When you are setting up your employee relocation program, the cost is an obvious factor in your choices. Each business has a different budget for its relocation offerings in general and for each individual move. Relocation costs can vary greatly depending on many factors. Some of these are within your control, such as which services your relocation packages include and others are not, such as the distance the employee needs to move.
What is a Reasonable Relocation Package?
The answer to this question is very subjective. It depends on your business, your corporate culture, what you have promised to your employees, and your budget. Some teams simply give employees a budget of $5,000 and let them work out all the details as a relocation reimbursement. Others take care of every single detail for the employee moving and spend tens of thousands of dollars. However, the more attractive your moving package is, the easier it will be to not only retain talent, but also attract new talent.
Here are some examples of what you may offer in your typical relocation expenses:
- Pre-visits to the new destination. This can help your employee find a home, pick a neighborhood, and get comfortable with the new city. Your company can cover some or all of the expenses associated with these trips.
- Temporary housing. If you want your new team member to start on a certain date, you may want to provide them temporary furnished housing. That way they can start working while looking for a new home.
- Flexible start date. This is an alternative to offering temporary housing. This gives your employees a chance to sort out their new living situation before starting the job.
- Financial help for legal or real-estate costs. Some companies cover the cost of breaking a lease, or some real-estate fees. Some companies even buy the employees home to make the process faster. Then they sell it at their own pace.
Other things to include in your relocation package:
- Location pay adjustment. If the cost of living is significantly higher in the new location, you may want to increase your team member’s salaries so they can afford the same lifestyle.
- Bonuses. To help deal with moving stress, some businesses offer a bonus to incentivize relocating.
- A payback clause. In your relocation contract, make sure to include a clause that says the employee will have to pay back all or a percentage of moving costs if they leave the job before a certain period of time has passed.
What Is The Average Relocation Cost?
For homeowners, in 2016, the average relocation was between $61,000 and $79,000. For renters, the average relocation costs were between $21,000 and $24,000 in the same year. However, in 2017, new tax rules changed how corporate relocations are taxed. Now there are fewer deductible expenses associated with moving, making the overall average cost higher.
The costs are dealt with in a few different ways:
- Direct billing. With this option, your company pays directly for all the moving costs. You deal with the moving and logistics companies directly. This is a great option for companies who want their employees to focus on getting to work, rather than organizing their own move.
- Lump sum. Lump sum moves are sometimes the easiest option for companies. However, they leave employees to organize the move on their own, meaning they won’t necessarily choose a trustworthy company. They also may be more distracted from their job dealing with all the moving details. With this option, companies just give employees a payment of a certain amount of money to pay for whatever moving services they want.
- Reimbursement. With this option, the employee pays for everything up front and then gets reimbursed by your company. However, this requires the team member to keep great records of all the moving costs.
How to Negotiate a Relocation Package
Your employees may want to negotiate their relocation packages. It makes sense, as they are the ones who will be shaking up their lives to move to a new location to work for your business. They want to make sure the situation will be the best for them. Plus, each individual employee has different needs. Some are single, some have families with children, and others have special medical needs to consider.
When negotiating these packages with team members, keep in mind that even with the high price tag, over time, it usually costs less to relocate an employee than it does to pay an employee who is already in that location a high salary for years on end. So, it may be worth it to go the extra mile!