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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.