When employees are relocating to another state, it’s a challenge for both the employee and the company. Whether the relocation is for a new role within the organization, to hire a candidate in a different state, or simply because an employee wants to make a personal move, managing a corporate interstate relocation requires careful planning and attention to detail. Companies need to navigate a range of logistics, legalities, and tax implications to ensure an easy adjustment for their employees.
This guide breaks down the key interstate relocation considerations and services, explains the company’s responsibilities when employees are relocating to another state, and outlines the best way to manage these employee moves. Let’s dive in!
The Company’s Responsibility For Employees Across State Relocations
When an employee moves to another state for a new role or work assignment, the company should provide corporate interstate relocation services that cover logistics like housing assistance and moving costs. These services support the employee’s transition and allow them to focus on their work or new role without unnecessary distractions.
If the company is relocating an employee hired from another state, the employer offers corporate interstate relocation benefits. The package pays for moving expenses, provides a lump sum, or a combination of both. The company should base the interstate relocation benefits on the employees’ needs, the complexity of the move, and the available resources.
However, if the employee relocates to another state for personal reasons but continues working remotely or at another company location, the company is not responsible for interstate relocation services. The company is still responsible for managing the tax and legal implications, such as updating tax withholding and complying with state-specific employment laws.
Interstate Relocation Services to Manage Employees Relocating to Another State
How to relocate to a new state can be a complex process for both the employee and the company. Let’s break down the interstate relocation services that can make this process easier for your employees:
Home Sale & Real Estate For Corporate Relocation Services
When an employee owns a home, selling it is the first step in the relocation process. Employers can include home sale programs in corporate relocation services. These programs help the employee sell their home quickly and for a fair price.
If the employee is renting, they will need rental services and may need to break their lease early. The employer can provide real estate services to help them find a new home at their destination.
U.S. Temporary Housing For Employees
Sometimes, when an employee moves to a new state, their new work responsibilities begin before they find permanent housing. In these cases, temporary housing is an essential relocation service. Temporary housing allows the employee to settle into the new location and start their job while they search for a more permanent home.
Corporate Interstate Moving and Relocation
Moving the employee’s household goods is a key aspect of relocating to another state. Use an interstate moving van line with corporate relocation expertise. These interstate moving companies are licensed to move items across state lines and have a nationwide network of quality moving agents. Therefore, the mover has vetted local resources for packing, loading, and delivering goods, no matter where in the country the employee is relocating to.
Source interstate relocation companies through a relocation management company to ensure the mover adheres to the unique requirements of high-level moves, interstate relocation policies, and communication with all parties involved.
First, the origin interstate relocation company agent will create an inventory of the household goods and quote the weight-based pricing. The origin agent then packs and loads the items, and an interstate driver transports them to the new location.
Typically, the interstate moving company will provide a range of possible delivery dates. Upon arrival, the destination moving agent will unload, place the furniture as directed, and unpack as requested.
Partnering with experienced interstate relocation companies ensures safe and efficient transport of the employee’s belongings.
Tax, Compensation, & Legal Implications of Relocating Employees to Another State
Relocating employees isn’t just a logistical challenge—it also involves significant tax, compensation, and legal considerations. These issues apply when the employee interstate relocation occurs for corporate or personal reasons.
Cost of Living Adjustment For Relocation to Another State
A key consideration when employees are relocating to another state is whether a Cost of Living Adjustment (COLA) is necessary. A COLA is an adjustment to an employee’s salary to account for the differences in living expenses between the employee’s current location and the new one.
For instance, if an employee is moving from a state like Missouri to a more expensive state like California, the company should consider adjusting the employee’s salary to reflect the higher cost of living in the destination state. An employer can offer COLA by negotiating a new salary as part of the relocation offer or by providing a Cost-of-Living Allowance (COLA) for temporary relocations.
It’s important to note that COLA typically does not apply if the employee relocates to a new state for personal reasons. The company is not obligated to adjust the employee’s salary in these cases.
Read our detailed guide on calculating COLA to learn more about determining the right adjustment amount for your employees.
Tax When Employees Relocate to a New State
When an employee is relocating to another state, there are tax implications. Both the company and the employee must understand how taxes will change after the move.
The company is responsible for withholding the correct state income tax withholding and determining if an employee relocating to another state creates a nexus that requires registering and paying taxes in the new state.
Employees relocating to another state will likely have a different income tax rate due to differences in state and local taxes. Therefore, the interstate move will impact their take-home pay. Depending on the timing of the interstate move, temporarily relocating employees may need to file taxes in two states.
In the year of the move, employees typically file part-year resident returns in each state, reporting income earned in each. Most states won’t double-tax, but some require a full-year income report if the employee is a resident at the end of the year. Employees can claim a tax credit on their new state’s return for taxes paid to the old state to offset extra tax.
Refer to this TurboTax guide for more detailed guidance on filing taxes during an interstate relocation.
Companies should consult a tax expert specializing in corporate relocations to navigate tax changes.
Understanding Employment Laws When Employees Move to a New State
Whether the employee is moving for a corporate relocation or a personal move, every state has different employment laws that may apply. The company is responsible for researching these laws and ensuring compliance when an employee relocates to another state.
These laws cover many employment aspects, including minimum wage and compensation, workplace and safety regulations, workers’ compensation requirements, and benefits and insurance coverage.
Additionally, states have different rules regarding sick leave, vacation time, and other types of leave. The company must familiarize itself with these state-specific requirements to adhere to all relevant laws when managing an employee’s interstate move. Consult with a lawyer to learn how to be compliant.
Hiring Interstate Relocation Companies
Handling an employee’s move to another state involves significant work and expertise. This is why many companies hire interstate relocation companies to manage some or all of the relocation process. These companies specialize in managing logistics, tax issues, and legal compliance, easing the burden on your HR department.
HR Managing Employees Relocating to Another State Internally
Managing employee relocations within the internal company HR department is challenging. Juggling the interstate relocation service vendors in many states and having specialized knowledge of each state’s logistics, legal, and tax requirements is nearly impossible.
The company’s resources are not sufficient to handle tasks like real estate assistance, interstate moving arrangements, tax, compensation, and legal compliance for many states. Without the expertise of a relocation company, there’s a higher risk of errors or oversights that could impact the employee’s experience or lead to expensive compliance issues and fines.
Hiring an Interstate Moving and Relocation Company
Some companies work with individual vendors to manage different aspects of relocating to another state, such as hiring an interstate moving company for transportation while using separate providers for services like real estate or temporary housing.
When human resources oversee the entire process, sourcing and managing the many vendors for each state is complex and time-consuming. The company risks inconsistent benefits, relocation service gaps for their employees, and not sourcing the best rates or providers.
Hiring a Corporate Interstate Relocation Company
The best option for managing an employee’s relocation to another state is to hire corporate interstate relocation companies that handle every aspect of the move.
This approach allows the employer to rely on experts to manage services, tax considerations, compensation adjustments, and compliance with local employment laws. Corporate interstate relocation companies reduce internal complexities and the risk of missing essential steps.
By outsourcing the process, human resources can focus on its core responsibilities while knowing experts are taking care of the interstate relocation details. Partnering with a relocation company offers consistency, cost predictability, and the ability to choose from various packages that meet the company’s budget and service needs.
NRI Relocation Can Manage Interstate Relocation For Your Employees
At NRI Relocation, we specialize in managing interstate relocations for companies and their employees. We handle all aspects of employees relocating to another state, from moving logistics to tax compliance and cost of living adjustments.
Contact us today to learn more about how we can support your next interstate relocation!