Moving for a new job can be exciting, but the logistics—and costs—of relocating can add a layer of stress. That’s where moving expenses paid by employers come in. These are costs your employer agrees to cover to help you transition smoothly into your new role and location. They might include expenses like transporting your belongings, temporary housing, or even helping with real estate fees.
In this article, we’ll break down everything about employer-paid moving expenses: Are they taxable? How do the policies work? What can you do to make the most of a relocation package? We’ll also offer practical tips to help you navigate this delicate process.
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What are employer-paid moving expenses?
Employer-paid moving expenses are costs a company covers to help employees who need to relocate for work. Companies pay for these expenses to make the transition smoother and reduce the financial burden of moving, whether a collaborator is transferring to a new branch, starting a new job, or filling a high-priority role.
For many employers, it’s about attracting or retaining top talent and ensuring the right person fills an important position—especially when the job requires specific skills or expertise that aren’t easy to find locally.
Many companies outline their approach to relocation assistance through a relocation expense policy. This policy specifies the types of costs they’ll cover and how the process works. Common expenses addressed in these policies include:
- Transportation costs: Flights, mileage reimbursement, or car shipping services
- Moving services: Professional movers, packing supplies, and storage units
- Temporary housing: Short-term rentals or hotels while you settle in
- International expenses: Fees for visas, work permits, or customs for shipping goods
Certain benefits might be capped or limited, like a maximum allowance for moving services or specific exclusions (e.g., costs for breaking a lease).
How does employer-paid relocation work?
Employer-paid relocation usually follows a structured process to ensure both the employer and employee are clear on the benefits, requirements, and timelines. However, it can vary depending on the company’s policy and the type of support offered.
Here’s how it typically works:
1. Offer stage
The relocation benefit is typically introduced during the hiring process or when discussing an internal transfer. At this stage, the employer outlines the relocation help they’ll provide, whether as part of a written relocation policy or a personalized offer. Common types of assistance include:
- Lump-sum payments: This is a one-time payment for relocation-related costs, often provided upfront.
- Direct payments: The employer pays service providers, like movers or housing companies, directly.
- Reimbursement: Employees cover costs initially and are reimbursed after submitting approved receipts.
2. Approval and planning
Once the offer is accepted, the employer formalizes the arrangement, frequently requiring the employee to sign a relocation agreement. This document may specify covered expenses, any caps or limits, and payment obligations if the employee leaves the company within a certain timeframe. Employers may assign a relocation coordinator or hire third-party vendors to assist with logistics, making the process smoother for both parties.
3. Managing payments and expenses
The method for covering costs depends on the type of relocation benefit offered. In cases where lump-sum payments are provided before the move, expense submission may not apply. However, for reimbursement-based setups, employees are typically required to keep detailed records of moving-related expenses, including receipts and invoices.
Employees should adhere to deadlines for submitting expenses and follow company policies to avoid payment delays. It’s also helpful to maintain open communication with HR or the relocation coordinator for support.
Are employer-paid moving expenses taxable?
When it comes to taxes, moving expenses paid by employers have undergone significant changes in recent years. Before the Tax Cuts and Jobs Act of 2017 (TCJA), many moving expenses were tax-deductible, and employer-paid relocation benefits were frequently non-taxable.
However, the TCJA eliminated the moving expense deduction for most employees, making almost all employer-paid moving expenses taxable as income. This means they should be included in your W-2 and subject to federal income tax, Social Security, and Medicare taxes.
There are some exceptions, primarily for active-duty military personnel moving due to a military order. These individuals can still claim a moving expense deduction and aren’t taxed on employer-paid relocation assistance.
How taxes are handled by employers
Many companies offer gross-ups to offset the tax burden on relocation benefits. A gross-up means the employer increases your relocation assistance payment to cover the taxes you’d owe, ensuring you receive the full benefit amount. For example, if they provide $10,000 in moving expenses, they might add extra funds to cover the taxes, so the total benefit is more substantial.
Unfortunately, not all employers offer gross-ups, so you may need to budget for taxes on the help provided by the company. Additionally, you’ll need to report these benefits on your tax return, and itemize them on your W-2 form.
Read this next: When and How To Pay Your Taxes: All the Answers Here
Tips for negotiating relocation packages
Securing a fair relocation package can make your move easier and less stressful. Here are some strategies to help you negotiate with your manager or HR.
- Research average relocation costs. Understand the typical costs of moving in your area, including transportation, housing, and incidental expenses. Knowing the numbers gives you a strong foundation for negotiating a package that covers your actual needs.
- Request a detailed breakdown. Ask your employer for a clear and itemized breakdown of the relocation package. This should include all covered expenses, limits, and exclusions. Understanding the specifics helps you identify any gaps and avoids leaving you with some unexpected costs.
- Ask about gross-ups. Relocation benefits are often taxable. To avoid a financial hit, ask if the company provides a gross-up, which covers the taxes on your relocation package so you don’t have to pay out of pocket.
- Clarify repayment clauses. Many companies require repayment of relocation benefits if you leave the job within a certain timeframe. Confirm these terms and negotiate adjustments if they seem overly restrictive, especially if the relocation involves significant life changes.
Even with employer support, costs can add up. Look for opportunities to save, like booking travel or movers during off-peak times, decluttering to reduce the size and cost of the move, and using employer-provided vendor discounts for moving services or temporary housing.
FAQs
Can a company make me pay for my relocation?
Typically, relocation expenses are paid by the employer as part of an offer or transfer package. However, in some cases, companies may require employees to repay the relocation costs if they leave the company within a specified time frame (often 12-24 months). This condition is outlined in the relocation agreement, and it’s important to understand these repayment clauses before accepting the relocation offer.
What is it called when a company pays for you to move?
When a company pays for your move, it's usually referred to as employer-paid relocation or relocation assistance. This can cover a range of expenses associated with moving, including transportation, moving services, temporary housing, and even travel costs. It’s commonly offered to employees who are relocating for a job, such as during a company transfer or for new hires moving to a different city or country for a role.
What is the relocation expense policy?
The relocation expense policy is a formal document outlining the benefits and expenses covered by an employer when they assist with an employee's move. This can include transportation costs, moving company services, temporary housing, storage, and other related costs. The policy will also specify whether the employer provides a lump sum or reimburses specific expenses, as well as any conditions. It is important for employees to carefully review these policies to understand what’s covered, how to claim expenses, and any potential repayment obligations if they leave the company prematurely.
What happens if I don’t use all the relocation money?
If you don’t use all the relocation funds provided, the company may ask you to return the unused amount, especially in cases where a lump sum was provided. However, if it’s a reimbursement-based model, unspent money might not be a concern.
Do companies require repayment for moving expenses?
Yes, many companies include a repayment clause in their relocation packages. This clause generally requires you to repay part or all of the relocation expenses if you leave the company before a specific period, usually one to two years. The agreement will specify how much you owe based on how long you stay. If you don’t stay for the required period, this repayment could be refunded in full, depending on the company’s policy.