Human Resources Policies
HR104 Payment for Relocation Expenses
Policy Steward:Vice President for Human Resources>
- Authorization of Relocation Expenses
- Covered Expenses
- Taxability of Relocation Expenses
- Arrangements for Contracting
The purpose of this policy is to provide parameters for the payment of relocation expenses. Although the University does not cover moving expenses for all new or transferring employees, payment for relocation expenses may be authorized at the discretion of the hiring unit.
The University may pay for relocation expenses of a newly hired faculty, staff, administrator or academic administrator accepting a position with the University, or a present faculty, staff, administrator, or academic administrator who relocates within the University from one University geographic location to another (e.g. from one campus location to another).
In order to be eligible for relocation expenses under this policy the move must increase the employee’s commute by at least 50 miles. (i.e., commute distance from employee’s prior home to new position location exceeds commute distance from employee’s prior home to prior position by more than 50 miles). This policy does not apply to temporary assignments (typically less than one year). Costs of moving office or lab equipment for faculty or staff does not fall under this policy; such costs are considered to be business expenses as defined by University policy FN10 Other Business Expenses and Activities. Costs for non-employee travel and business travel are covered by University policy TR02 Penn State Travel Policy.
Approval by the Dean or senior executive (budget executive) of the hiring unit is required prior to making commitments to pay for relocation expenses. Management should consult with representatives from their unit human resources and financial office prior to offering payment of relocation expenses in consideration of the total compensation package. Individual colleges and units may authorize full or partial payments for relocation expenses up to the maximum allowable relocation payment. The maximum payment allowable is as follows:
- Fifteen thousand ($15,000.00) dollars, and
- The amount equal to one’s month’s salary of the employee
Amounts higher than fifteen thousand ($15,000.00) plus one month’s salary may be authorized if contracted by Purchasing Services and with approval of the unit financial officer. Units have the discretion to determine whether relocation will be offered and may opt not to offer relocation or to offer less than the maximum allowable relocation payment based on budgetary or other factors. Relocation payments may vary based on the level of the position. Authorized relocation payments should be documented within the employment offer letter, clearly noting the eligible payment amount. Units may require employees to submit receipts for reimbursement of expenses. At the discretion of the unit, a lump sum payment may be paid to the employee without requiring receipts. Relocation payments are not eligible for retirement benefits offered by the University.
Relocation costs that will be covered by government contracts, or other funding that has additional requirements for reimbursement, must follow the guidelines of those contracts and/or funding sources. The maximum allowable expense payments and required approvals, will still apply; however, documentation of expenses (receipts) and/or further delineation of costs must be implemented to comply with additional contract/funding requirements.
Any requests for exceptions to this policy will be considered on a case-by-case basis. Requests must be made in writing and will require the approval of the Sr. Vice President for Finance and Business or Executive Vice President and Provost or their designees.
The tax law provides that an employer’s payment and/or reimbursement of an employee’s relocation expenses are taxable to the employee, subject to payroll tax withholding and form W-2 reporting. All University relocation payments (whether paid to the employee or directly to a third-party vendor on behalf of the employee) constitute taxable income to the employee. The tax withholding on payments made directly to third-party vendors will appear as imputed income on the employee’s pay stub and taxes will be withheld on the vendor payment amount. Meaning, payments made directly to third-party vendors will appear on the pay stub as income and be taxed as income earned. This may result in a significant reduction in net payment to the employee during the impacted pay period(s). Employees are encouraged to consult with a personal tax advisor related to the tax impact of relocation payments.
Arrangements for moving employees when the University will provide for the total move must be coordinated through Purchasing Services by calling the appropriate buyer. Purchasing Services will obtain estimates or give instructions to proceed with the move through University-approved vendors under contract. A Purchase Order will then be sent to the acceptable vendor. Such Purchase Order will specify any maximum dollar limit to be covered by the University and provide instructions to the vendor that any remaining balance is the responsibility of the employee. Payment of the remaining balance will be collected by the vendor from the employee directly.
Storage of household goods and personal effects for up to 30 days may be included in the Purchase Order. The cost of storage beyond 30 days is billed directly to the employee.
The University will spread the tax burden from third-party vendor payments by dividing the relocation cost over three pay stubs.
FN10 Other Business Expenses and Activities
TR02 Penn State Travel Policy
FNG05 Expenditure Guidelines for Costs Not Allowable under Uniform Guidance
08/01/2019 – Policy rewritten to reflect changes to taxability of relocation payments under the Tax Cuts and Jobs Act.
Date Approved:June 25, 2019>
Date Published:August 1, 2019>