February 7, 2011 by MSI
Since 2003, The Worldwide ERC® has been reporting that
temporary domestic assignments were on the rise or holding steady. In many
companies, the temporary domestic assignment (TDA) is an important part of the
domestic employee mobility relocation program. But exactly how does a TDA differ from a permanent relocation and what
is leading to the apparent increase in activity?
The main difference between the two assignment or relocation types is
the duration. A TDA typically lasts between 12 and 24 months, although it can be
as short as 90 days. Two of the primary reasons that TDAs are increasing are to
provide greater flexibility for employees and to support ongoing cost controls
for the organization. Corporations are facing additional pressures for
talent management (recruiting, retaining and developing leadership) and TDAs
allow them to make best use of their workforce, while still controlling costs. In today’s talent-driven employment market, companies
can obtain a skilled candidate in the new location. For
employees, a move that is for a limited
time frame rather than permanent transfer may ease the logistics involved and
reduce the burden on family members. Below are a few of the typical family and
financial challenges:
- Employee is in a difficult real estate market
- Employee may have a
property that is not eligible for the company’s home sale assistance program
- Employee may have a spouse or partner that cannot
find appropriate work in the new location
- Additional family issues – child close to graduation,
aging parents are dependent on employee, etc.
The significant cost savings to companies offering a
TDA versus a permanent relocation come from the elimination of the home sale
and home purchase events. However, careful analysis and planning should
occur prior to the relocation so that the costs associated with the TDA can be
contained and compliance obligations met. The biggest compliance issue is the
accurate tracking of the TDA and management of the associated tax issues.
Assignments in excess of one year can result in tax ramifications, causing
complications for companies and employees on these assignments.
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