The Covid pandemic has spurred companies and employees to reassess work models and locations, and to consider more flexible, cost-effective ways to achieve business objectives. While not new, short-term assignments can be an effective workaround to current obstacles to employee relocation—from reluctance to relocate to a frenzied real estate market and global restrictions.
Short-term assignments are a “lite” form of talent mobility, enabling businesses to achieve specific, finite project objectives with less expense and disruption. International short term assignments have a longer history, arising as a relatively inexpensive alternative to global relocation. Domestic short-term assignments became more popular over the past 15 years, as the U.S. recovered from the Great Recession.
Objective of Short-Term Assignments
Companies originally devised short-term assignments as a developmental opportunity for high potential, junior-level employees. The employee had the opportunity to meet and work with employees in a different company location, master new skills and hone leadership abilities. This opportunity can increase the employee’s job satisfaction and loyalty and help the company to retain a promising employee. Employees who shine in STAs can be candidates for promotion and future STAs or possibly a traditional global assignment.
Short-term assignments also can be an effective way for more experienced employees to share their expertise with other parts of the organization. A company might deploy a manager to oversee the opening of a new company location, lead a merger or acquisition or bring specific IT or other technical expertise to another company location. In these examples, permanent relocation might not be necessary, but a brief business trip wouldn’t be enough.
Tax Implications of Short Term Assignment Jobs
The IRS treats short-term assignments more like business travel than relocation expenses. Relocation expenses are employee benefits and must be reported on the relocating employee’s W-2 for the year. Most companies gross many of these expenses up to cover the tax obligation, creating another expense for the company.
The IRS definition of a short-term assignment is very precise: the company must expect it to last for less than one year and it must actually last for less than one year. In this case, the IRS considers travel, lodging and certain other expenses to be business expenses that are deductible for the employer and not W-2 benefits to the employee.
Assignments can change in scope or length once underway, and this can influence the tax treatment. The minute an employer determines the assignment is going to extend longer than a year, the reimbursed expenses from that point forward become a taxable benefit to the employee. This applies whether the company reimburses the employee directly or pays expenses on his/her behalf.
So short-term assignments can last longer than a year (this is particularly common with rotational assignments), but the company will sacrifice some of the cost-savings of shorter-length assignments. The scope of work will be one consideration in deciding whether a short-term assignment or relocation makes better business sense.
Within the mobility arena, short-term developmental assignments are gaining traction with companies looking to support business growth and employee development while controlling costs. This creative strategy allows businesses to deploy talent where needed without making the financial commitment inherent in a permanent domestic relocation or a long-term international assignment, but not without careful consideration. Download the Short Term Assignments White Paper