Q: I’m so excited. I just got a job offer and in addition to the agreed upon salary they’re also offering me $3,000 for moving expenses. But there is a catch. They’re referring to this as a no-interest “forgivable loan”, a third of which would be forgiven for each year worked. So as long as I stay with the company for three years I don’t owe them anything. I’ve never heard of this, is it legit?
A: First, congratulations. And yes, this is legit. Forgivable loans have been around for decades. And even though they’re referred to by different names -a sign-on bonus, a relocation bonus, I’ve even heard them called “curtain money” euphemistically- the bottom line is that the employee gets a lump sum of money which they can use any way they like. You could use it for moving, to buy a big screen TV or to deposit in your savings account.
A true relocation benefit is different. The company pays for your actual moving expenses, sometimes even house-hunting, temporary housing, and real estate costs. But the employee doesn’t receive a lump sum, instead the company usually handles those expenses directly.
In my experience, I’ve seen these forgivable loans offered mostly to employees in hard-to-fill or high-level positions. Positions with an abundant applicant pool are not usually offered this incentive. Companies also use these loans to improve retention. So, you could assume that you’re highly valued and they want you to stick around.
But, what if the job doesn’t work out for you? Or for the company? In the event the company thinks you’re a poor fit and decides to fire you, then the loan is customarily forgiven. If you’re the one who isn’t happy, you’ll have to decide whether you’re so miserable you’d pay to leave or whether you can live with it for three years.
Tax Caveat: ask the company about the tax implications of receiving such a lump-sum. In some cases the full amount is taxable as income during that year, in other cases it can be spread out.
Lastly, If you’re happy with the offer and the company, I don’t see a problem accepting the loan. Just go into it with eyes wide open.
© Copyright Eva Del Rio
Eva Del Rio is creator of HR Box™ – tools for small businesses and startups. Send questions to Eva@evadelrio.com
