FAR 31.205-35 addresses relocation costs. Relocation costs are incurred when a current employee is reassigned or when a new employee is recruited. A permanent reassignment must be for an indefinite time or if a definite time, no less than 12 months. If an employee who is paid otherwise allowable costs resigns within 12 months for reasons under the employee’s control, the relocation costs must either be refunded to the government or credited to the account. Costs for mass relocation of personnel are allowable but the costs should be allocated based on the contracts or time periods benefiting from the costs. So, for example, when a facility is closed and employees are transferred to another site, the costs are to be allocated to the cost objectives at the new location.

Relocation costs that are generally allowable include travel costs of the employee and their immediate family and costs of transporting household and personal effects to the new location. Also, the costs of finding a new home are allowable which includes house-hunting trips by employees and their spouses and temporary lodging which cannot exceed 60 days for the employee and 45 days for spouses and dependents.

Unless relocations costs meet the following three criteria they are unallowable:

the move must be for the benefit of the employer;

reimbursement must be in accordance either with an established policy or with a practice that is consistently followed and designed to motivate employees to relocate promptly and economically; and

employee reimbursement may not exceed actual costs, except that a policy may be established to reimburse employees up to $1,000 for certain miscellaneous expenses (discussed below).

Slightly different requirements exist for relocation of employees who are hired for specific contracts or long term field projects. First, the employment agreement must specifically limit the duration of the employment to the time spent on the specific contract or project. Second, the agreement must provide for the return of the employee to their location before the employment covered by this agreement or to a location of equal or lesser cost.

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