|
Relocating in a hurry
|
 |
March 22, 2000: 12:22 p.m. ET
Do your research and use your bargaining power to negotiate package
By Staff Writer Shelly K. Schwartz
|
NEW YORK (CNNfn) - You've accepted a job with a West Coast start-up promising hefty stock options and more-than-adequate pay.
Or maybe your company is gearing up for its international push, and the boss tapped you to spearhead the effort from Madrid.
Whatever the reason for packing your bags, experts say you'll need to find out what should be negotiated into a relocation package - before it's too late.
"Sometimes the employer doesn't tell the employee what to expect," said Dennis Taylor, a relocation consultant with Runzheimer International in Rochester, Wis. "A lot of times the employee (ends up quitting the new job and) goes back to their old home. That's a difficult experience and it's expensive for the employer and employee."
Look before you leap
More than 1 million heads of households make a job-related move each year.
The Employee Relocation Council in Washington reports the average cost to a company that relocates a homeowning employee is just over $50,000. Recruiting a new worker who rents a home costs a lot less -- about $11,500.
Cris Collie, executive vice president of the ERC, said that's because many relocation packages these days include a real estate sales assistance component.
"Most of the major companies out there will offer to purchase your old home for you if you fail to sell it within 30 days-to-90 days," he said. "What they are interested in doing is getting that employee into their new job quickly so they can be productive immediately. By agreeing to purchase their old home, that means the employee won't have to worry about it."
Nearly 70 percent of companies today, including IBM (IBM: Research, Estimates), Dupont and Kraft Foods, offer such programs. They agree to purchase a new employee's old property at fair market value (based on professional appraisals) if he/ she is unable to sell it on his/her own in one-to-three months.
The companies themselves don't actually own the property. Instead, they contract with a third-party purchaser, such as Prudential or Cendant (CD: Research, Estimates), to handle the real estate sales assistance for them.
Smaller companies don't always  have the resources to offer such programs. But that doesn't mean you shouldn't ask.
Many companies will still agree to fly you and your family out to the new city several times on house hunting excursions - all expenses paid. Many, too, pick up the tab for temporary living until you find a home you like. And in the worst-case scenario, the company should at least agree to pay your shipping, packing, unpacking and storage expenses.
Keep in mind, experts say, that no matter how good the relocation package is, the move itself may not be.
"There are so many expenses and things to consider when you're relocating," said Shari Steiner, a long-time real estate agent and co-author of "The Complete How-To-Move Handbook." "One of the biggest reasons transfer offers are turned down is because of the working spouse. Professional couples have to think about that, too."
If you decide this new job is indeed in your family's best interest, just remember the ball is in your court. In today's tight labor market, employee bargaining power is at an all-time high, and you should be able to strike quite a lucrative deal with the recruiter.
For example, try to include in your contract a provision for miscellaneous expenses that will cover all incidental costs related to the move. That might include auto registration fees, appliance hook-ups. Not sure how much to ask for? Most companies agree to one month's salary.
Negotiations with your employer should also include some discussion of closing costs. The ERC said most companies will reimburse all "normal, required" costs associated with the purchase of your new home at the destination location, but they generally restrict coverage to transferees that were homeowners at the old location and/or have attained certain job levels.
To keep it simple, lots of companies these days are using the lump-sum approach to cover the entire cost of a move, as an alternative to reimbursing relocation expenses on an itemized basis. Before you sign one of these contracts, go over it carefully to make sure it covers all the expenses you want covered.
"Any change is always viewed with rose-colored glasses but a relocation really needs to be thoroughly analyzed," Collie said. "You have to engage the entire family in this decision and determine whether this is a good time to move the kids into a new school."
Selling your home
If you're not joining a company with pockets deep enough to buy your home and sell it for you, you will face a different set of challenges entirely.
Steiner recommends that recruits in such a position, especially current homeowners, should tread with caution.
You may be anxious to get the move behind you, she said, but struggling to sell your home and close on a new one all in a month's time is a recipe for disaster.
"We do not recommend anybody do that," Steiner said. "Six weeks is really the absolute minimum a person needs to sell their home and find a new one. Moving yourself all at once is probably the biggest mistake you can make."
Steiner, whose Web site offers numerous moving tips, said you should instead consider renting your existing home fully furnished, and set yourself up in rental property in the new locale. That gives you time to settle into your new job, get to know the neighborhoods and determine whether you're going to be able to hang in there for the long haul.
"What happens is you move all your furniture, sell the house, buy a new one and six months later you think, 'Oh, my God. What have I done?'" Steiner said. "It's a very expensive mistake and emotionally it's ridiculous."
If the notion of would-be renters using your coffee table without a coaster makes you cringe, however, you might be better off putting your belongings in storage. Simply rent your home unfurnished, or, if you can afford it, don't rent it all for the first few months until you're sure about your new locale.
That'll be one extra step of loading and unloading, regardless of where you end up, but it may be worth it if for the peace of mind.
A taxing move
It used to be that uprooting yourself and moving to a new location yielded big tax write-offs. Some still remain, but due to the Revenue Reconciliation Act of 1993, you're no longer able to claim temporary living expenses or househunting excursions as a deduction.
(Click here for IRS Publication 521, which outlines allowable moving expenses and provides instructions for doing so.)
"It used to be much more advantageous prior to the change (in 1993)," said Frank Degen, an enrolled agent and spokesman for the National Association of Enrolled Agents. "There's been a lot more tightening."
Today, you can still claim the costs of moving yourself and your family to your new home. That includes transportation costs and lodging but does not include meals, since you'd have to eat anyway.
The second allowable deduction is the cost incurred from moving your household goods to your new location, including the cost of renting a truck or hiring a moving company.
The deductions, Degen notes, are taken as an adjustment to your income, meaning you don't have to itemize. "That's important to know because many people don't have enough deductions to itemize," he said.
In order to claim the deductions, however, there are two tests you have to pass. The first is a distance test, which holds that the distance from your former house to the new job location must be at least 50 miles greater than the distance from your former house to your old job. In other words, you can't move 20 miles down the road and claim a moving write-off.
Additionally, you must satisfy the "work test," which requires you to work in the new location (not necessarily the same job) at least 39 weeks out of the next 12 months. For the self-employed, you must work 78 weeks out of the next 24 months.
Those who claim the deduction this year and fail to satisfy the "work test" in the next year (or two for the self-employed), must amend their 1999 returns to reflect that in the future.
Keep in mind, too, that if your employer picks up the tab, paying you a flat pre-negotiated fee (e.g., $5,000) for your moving expenses, that money will be included on your W-2 as added income and you'll be taxed accordingly.
Degen said the best way to negotiate employer plan is to arrange for an accountable plan, whereby you hand your boss your moving bills and he/she reimburses you directly.
"In an accountable plan there are no tax consequences," he said. "You don't report it on your W-2 and you don't take the moving expense deduction."
Relocating to another country
Lastly, if you're relocating abroad, your task is considerably more difficult. In  these cases, experts say doing your research ahead of time, and renting out your home (just in case you want to move back), is paramount.
"The biggest thing employees need to do when relocating or transferring abroad is to educate themselves on what to expect," Taylor said. "If the whole family, including the kids, isn't buying into this move, you're going to have problems. It's always wise to keep one foot back on the home soil just in case."
Taylor noted a large percentage of internationally relocated workers defect back to their homeland within a year. That's expensive for the company, and emotionally taxing on the family.
And if you're really unsure about the move, Collie suggests you draw into the contract a special provision that allows you to return home if needs be.
"Many companies, especially if they are relocating an entire group, will sometimes consider a move-back policy," he said. 
|
|
|
|
|
 |
|
