Whether your company currently offers relocation packages or is starting to think about it, it’s essential to view relocation in light of our new normal—i.e., in the age of COVID-19. After all, you can’t offer a competitive-yet-cost-effective job relocation package without understanding relocation industry standards, trends, practices and options, particularly in light of our current environment.
For many employers, these questions are about to get even more pressing. As businesses develop new strategies to recover from the impact of COVID-19, having the right talent in the right place—right away!—is likely to become essential to their staying competitive and achieving new goals.
At the same time, reducing and controlling relocation expenses will be a high priority for companies operating on leaner margins. This is particularly true for those relying on traditional (aka, costly) Relocation Management Company (RMCs) to administer their programs.
At UrbanBound, we are all about offering employers and employees options. We pioneered relocation management technology—the cost-effective, tech-driven alternative to expensive, legacy RMCs. Frankly, it’s in our interest to share all of these facts with you.
Because the more you know, the more likely you are to reject the old way of thinking and choose the flexible, affordable, relocation solution: us.
What is a Relocation Assistance Package, Exactly?
At UrbanBound, we define a relocation package as an employer-sponsored benefit that is offered to employees who have agreed to move for work—or to prospective new hires as an enticement to accept a job offer that involves relocating to a new city.
In our lexicon, the term “relocation package” encompasses both the specific financial benefits an employee receives to offset the cost of their move and the logistical assistance provided to them, whether through an internal mobility department, external RMC, relocation software platform, or any combination thereof. Those financial benefits are often broken down into specific categories, which we’ll address in more detail later.
Relocation assistance packages come in all shapes and sizes. Some employers put a great deal of care into designing tiered, standardized packages for various levels of employees; others are more casual and case-specific.
Either way, relocation benefits are a business expense. If your company offers them, it’s in your best interest to be thoughtful in the way you create, manage, and negotiate these benefits—not to mention how you track and measure your program’s effectiveness.
For example, we recently sponsored a panel of talent acquisition and mobility thought-leaders from some of the country’s most-respected employers. There, we learned that these employers—who move hundreds if not thousands of employees per year—are continually reevaluating and restructuring their relocation packages and processes.
Relocation assistance packages are an ever-evolving tool that helps employers reach various, possibly evolving goals.
Why Offer a Job Relocation Package?
There are a number of reasons employers offer job relocation as a compliment to traditional employee benefits. Of course, the most common is to help companies achieve their talent acquisition goals.
Companies in specialized, fast-growing fields like technology and healthcare have been particularly hard hit by skilled labor shortages. As a result, they’ve had to expand the geographic scope of their recruiting efforts. Without an attractive relocation package, securing skilled long-distance talent is a long shot indeed.
Similarly, if a company is committed to building a robust internship program—in the interest of cultivating an ongoing talent pipeline—offering a modest-but-competitive relocation benefits to interns can set an employer apart from the pack.
There are other reasons, too. Perhaps, you want to diversify your workforce by hiring internationally, bringing people to the U.S. from all over the world—like MicroStrategy. Or perhaps you’re opening a branch in a new location. Strong relocation assistance packages give employees an incentive to move.
Whatever your company’s motivation, here’s one thing to keep in mind. Every relocation package you offer is a reflection of your company’s values and culture. No matter how much you spend (or don’t), at the end of the day, you want relocating employees to feel that you’re taking great care of them every step of the way.
What is Typically Included in a Job Relocation Package?
This depends greatly on the employer, job position or title and current benefit packages. However, most assistance packages typically cover these costs:
- Moving – Traditionally, the total cost to move household goods from one location to another.
- Transportation – i.e., the cost of plane tickets or car travel to get an employee—and his/her family, if applicable—from the old to new location.
- Home selling and purchasing assistance – This includes costs related to the sale and purchase of a home, such as closing costs, and often includes house or apartment hunting trips conducted in advance of the move.
- Rental-related expenses – Because many Millennials have chosen to rent as opposed to buying homes, rental-related benefits are playing an increasingly important role in relocation packages.
More generous relocation packages may also include these benefits:
- Short-term housing – Maybe an employee’s closing isn’t for another month, or maybe he/she didn’t have time to find the right apartment. In those cases, short-term housing is a valuable benefit.
- Complete packing and unpacking services – This benefit is typical of executive level relocation packages.
- Job search assistance for a spouse or partner – Also a feature of executive level relocation assistance.
- Acclimation services – The main reason relocations fail is because employees and/or their families fail to acclimate to their new environment. Providing destination services—i.e., introducing the employee to various aspects of his/her new city, from transportation to slang to the best restaurants—is an excellent return on the employer’s investment.
- Pre-decision Services – An UrbanBound innovation, this Pre-decision Services boosts job offer acceptance rates by providing candidates with information and tips that improve their interview experience, while speeding reimbursement for travel expenses.
It is worth noting that sometimes the best relocation benefits are those that offer the most flexibility, allowing employees to pick and choose their benefits—in essence, designing their own personalized job relocation package based on their needs and lifestyle.
Who Gets a Relocation Package?
That depends on the employer. Obviously, high-level executives—i.e., C-suite officers, directors, etc.—have always been the most likely candidates to receive relocation assistance and the most deluxe relocation benefits at that.
However, due to skills shortages in certain specialized industries, more employers are offering relocation packages to attract valued individual contributors. The technology industry is a perfect example. Tech companies tend to offer very attractive relocation packages to keep pace with expanding hiring needs, as detailed in one of our recent case studies.
Some companies are now offering relocation benefits to entry-level hires and interns, with an eye toward long-term talent development. (To learn how GE Digital built an award-winnings internship program, check out this on-demand webinar.)
Who gets relocation packages? Whoever the employer wants.
What Types of Relocation Packages Are There?
Like everything else, the relocation industry sees various trends come and go. One of the advantages of today’s relocation management landscape is that employers can choose from a range of relocation packages and customize them as they see fit. Here’s a rundown of the main types of relocation packages you’ll find in the market right now:
The Lump Sum Relocation Package
Also known as “cash only” plans, the lump sum package is essentially like a signing bonus that’s intended to fund relocation expenses. The employer gives a pot of money to the employee, who can use it however he/she chooses, keeping whatever isn’t spent.
The advantage: it’s easy for employers to manage as well as budget, and, at least initially, employees like the idea.
The disadvantages: employees are on their own when it comes to planning their relocations. If they’re trying too hard to pocket some of the money, it can result in a very bumpy relocation. Furthermore, the employer has no way to know how the move is going.
One way to overcome the disadvantages of lump sum packages is to use relocation technology that gives employees support and direction while planning their move designed to keep employers in the loop.
Learn more—watch Lump Sum for a New Generation!
The Managed Budget Relocation Package
The “managed budget,” also called a “capped allowance” plan, is a variation of lump sum that’s designed to address some of that plan’s shortcomings. Instead of simply handing off funds to the employee, the employer sets a maximum amount he or she can spend—often accompanied by guidelines on how to use the funds. The employer may provide support to the employee in the form of a specialist or relocation technology—or both.
The big difference to note? UUnder managed budget plans, nder managed budget plans, if the employee doesn’t spend his or her entire allowance, he/she doesn’t get what’s left over.
The advantage over lump sum packages - more support for employees and more control from the employer, while still providing flexibility. These are more cost effective for employers, although not typically preferred by employees.
The Core/Flex Job Relocation Package
Core/Flex relocation packages strive to balance value with flexibility, by providing certain fixed core benefits—such as moving costs and portions of real estate transactions—with a menu of flexible benefits employees can pick and choose from. For example, while some transferees need a service to move their pets, another might opt for extra storage space.
Employers can create multiple tiers of core benefits with flexible options for employees at different levels, but the basic core/flex structure remains unchanged. The primary advantage of Core/Flex plans: they offer employees the opportunity to customize their relocation to meet their needs, while offering employers greater cost control. For a greater understanding of Core/Flex, download our ebook.
The Tiered Relocation Package
Tiered relocation packages are ideal for employers that offer relocation benefits to various kinds of levels of employees. Three-tiered programs have become the standard. Usually, they’re organized like this:
- Tier 1 - the most modest relocation package, geared to interns and entry-level new hires.
- Tier 2 - a package with more benefits and higher maximums, geared mid-level professionals and valued independent contributors.
- Tier 3 – the most deluxe relocation package, geared to C-level executives and upper management.
The advantage of tiered relocation plans is that they are a cost-effective way to offer competitive relocation packages to all kinds of employees. However, they do require more sophisticated administration. Utilizing relocation management technology can be very helpful in this regard.
The Fully-covered Relocation Package
Under the fully-covered relocation plan—usually reserved for the highest-level executives—the employer pays the complete cost of the relocation. These types of plans are invariably very expensive to offer and complex to manage.
In addition to broad benefits, most employers also provide personal support to these employees in the form of a relocation management specialist (either an inhouse employee or through an RMC). Fully covered relocation packages generally get high satisfaction grades from employees, but they are costly for employers, as well as hard to manage and predict.
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What Does an Average Relocation Plan Look Like?
That depends who you ask. The “average” relocation package varies widely from industry to industry and from one employee level to another. (For example, check out this average executive relocation package). It also depends on the type of relocation package—i.e., lump sum vs. core/flex vs. full coverage.
However, the average relocation benefits package—regardless of the specific dollar amounts—will typically include assistance with moving, home selling/rental expenses and transportation to the new location at the least.
Furthermore, statistics do indicate how much relocations typically cost. Specifically, the average cost to relocate a current employee who owns a home is $97,166, as opposed to $24,216 for renters. The average cost to relocate a new hire who owns a home is $72,627, as opposed to $19,309 for renters.
Of course, if you’re using your relocation package as a way to attract and develop talent, you want a relocation package that is clearly better than average!
How to Structure a Relocation Package
There are infinite ways to structure an employee relocation package. Perhaps the best place to start is by identifying your objective, reviewing your budget, and establishing a core framework of benefits. If you’re starting from scratch, answering these basic questions might give you a helpful starting point:
- Who will we offer relocation benefits to? – If you’re offering relocation assistance to executives only, you can structure them very differently than if you’re offering them to employees across all levels.
- How many relocations will we offer per year? – If you’re only handling a few relocations per year, you may want to approach them on a case-by-case basis. However, if your fast-growing company will be offering an ever-increasing number of relocations, creating a consistent, standardized program is key. (Checkout this case study on this very topic.)
- What do our competitors offer? – Relocation assistance packages vary widely by industry, location and employer size. For example, relocating to St. Louis or Minneapolis is very different than relocating to Boston or San Francisco, because of differences in the cost of living. In order to craft a competitive package, you’ll need to incorporate market research.
- What types of relocation package(s) do we want to offer? – Lump sum, managed benefits, core/flex…we discussed these various models previously, and they’re all viable options. If you’re looking for guidance, the most competitive relocation packages right now are those that offer flexibility and support to employees, while providing cost control and analytical tools to employers.
- Who will administer relocation benefits? – You have the option of managing your program in-house, or outsourcing it to a relocation management company. If you outsource, you have the option of choosing a traditional RMC or a more modern, relocation technology provider like UrbanBound. For more about these options, download our ebook.
- What benefits do we want to include? – Choosing benefits and setting maximums depends on several factors, including what a competitive relocation package looks like in your market as well as your budget.
At the end of the day, you want to offer the most competitive benefits—and the best relocation experience—as cost-effectively as possible. If you don’t have the inhouse expertise to accomplish all this, your best bet is to get some help from an expert.
Crafting a Relocation Assistance Benefits Offer Letter
Your relocation package offer letter is a mini-reflection of your relocation policy. Writing a clear, compelling offer letter starts with a well-written relocation policy. This policy should be consistent with whatever job offer conversation it accompanies or follows.
Content in the letter should include:
- The employee’s new job title, position and description of duties.
- The proposed salary, benefits and any bonuses.
- The new destination, and the name of the employee/candidate’s new manager.
- The date on which you would like the employee to start.
- A summary of the offered relocation package, along with key benefits and maximums. (If you’ll be providing a tax gross-up benefit, include that information here.)
Repayment terms, should the employee leave the company within a certain timeframe.
- The date by which you would like to receive an answer to your offer.
The letter will be written in a way that will inspire enthusiasm in the employee. Once the employee accepts your offer, you can then provide the complete relocation package information.
Relocation Package Negotiation Best Practices for Employers
If you like a candidate enough to offer him or her a relocation package, you should be open to some negotiation on the particulars. It may be necessary to help you seal the deal.
Bottom line: you want to provide your new hire with competitive relocation benefits, without blowing your relocation budget. You want to appear flexible. When it comes to relocation package negotiation, here are some best practices to consider:
- Listen to your new hire’s requests and try to fully understand his/her needs.
- Estimate what his/her actual relocation costs will be, so you can factor that into your counteroffer.
- Be sure to factor in the cost of living in the destination city.
- Establish your maximum offer in advance. In fact, you may wish to establish standard maximums for your relocation program in general and apply them to specific negotiations. Then, if you want to make an exception, be sure you have a good rationale for it.
- Be clear and specific during negotiations. During back-and-forth, it’s easy for misunderstandings to occur.
The best way to minimize the need for negotiation is to offer a relocation package with built-in flexibility. If employees already have the freedom to use their relocation dollars the way they want, it greatly reduces the need for negotiation in the first place.
What’s the Difference Between Traditional and Tech-based RMCs?
This is a hugely important question when it comes to controlling relocation management costs and improving the employee relocation experience.
When it comes to administering relocation management programs, companies have three options:
- - They can manage their program internally, provided they have the staff, resources and ibuprofen to do it right (most don’t).
- - They can outsource it to a legacy RMCs—the expensive, old-school solution. These companies are powered by people, often working with outdated software and cumbersome administrative processes.
- - They can partner with an affordable, tech-based RMC—namely, UrbanBound. Our solution allows employees to plan and book their move online, while offering the support of a dedicated relocation consultant. Our platform offers employees more choice in personalizing their relocation and employers more control over and visibility into their relocation expenses.
- In addition, UrbanBound saves employers enormous amounts of money—up to 70% per relocation—due to a deceptive industry practice we refer to as “the elephant in the room.” Most traditional RMCs silently markup multiple aspects of every relocation, including household goods shipments, short-term housing, and even tax gross-ups, adding thousands of dollars to the cost of every relocation.
