The Costs of Employee Relocation

Moving to another location for work can be costly, but employers can ease that burden with a relocation package.

  • Companies use employee relocation benefits to entice candidates from all across the nation and even the world.
  • Although relocation benefits for employees might help in recruiting, they are not free.
  • The specifics of their relocation package may be up to negotiation by employees.
  • This post is for both employees who want to know what to expect and company owners who are interested in employee relocation packages.

Every small company owner wants to hire the best person for a position that is vacant, and every job seeker wants to get the ideal job. But what if the top applicant resides a long way from the potential employer? The solution is frequently an employee relocation package. An employee relocation package might be advantageous to all parties if it is given careful thinking and study.

What is an employee relocation package?

Companies offer new and existing workers a cash perk called an employee relocation package to help them move from one place to another if their employment needs it. In certain fields than others, this kind of support is more frequent. For instance, internet firms like Spotify and LinkedIn frequently provide relocation benefits.

A small firm doesn’t have to be concerned about an employee relocation package if it feels comfortable growing its team locally. However, if a company is searching outside of its local region for skilled employees, this sort of offer can persuade a strong candidate to relocate. Businesses may recruit applicants from all across the nation or even the world with the correct job opportunity and employee relocation package.

In a post-pandemic poll, moving company Allied discovered that 64% of respondents had gotten paid for relocating for employment, and that almost 37% of respondents would relocate for “professional development or the opportunity to make more money.” In comparison to bigger enterprises, the survey also discovered that “smaller to medium companies most typically move their staff.”

How much do employee relocation packages cost?

It can be expensive for businesses to relocate an employee. According to American Relocation Connections (ARC), a business relocation firm, the typical relocation package costs between $19,309 and $24,216 for renters and between $72,627 and $97,116 for homeowners. Whether the person is a new hire or an existing employee will determine the range.

Despite the fact that the total cost of an employee relocation package varies, there are techniques for firms to estimate and save costs. Companies can estimate the cost of a specific relocation endeavour by taking into account the following costs for the employee when they build relocation budgets:

  • Make the trip to the new place.
  • Moving and packing assistance
  • Transport insurance
  • Short-term housing Storage facilities or other types of temporary storage
  • Purchase or selling of a home
  • Taxes are increased for advantages.
  • Transfer taxes

While the most of those are obvious, “relocation tax gross-up” is less well-known to most people. When an employer adds the withheld taxes to the gross amount of a payment sent to an employee, this is known as a tax gross-up. The employee won’t be required to pay out of pocket because of this. Relocation expenditure tax exclusions and deductions were basically eliminated by the Tax Cuts and Jobs Act of 2017. Relocation is now more expensive than it was previously due to those modifications, which also abolished the IRS 50-mile restriction.

What does an employee relocation package typically include?

When putting up an employee relocation package, there are several strategies and choices to take into account. The benefits of relocation may influence how appealing a position is to candidates, much as a competitive corporate benefits package. Ilona A. Keil ich, founder and managing director of Eastside, noted that it might be challenging to comprehend a worker’s demands prior to the start of the migration.

If the move is not effectively managed, there are a lot of hidden costs that could be quickly forgotten. “The employer has a stake in the proper operation of the move,”

A range of amenities might be included in an employee relocation package to entice the possibility. Here are some important factors to think about.

Relocation reimbursement

Moving is expensive, thus employers can assist staff by providing some financial assistance for costs like moving services, mover’s insurance, or transportation. Others choose to pay a single lump sum up front, while some companies only offer the cash when the transferring employee provides pertinent cost reports.

Flexible start date

Normally, new hires begin their employment two weeks after accepting a job offer. It could take longer for the new employee to settle in if they have to move, though. Businesses should ask employees how much time they need when creating a relocation package. By collaborating with new recruits early on, businesses may determine a more reasonable timeline for the transition and take the first steps toward developing a productive working relationship.

Free visits

Organizations occasionally permit migrating workers to tour the area so they may get a feel for it before making the big move. This often include frequent excursions to the new site, paid for by the business, so the employee may seek for homes and get to know the neighborhood.

Temporary housing

Companies may think about giving or sponsoring temporary lodging if the employee must start work by a certain date. Businesses may avoid expensive hotel rates now that home-sharing services like Airbnb are more popular, albeit that choice is still accessible. In a month or two, temporary housing can aid the employee’s settlement into the new community. Companies frequently pay for utilities as well as rent for those few months.

Familial support

Remember that if you hire someone and ask them to move closer to your office, they probably have others depending on them. In some circumstances, it may make sense to help the moving person’s family adjust. Sometimes this includes offering child care and assistance in helping the employee’s children enroll in the best school, as well as assisting the employee’s spouse or partner in obtaining employment elsewhere.

Real estate cost assistance

In many cases, employers might entice employees to relocate by paying the costs of purchasing or selling their homes. Businesses sometimes accomplish this by marketing the employee’s former residence or by purchasing the property themselves to resell later. A corporation can deal with the issue if an employee is a renter with a lease agreement by paying any charges associated with breaching the contract.

Pay adjustments or bonuses

The cost of living differs from state to state and from city to city. Some employers provide corresponding salary adjustments or relocation incentives to help make up the shortfall as an additional relocation incentive. Particularly in states with high tax rates, this is advantageous.

Payback clause

It’s crucial for businesses to see a profit from the relocation process. Businesses might think about including a payback provision, which specifies that if the moved employee quits before a predetermined time period, they will be responsible for paying back the company’s relocation expenses, just to be safe.

What are the benefits of offering employee relocation packages?

There are several reasons why business owners should consider offering employee relocation packages.

A larger talent pools

Accessing a larger talent pool is the primary advantage of offering relocation compensation to employees. Do you want to employ the top workers in the world? In order for new hires to work for you, you must be prepared to get them there. In the current job market, offering a compelling relocation incentive is essential to luring top candidates. Who would want to work for an organization that makes moving difficult?

Less time for HR to fill the role

A human resources (HR) department can locate the best candidates for a position faster when they are free to do so, regardless of where they are. Additionally, your HR department’s recruiting and onboarding expenses might be decreased if quality personnel is recognized more quickly. Your company’s efforts to promote diversity, equality, and inclusion (DEI) are strengthened when you assemble a team with individuals from all backgrounds. Win-win situation. How to Foster an Inclusive Workplace Culture is a related article.

Improved retention rates

The productivity, contentment, and retention rates of employees all rise when you fill the right positions with the right individuals. People are driven to stay with the organization after they have committed to relocate to a brand-new location for the proper job and fit. A positive workplace culture often results in higher employee retention. Onboarding, which may involve employee relocation, is the first step in this process. [Find out how to cut down on staff turnover.]

What are the drawbacks of offering employee relocation packages?

Of course, there are also downsides to employee relocation packages that business owners should weigh.

High cost of relocation

The high expense of relocation is the main disadvantage of transferring an employee. There are several costs, such as moving or shipping costs, as well as help with buying a new home or renting a new apartment. Finding a place to reside and purchasing airline tickets for the entire family to travel to a new location are basic moving expenses that must be taken into account.

Decreased productivity

When selecting new personnel, a company’s screening procedure is crucial. While many applicants will be happy to join the team, there are those who may only be looking for employment and may not genuinely want to work at this new location. They must desire to be there in order to perform at their best. An employee won’t likely be producing their best job if they are uncomfortable and stressed out in their new setting. In actuality, a link has been shown between increased stress and lower productivity.

Risk of early resignation

To ask someone and their family to uproot their life and relocate to a new city or state is no little request. Employees find the process stressful and draining, and it takes a lot of work from the business to facilitate a smooth transition. In fact, over 25% of moved workers indicate that acclimating to their new neighborhood is the main source of stress throughout the transfer process, according to the Allied poll. A relocated worker can regret signing an employment agreement and wish to get out if the transition doesn’t go well.

The perfect match for your employee is just as crucial as making sure your entire family adjusts to a significant shift. After the relocation, businesses must take proactive measures to ensure that the staff member is adapting to their new surroundings. If they decide to leave because they aren’t adjusting properly, your relocation expenditure was useless.

Why should employees consider negotiating their relocation package?

While there are many considerations that companies must take into account when developing relocation packages for workers, in the end, it is the employees who are making a significant shift in their lives and as such, will want to keep a few things in mind. Being able to negotiate the relocation package is crucial among these factors.

Employees may have specific demands or requests to make the transfer as easy as possible, even though most organizations have a relocation package fully planned out by the time they make an offer. Employees shouldn’t be afraid to request those things, according to Next pat founder Priya Jindal.

“For many organizations, moving you initially is a more affordable choice than an initial wage raise,” the expert claimed. That’s a different bargaining factor, of course.

The advantages that Jindal’s company offers when moving staff members include:

  • A few days off
  • House-hunting trips domestically and housing internationally
  • 10 days of hotel expense reimbursement on either end of the move
  • Payment for all moving expenses, including packing
  • Storage

The employee relocation balance

Although moving an employee is not an easy undertaking, the rewards are priceless. Your employees will get the support they need at every stage when you put together a warm, inviting relocation package, and you’ll attract top talent. However, if there is even a slight gap in your remuneration plan, it may discourage potential employees from ever applying to work for you. You may create a relocation plan that pleases both you as the business owner and your relocating employee with careful planning and implementation. Our employee hiring guide offers extra information about hiring new employees.


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