How Does Paid Relocation Work?

Paid relocation—aka corporate relocation—occurs when employers finance some or all of an employee’s move for business purposes. That employee could be a new hire, transferee or intern. Paid relocation benefits often include providing assistance as well as compensation. 

That said, paid relocation works in many different ways, depending on the employer and/or their relocation provider. How those dollars are distributed…who manages those payments…and which specific services are covered—these all vary by employer and plan. 

Whether you’re an individual considering a job offer that includes paid relocation or you work for an employer building a relocation program, here’s the least you should know about how paid relocation works—and what those key variables look like.  


Who Administers Paid Relocation Programs?  

Paid relocation programs are administered one of two ways: internally within an organization or externally via a third-party relocation management company, or RMC. 

Employers that manage only a handful of relocations per year are more likely to handle them in-house. However, because relocation administration is time and labor intensive, many employers outsource their program operation to relocation management providers.  

Now, there are two types of relocation companies: traditional RMCs and modern, tech-based RMCs. Traditional RMCs deliver their services primarily through trained specialists, while tech-based RMCs also offer user-friendly software platforms that offer ease and transparency to employers and employees.

Whichever type of RMC employers choose, they should always do their research first! 


How Paid Relocation Funds Are Disbursed

Paid relocation benefits can be disbursed in several ways. For example, some employers provide employees with an upfront lump sum to be spent however the employee chooses, without the employer’s oversight.

Under other paid relocation plans, however, funds are paid directly by the employer (or the RMC) to movers and other vendors. This works especially well when RMCs have negotiated discounts with preferred vendors and when using tech-based RMCs.

Some paid relocation plans operate via reimbursement—i.e., the employee foots the initial costs, but is reimbursed by the employer or RMC after submitting their invoices. The drawback: this can create financial stress for employees while generating more paperwork for employers.

Some paid relocation plans use a combination of disbursement methods, depending on the benefit and whether the employee is using a preferred vendor. 

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What’s Covered Under Paid Relocation Policies

Specific relocation benefits vary by employer and plan. Many employers offer tiered relocation programs, which tie specific benefits to specific job positions and titles. 

However, most paid relocation policies typically cover some or all of these expenses: 

  • Moving Expenses – Defined as the cost to move household goods to the new location by moving van or another carrier. 
  • Employee Transportation Expenses – The cost of plane tickets or car travel to move an employee—and his/her family, if applicable—from the old to new location.
  • Home Buying and Selling Costs – This may include closing costs, attorney fees and realtor commissions. Employers may also cover rental-related expenses as well. 
  • A House or Apartment Hunting Trip (or Trips) – Conducted shortly after the job offer is accepted. 
  • Short-term Housing – Real-estate closings take time. Sometimes, so do rental availabilities. In order to get employees on the job faster, many employers pay for or offer short-term housing (as well as temporary storage of household goods when required). 
  • Relocation Tax Gross-up Benefits – Because relocation benefits are taxable to employees, many employers cover the cost of those taxes—a practice known as relocation tax gross-ups. 

In addition, executive-level paid relocation plans may also include benefits for packing/unpacking services and destination services, which help employees and families acclimate to their new area.  


Communicating How Paid Relocation Plans Works

When an employer issues a formal job offer that includes paid relocation, it’s customary to include a relocation letter that summarizes the key points of its paid relocation benefits. (It’s also customary for employees and applicants to negotiate these benefits.) 

More specifics of the plan are captured in a written relocation policy (or for employers offering tiered plans, policies). 

Granular details are generally provided via a relocation “binder” or PDF documents (for traditional RMCs) or, better yet, via a real-time online portal (provided by tech-based RMCs like UrbanBound). In addition, trained relocation specialists act as a go-to resource for employees throughout their move.

One final thought: while paid relocation plans work any number of ways, the universal goal of all relocation plans should be to make every employee relocation as smooth and stress-free as possible.

Human Resources Today