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Temporary Domestic Assignments: Program Creation and Policy Development

February 14, 2011 by MSI

For the most part, domestic temporary assignments have been administered by most organizations as an informal program and typically considered as extended business trips. But, for other organizations, the temporary domestic assignment (TDA) is an important component of the overall domestic employee mobility program. Similar to the way global programs are structured, the requirements are likely to vary depending on the business need and assignment length.

TDAs address a number of business and personal factors that permanent relocations do not, such as: lower costs, better talent management and more satisfied families. The program is not difficult to design or implement, though it is different from a permanent relocation program. Following are several key steps an organization should take to ensure they have an appropriate, effective, and competitive TDA program:

1. Determine the business need. How would a TDA support the need? The organization may already be sending people on temporary assignment with or without a formal program.
2. What are the costs – hard costs and soft costs, such as program administration? Even if the expenses of the TDA are treated as permanent and require tax assistance, the overall cost of the move should be substantially less than they would be for a permanent relocation.
3. What is the impact on the employee and family? Does the TDA make the mobility experience better than a permanent relocation? Treating a move for a limited time frame as a temporary rather than permanent transfer may ease the logistics involved and mitigate the burden on family members. In today’s talent-driven employment market, the TDA may provide a skilled candidate not otherwise available.
4. What are the practices currently in place? If the organization already has such assignments on an informal basis, it will be important to ask the approving managers why they choose this route and how they support these employees. These managers are a key source of information about organization’s needs and uses of TDAs.
5. Are appropriate housing and rental companies available in the new location? It is important to have existing relationships that can be leveraged to ensure the best service to the temporary assignees. A Relocation Management Company (RMC) can be invaluable in developing an effective program. Particularly, one that is independent with an objective position for all downstream suppliers and has the ability to incorporate client-directed suppliers into their service delivery model.
6. How will the assignment be formally documented? Will it be internal policy or will it be outlined in an assignment offer letter? The organization may benefit from developing information for HR managers and various business units, such as procedures, exception guidelines, and frequently asked questions (FAQs).
7. Does the organization have tax counsel regarding the tax treatment of TDAs? Because there are many aspects to consider relating to home ownership, residency and moving expenses, it is advisable to seek tax counsel regarding the tax treatment this type of related expenses.
8. How will they effectively communicate the new program to the group or individuals that need to know? Consider the HR managers, business unit managers and executive staff member.
9. What policy components will the organization offer? Typical benefits include:

• Allowance: An allowable amount for living expenses, including lodging in the new location. This is paid through direct reimbursement or a lump sum allowance.
• Home finding: Limited or no home finding assistance.
• Temporary Living: Temporary living period is typically up to 30 days.
• Housing: Employees are typically allowed to select housing, if the assignment is longer than six months.
• Return Trips: The treatment of return trips home varies. Some directly reimburse a trip once a month or every three weeks, while others provide a travel allowance lump sum.
• Household Goods: Limited household goods shipment, depending on the length of the assignment.
• Automobile: Auto shipment policy typically reflects permanent relocation policy.
• Lease Termination: If the employee does not maintain a home location residence, the organization may treat the move as permanent from a tax perspective.
• Miscellaneous Allowance: One month’s salary
• Tax Assistance: If an assignment is anticipated to last longer than one year, the organization-paid assignment expenses are considered taxable income to the employee. Most organizations will provide gross-up assistance for applicable components.

The transition to treating a domestic relocation as a temporary rather than a permanent move presents challenges to an organization’s culture, practices, expectations and industry norms, but it can have many advantages when added to the existing workforce mobility program portfolio.