate.
- Assistance selling your home. One of the major reasons employees are reluctant to relocate is the unease surrounding selling a home after the real estate crash. A relocation package may offer you aid when selling to calm your apprehensions. This can include providing a choice of real estate agents, and the payment of fees, closing costs and real estate commission. This can be a great help in a time of lackluster economy and a dismal housing market.
- Covering the loss. With the real estate market in a slump, you may be forced to sell your home for less than what you owe, especially if you have refinanced your mortgage or taken out an equity loan. In this case, your company may offer to cover your loss. After a buyer makes an offer, you will sign the grant deed over to the third-party RELO company, and they will sign the contract with the buyer. Some packages may also offer what is called a "perceived loss on sale"--if you don't owe more than you will get for your home, but feel you could sell the home for a greater amount at another time, you could be compensated for the perceived loss of value.
- Guaranteed Buy-Out. If you are an especially valuable asset to the company, you may be offered what is called a "Guaranteed Buy-Out". A GBO eliminates all risk if you cannot sell your home in a certain time period. The RELO company will hire two appraisers and buy your home directly for the average of the two amounts. If the home is unable to be resold for the amount the company pays for it, they eat the loss, not you.
What you should do
- Negotiate your benefits. Before signing any contract, do your homework and be confident about what you feel you are entitled to when accepting your new position. Relocation benefits are like a salary--they are negotiable. What are the conditions of your package? Will specific expenses be paid in full, or will you receive one lump sum? Will you be reimbursed later for incurred costs, or will the company pay them up front? Even if your RELO package covers everything you need, if you don't have the means to pay it initially, reimbursement may not be a suitable option for you.
- Consider tax deductions. Even if all of your relocation expenses aren't covered by your employer, they may be tax deductible. If you are a new employee moving more than 50 miles away, expected to work full-time for at least 39 weeks in the first 12 months of relocation, you may be eligible for tax breaks. Expenses that could be tax-deductible include transport of household goods and gas mileage.
- Research cost of living. While the RELO package may seem quite attractive at first, when you factor in the cost of living in your new city, you could change your tune. If you are moving to a location with a much greater average cost for rent, real estate, groceries, utilities, and entertainment, you may realize the opportunity isn't as valuable as you thought. Make sure your proposed salary will still allow you to live comfortably in your new home by researching the local economy. Talk to local residents or utilize an online living cost calculator like this one at Movers.com.
- Visit first. Before making any final decision in long-distance relocating, it's imperative to visit first. Many companies will pay to fly you out to your potential new home so you can scope out the scenery, check out available housing options, and decide if it's right for you and your family. Make sure you visit any possible neighborhoods, view any apartment considerations first-hand (never trust photos of any unit online--always physically look at it before renting) and consider the entertainment options in the area. How important are your leisure activities to you? Will this new region suit your desired lifestyle? Can you be happy here? If you have children, research the crime rates and quality of schools in your possible new home. There are many things to consider before moving, and a prior visit (or several) is the best way to get informed.
- Consider your spouse. Relocating for a job when you are single is simple--there are no one else's opinions to consider. However, if you have a spouse or significant other that will be making the trek with you, you will have to consider their feelings as well. Will they be giving up their career to follow you? Some RELO packages will offer career counseling or placement services for your spouse, which may make the transition a little easier for your partner.
- Get it in writing! Once you have negotiated your relocation benefits to your desires, thoroughly researched your new city to ensure its right for you, and gotten your family on board, it's time to sign the papers. An employer can verbally promise you benefits that you will never see unless they are documented. Don't make that mistake, and make sure you get every aspect of your offer in writing!