Selective job markets often require that certain workers seek employment involving geographic relocation. Businesses may find that offering existing and new employees relocation services allows for higher quality recruitment from larger talent pools. Whether relocation is intrastate or cross-country, companies offering “relo” benefits must consider certain aspects of the moving processes and contracts. Transportation of household goods is a major component of “relo” benefits.
According to a nationwide study by CareerBuilder, 44 percent of U.S. workers in 2012 indicated that they would relocate under the right circumstances, for a career opportunity. According to the same studies, 32 percent of employers reported that they would be willing to relocate new employees in 2012. The following sectors have the most employers willing to pay “relo” costs for certain positions:
Given this workforce mobility trend, employers who are willing to pay relocation costs are addressing practical and logistical aspects of employee household goods transportation.
This article is not intended to provide tax advice or specific tax information regarding relocation costs and/or deductions. Any employer contemplating employee relocation should consult with a tax professional.
In general, however, amounts expended by an employer to facilitate employees’ job-related moves are deductible as ordinary and necessary business expenses. The employer may deduct such expenditures, whether they are paid directly to the household goods mover or reimbursed directly to the employee. For tax purposes, it is important for the employee to furnish detailed documentation to the employer and an accounting of the moving expenses.
Arranging or reimbursing?
Many larger employers have existing contracts with household goods movers, both interstate and intrastate, for employee relocation. In the event that an employer selects the carrier and enters into the moving contract, caution should be exercised to evaluate risk factors in the event that household goods are lost, damaged or delayed.
Both interstate and intrastate moves allow the shipper the opportunity to select among various levels of carrier liability. In some cases, insurance is offered, but in many cases, levels of carrier liability are determined contractually in the bill of lading and by the carrier tariff. The carrier may be legally liable for loss or damage occurring in the transportation of household goods, but significant limitations of liability are common in most contracts of carriage. Unless “a full value protection” option is elected by the shipper, most household items will travel with a “release valuation” which is commonly as low as 60 cents or $1.25 per pound.
Accordingly, while many employers or employees can elect a limitation of liability (and pay lower shipping charges in return), it is important that the various protection options are considered by all. Whether employer- or employee-arranged, the maximum liability of the carrier will be the declared value of the shipment, if proper elections are made and fees or premiums paid for valuation protection.
In an interstate move, the declared value is subject to rules issued by the Surface Transportation Board and carrier tariff. For intrastate moves within Nevada, fully regulated carriers are governed by the Nevada Transportation Authority. Carriers not subject to NTA regulation (such as packing and loading services and less-than-full-service household goods movers), are generally governed by the agreed-upon contractual terms. The employee may also decide to independently purchase transit coverage or obtain a homeowner coverage rider where available.
Reimbursement vs. lump-sum payment
If an employer elects to pay an employee directly for household goods relocation, it should be done in the form of reimbursement, with an actual dollar maximum and a documentation requirement. Lump-sum relocation incentive payments are discouraged because they are generally treated as salary and may be fully taxable to the employee.
By reimbursing an employee for actual moving expenses with a reasonable moving expense limit placed upon the household goods transportation, an employer is allowing an employee to select the carrier of its choice, select the nature of the service, and if a full service carrier is chosen, designate the level of valuation protection in the event of loss or damage. This often has the secondary benefit of insulating the employer from potential liability.
Under any circumstances, employees should obtain two or more estimates based upon physical inventory of household goods and possessions. These estimates may be binding estimates or non-binding estimates. A carrier that provides a guaranteed binding estimate of the total shipment charges, will generally will be held to it, if it is based upon a physical survey of the household goods. The actual cost, however, may be higher if it appears that the shipper has tendered additional household goods or receives additional services not identified in the estimate.
Employees or employers arranging household goods transport should determine in advance:
Insurance or valuation options;
What services will be provided, e.g., moving, packing, unpacking, loading, etc.;
When and how payment will be made;
Procedures for loss or damage claims;
The date range for delivery of goods.
No matter how smoothly the moving or relocation process goes, it can be a stressful experience for an employee. Eliminating as much stress as possible is beneficial to all and optimizes an employer’s ability to quickly take advantage of a geographically diverse workforce.
Ellen Jean Winograd is a shareholder with Woodburn and Wedge in Reno. Contact her at 775-688-3000 or through www.woodburnandwedge.com.