How to Effectively Provide High Cost Area Assistance

An increasing number of companies are struggling to get high-demand employees to relocate to high-cost-of-living areas in the US. If you’re facing this problem and offering these employees a one-time “bonus” or an increased salary, consider a more effective option.

A salary increase is difficult to rescind in the event the employee is later transferred to a city with a lower cost of living. And a one-time lump sum payment is difficult for employees to ration over time in order to use it for its intended purpose. On the other hand, a one-time payment can be useful as a down payment on a new home; although again, it is difficult to ensure the amount is used for this purpose.

A mortgage payment differential or mortgage subsidy for homeowners and a cost of living allowance (COLA) for renters can be more effective options. These benefits were historically often provided over five years, but are now more commonly provided over three years (this is partially due to some lenders no longer offering a five-year benefit). By providing assistance over an extended period, these benefits allow employees to ease into a higher cost of living. Additionally, having a formal benefit and process in place eliminates the questions, “What should we do to help this employee?” and “How much should we provide?”, saving the company time and maximizing equitability.

With regard to tax assistance, most companies do not provide tax assistance on a mortgage payment differential or mortgage subsidy, as a portion of the mortgage payment, which these benefits assist with, is tax deductible. COLAs are not deductible, and most companies do not provide tax assistance.

For assistance in determining what benefit, administration and calculation method will meet your company’s needs, contact SIRVA.