Relocation Packages 101: How to Create, Manage & Negotiate Winning Relocation Benefits in the Era of COVID-19

Complete Guide to Employee Relocation

Any way you look at it, employee relocation is an essential component of modern business. Companies large and small, in the U.S. and on a global basis, use employee relocation as a tool to deploy their human assets strategically. The practice is so popular, it’s given rise to a $25 billion industry—the relocation management industry! 

In recent years, technological advances have added a whole new dimension to the relocation management industry. In fact, there are as many ways to approach employee relocation as there are employers.

There are nearly as many questions, too. As the first tech-driven relocation management company, UrbanBound has pretty much heard them all. For your reading pleasure, we’ve rounded up the top 20 questions we get most frequently from employers, along with our best, in-a-nutshell answers. If you have questions about employee relocation, this is a great place to start.

What is Employee Relocation?

Employee relocation is when an employer moves a worker, new hire or even an intern to a new location for business purposes. Many companies pay part or all of the employee’s relocation expenses and also help with the moving arrangements.

Companies do this via an internal mobility team or by outsourcing the work to a relocation management company, or RMC. Many companies consider their employee relocation program essential to meeting their recruiting goals. In fact, the top reasons employers utilize employee relocation are:  

  • To fill positions internally by transferring and/or promoting proven employees
  • To recruit specialized talent that can’t be found in-house
  • To combat a talent shortage in the employer’s home city 
  • To bring along key employees and executives when relocating headquarters to a new city or opening up a new location.  

What Relocation Statistics Should I Know?

So, the first thing you should know about relocation statistics is that they’re always changing. What was true just a few years ago is no longer the case today, and what we write here today may no longer be the case tomorrow. That being said, here are a few basic relocation statistics you probably should know: 

  • Companies spend an average of more than $16,000,000 on employee relocation per year.
  • It costs an average of $97,000+ to relocate employees who are homeowners.
  • It costs an average of $24,000+ to relocate employees who are renters. 
  • Roughly 60% of employers outsource their mobility function to relocation management companies.
  • About 28.5% of job applicants are looking to relocate to a new metro area. 

Does Employee Relocation Vary by Industry?

Yes, it really does! Industries differ in terms of their recruiting goals, challenges and practices, and this is reflected in their approach to employee relocation. 

For example, the healthcare industry—which has traditionally offered fairly modest relocation benefits—is facing an urgent physician shortage. As a result, some forward-thinking healthcare organizations are ramping up their employee relocation programs.  

Another example is the technology industry, where recruiting is also fiercely competitive. While studies indicate that three-quarters of the tech workforce is willing to relocate for work, the high cost of living in established tech hubs like Silicon Valley create a hiring challenge. Furthermore, adopting cutting-edge relocation software has become an industry trend for tech employers, since they’re appealing to people who know and love technology.

What’s Involved in Employee Relocation?

While there are many ways to slice employee relocation, it basically boils down to four key activities: 

  • Physically moving the employee to his/her new location
  • Physically moving his/her stuff there, too
  • Finding housing, whether buying or renting 
  • Helping the employee acclimate to his/her new area  

Of course, within these four areas there are infinite subsets, such as moving spouses and families, transporting pets, and storing belongings until permanent housing is found. And at the end of the day, the acclimation process can be most challenging of all.

In short, because every relocation is unique in some respect, one hallmark of a well-designed employee relocation program is that it’s flexible enough to address all such variables.

What Are Some Typical Employer Relocation Benefits?

While employee relocation benefits vary, often they are organized around helping employees accomplish the activities outlined in Question #4. As a result, typical employer relocation benefits include assistance with:

  • Moving (known in the industry as household good shipment)
  • Short-term housing (some employers provide corporate housing)
  • Home selling and purchasing—or, alternately, rental-related expenses 
  • Transporting employees to their final destination (flights, rental cars, train tickets)

Although employer relocation benefits consist of similar components, employee benefit packages can be structured a number of different ways—i.e., lump sum benefits, managed budget plans, full reimbursement, etc.

What are Typical Relocation Expenses?

Typical relocation expenses include coverage for all the services and benefits mentioned above, plus applicable taxes. Depending on an employer’s relocation program, these may be paid for by the employer or employee—or, through some form of cost sharing. 

In addition, employers must pay for the expense of administering their employee relocation program, whether covering the salaries of an in-house mobility team or paying fees to a third-party relocation management partner. 

Are Relocation Packages Taxable?

Unfortunately, yes: relocation benefits are now taxable to employees. Furthermore, relocation programs no longer offer employers the tax advantages they did prior to tax reform. 

Before the Tax Cuts and Jobs Act of 2017, relocation benefits were not considered taxable income to employees, and employers could deduct many relocation expenses incurred on behalf of employees. 

Now, however, the opposite is true. Not only have employers lost a valuable business deduction, but employees must pay taxes on relocation benefits they receive. To keep their relocation programs competitive, many employers elect to gross up their relocation benefits to cover the additional taxes their employees incur. 

If you’re involved in employee relocation, it’s essential to have a good understanding of how relocation taxes and gross ups work—and we can help. 

How Much Do Employee Relocations Normally Cost?

Generally speaking, employee relocations are expensive, although it really depends on each employer’s relocation benefit package. As a rule of thumb, it costs more to relocate a current employee than a new hire and it costs more to relocate a homeowner than someone who rents—as borne out by these relocation statistics:   

Type of Employee Average Cost

Current employee – homeowner $97,166

New hire – homeowner $72,627

Current employee – renter $24,216

New hire – renter $19,309

What Are the Challenges of Global Relocation Compared to Domestic Relocation?

Global relocation is inherently more expensive and complicated than domestic relocations within the U.S. Beyond the greater distances involved and the potential of language barriers, there are other unique issues, including:

  • Complex logistics – Including the successful navigation of visas, customs and tax implications. International relocations require more hands-on mobility support. 
  • Length of assignment – Unlike domestic relocations, which may be open-ended or permanent, most global relocations are undertaken for a fixed length of time, which is specified upfront in a letter of assignment. The length of the assignment impacts many aspects of the relocation package, including what benefits the employer chooses to cover. 
  • Higher risk of failure to acclimate - Assimilating to a new culture is one of the most difficult challenges employees face, and failure can be very costly to employers. For this reason, some global employee relocation policies offer assistance from a “destination service provider” that specializes in helping employees acclimate.

What’s a Good Relocation Policy?

Once again, this varies by employer (and employee). But generally speaking, a good relocation policy is flexible enough to meet each employee’s unique needs, yet is also cost-effective for the employer—not to mention relatively easy to manage. 

At the end of the day, the key question will be: did the employee have a positive relocation experience?  Did he/she arrive on Day One, ready to get to work? And did they employer feel the relocation was worth the expense?  

What Are Some Employee Relocation Best Practices?

Because employee relocation can get incredibly complex, and because misunderstandings can cost employers both money and goodwill, our essential best practices for employers include:

What Makes a Good Employee Relocation Program?

A good employee relocation program offers transferring employees a nice balance of choice and flexibility, while providing employers with excellent value for their investment. While most employers aren’t there yet, analytics are playing an increasingly larger role in helping employers gauge just how “good” their relocation program is. In this regard, four key KPIs to measure include:  

  • Program costs and cost savings  
  • Employee satisfaction with the relocation experience
  • Turnover rates for newly relocated employees  
  • Effectiveness in achieving key initiatives  

What Are the Different Types of Employee Relocations?

There are a number of different ways to characterize the various “types” of employee relocations. For example, for many employers, relocating current employees vs. new hires are two different types of relocations. Similarly, relocating single employees vs. those with families are two different relocation arrangements—as is relocating homeowners vs. relocating renters. 

And of course, moving an intern or entry-level employee is typically a very different type of relocation than that of mid-level and C-suite employees. 

Often “types” of employee relocations comes down to different degrees of complexity and their corresponding costs. The good news is, employers can structure different relocation benefits to apply to different types of employee relocations however they see fit.

What is a Relocation Package and Should My Company Offer One?

A relocation package is the total of all the financial benefits you provide to relocating employees—i.e., moving benefits, housing assistance, transportation costs, even the tax gross up sum, if you’re paying it. A relocation package also includes any personalized support you provide to employees during their move, whether via your in-house mobility team or through an outside RMC. (Often the difference between an “average” relocation package and a “good” relocation package comes down to the quality of support that’s provided.) 

As to whether your company should offer a relocation package, that’s up to you. If your company is in a competitive industry, if your hiring efforts have been stymied by the current talent shortage or if you’re opening up in a new location, a relocation package can give you that competitive edge you seek. Many top employers depend on their relocation programs to help them maintain their leadership positions.   

How Should I Negotiate Relocation Package Options with My Employees?

It’s entirely normal for new hires to want to negotiate their relocation package. The trick is to negotiate benefits will entice them to accept your offer, but doesn’t break the bank on your end. Good negotiating involves achieving the balance of these three factors:

  • Your new hire’s needs
  • The cost of living in the destination city
  • Your relocation budget 

Before you engage in negotiations, calculate what the actual cost will be for the employee. This can help you set your maximum and minimum offers. Be open to compromise, but try to avoid making program exceptions.

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What Are Some Types of Relocation Packages?

Like everything else, relocation packages keep evolving. Here are some popular types or models of relocation packages right now: 

The Lump Sum Package (aka Cash Only) – The Lump Sum model is just like it sounds: the employer gives the employee a fixed amount of money, and the employee uses it however he/she likes. It’s easy for employers to administer and budget, and employees get to keep any unused funds. However, the employer has no oversight into how the relocation is progressing, and employees have no support in arranging their move—which can result in disaster. Also, sometimes the lump sum just isn’t enough to get the job done.

The Managed Budget Package (aka Capped Allowance) – Under this model, the employer sets a maximum amount the employee can spend on relocation, often with guidelines on how it can be used. The company may also provide a specialist to help the employee manage the process. If the employee doesn’t reach the maximum, he/she doesn’t keep the remainder. This model gives the employer more control and the employee more support than a cash-only program, while still allowing flexibility. It’s also more cost effective for employers.  

The Fully-covered Relocation Package – Also referred to as a traditional relocation policy. As the name implies, under this model, the employer pays the full cost of the employee’s relocation. These plans are typically reserved for high-level executives and can be very costly, although employers can define what services they will and won’t cover. Typically, the employer also provides a relocation management specialist to support the employee’s move, either via an in-house mobility team or a third-party relocation management company. Fully covered plans provide a great employee experience, but costs can be hard to control and predict. 

The Tiered Relocation Program – Under the tiered relocation model, the employer offers multiple relocation packages—three is a common number—scaled to different level employees. For example, interns and entry-level new hires receive modest relocation benefits…mid-level professionals receive more benefits with higher maximums…and C-level executives may receive a fully-covered relocation package. The approach is very popular with employers because it is a cost-effective way to offer competitive relocation packages to employees at every level.    

What Are Some Employee Relocation Services?

In addition to offering relocation benefits, many employers offer their employees an array of services designed to help them manage their move smoothly. These can be delivered by the company’s in-house mobility team or by a third-party RMC. These services may include:

The personalized support of a relocation specialist, who can make reservations, research information and answer questions for employees 
 - A network of preferred suppliers, including movers and realtors with a proven track record of success and cost-effective pricing
 - Checklists and how-to information to guide the employee through the relocation process  Information about the new city, to speed acclimation 
 - Help with visas and customs, etc., if needed    

How Should I Be Managing Employee Relocation?

Well, of course that is up to your company. The good news is, you have choices. If your company only manages a handful of relocations every year—say, under 10—and you have the bandwidth and expertise to handle them in-house, you may prefer to do it internally. On the other hand, you may find it preferable to outsource functions like relocation, so your staff can better focus on your core business concerns.

If you choose to work with a relocation management company, you can elect to go with a traditional RMC or a tech-based RMC. While traditional RMCs largely deliver their services through live specialists—just as they’ve done for decades—tech-based RMCs balance user-friendly software platforms with the support of live specialists. 

Tech-based RMCs not only tend to be much more affordable than their traditional counterparts, they are obviously more contemporary in their approach. They also offer greater access to the analytical data we discussed. As a result, they are becoming the RMC of choice with tech companies and progressive businesses and professionals.

Is there an Employee Relocation Tool that Can Help Me?

If you’re interested in employee relocation tools, it’s in your interest to investigate tech-based relocation platforms, which are essentially one giant multi-tool for employers and employees. 

Relocation technology gives employers easy access to data about their employee relocation program, including spend, savings, trends and the real-time status of ongoing relocations. This allows companies better control over their relocation budgets and more accurate forecasting abilities—allowing them to make informed decisions about their relocation program. 

What are Some Relocation Software Solutions?

Well, we are only qualified to tell you about one of them—ours. But as it happens, talking about UrbanBound is one of our favorite things. 

As the first tech-driven relocation management company, we started revolutionizing the way companies relocate employees. Our first-of-its-kind software—combined with our exceptional customer support and knowledgeable policy guidance—is helping companies of all sizes and budgets offer highly-competitive relocation benefits. 

Our software offers employers the opportunity to provide a personalized relocation experience to every employee, while optimizing every relocation dollar. Furthermore, we give our clients:

 - Real-time control over relocation management programs and expenses
 - True transparency into how relocation dollars are spent
 - Flexibility to structure policies on your terms 
 - A lighter workload for employees who manage relocations 
 - Peace of mind that relocating employees are well taken care of
 - Potential cost savings over traditional RMC programs

f you’d like to learn more about UrbanBound’s software solution, explore our website or request a demo below! We welcome the chance to tell you more! 

Human Resources Today