Personnel: Hidden costs of relocating: moving may cut costs long term, but companies must consider the human angle

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WHEN ex-Chancellor Norman Lamont announced an pounds 8,000 ceiling on tax-free relocation expenses in the spring, there were dire warnings from the business community.

Companies would be encouraged to sack workers and hire afresh in their new chosen location, the Confederation of British Industry pronounced. There was widespread lobbying for the cap to be scrapped.

But with the Government eager to claw in revenue, the protests failed. The Finance Act has come into operation with only minor amendments.

However, it is now believed that restricting tax-free moving expenses will not have the predicted catastrophic effect on jobs and employee mobility. Inland Revenue guidelines, issued in July, take a softer line than many had feared.

Bridging loans and schemes where companies promise staff a guaranteed sales price on their old home are both now viewed as employee benefits. As such, they are fully taxable if moving costs exceed pounds 8,000.

But tax-efficient routes beckon for the astute company, and firms specialising in relocation are organising their packages accordingly.

Acquiring the 'beneficial interest' of the employee's home at an open-market value is now the most tax-efficient scheme for relocation.

Hambro Countrywide, the relocation specialist, has just launched such an initiative. Acting as agent to the employer, it values the property and then offers to buy it for that amount. Beneficial ownership transfers to the employer and all future costs associated with the property are seen as employer costs. Therefore, the employee is not liable for tax. But all other relocation costs are still subject to the pounds 8,000 cap.

When companies are trying to coax key staff to move with a job, it is not only those on the payroll who have to be convinced about the move; partners and families also have to be won over. Although the Inland Revenue may think otherwise trips to the planned new location should not be viewed as luxuries; they can be important in winning over family members.

Today the non-profit-making organisation Women on the Move is starting a conference in London on Families and Relocation. Pointing out that poorly managed relocations can cause serious illness and loss of productivity, the organisers have invited a range of organisations, including Intel and ICI, to talk about their solutions to the problems.

One of the lessons, says conference organiser Deborah Grieco, is the need to spend a lot of time with spouses 'managing expectations'. As she points out, dual-career couples can have special problems when one partner is required to uproot. Job satisfaction apart, they may find it hard to adapt to relying on one salary.

Jean Crawford, head of research at the property advisers Jones Lang Wootton, said: 'If too many key staff choose not to move because of family resistance, the company will suffer.'

In a survey of personnel managers on attitudes to relocation, published this month by Methven Career Development, career aspiration of the employee's partner was given as the prime reason for objections to the planned move: more than 82 per cent of the sample cited it as a key stumbling block.

This was closely followed by perceived problems with schooling in the new location: 72 per cent of respondents identified problems in this area.

The survey found that 60 per cent had experienced 'out- and-out refusal' from partners to relocate. And for 41 per cent of the sample, the fact that one person was the main breadwinner emerged as a 'possibly insurmountable obstacle' to a planned move.

Given these findings, it is startling that only 5 per cent of the total sample had communicated with employees' partners, and this mostly amounted to organising outplacement seminars, talks and counselling.

Even though Mr Lamont made it more costly for companies to relocate, there can still be compelling reasons to move. These include closeness to markets and the chance to restructure the company to cut costs.

In the wake of the tax relief cap, firms contemplating a move will have to weigh the costs against future savings. They should also include partners in their plans.

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