Your company is smart to offer relocation benefits to attract talented candidates and retain current employees transferring locations. After all, it’s one of the critical factors top talent weigh when contemplating job opportunities. However, if the relocation package you’re offering is a modest lump sum—say, a $5,000 relocation allowance—it may not be sufficient to get the job done.
On the one hand, you may lose your coveted candidate to a competitor that offers more generous relocation benefits. On the other, you may land your talented new hire—only to promptly alienate them when they are saddled with excessive moving-related expenses your relocation allowance didn’t cover.
To ensure your relocation benefits are effective, it’s important to understand actual relocation expenses in full. That way, you can reason why maybe a $5,000 allowance or reimbursement program may not be enough to relocate your employee. Fear not! We’ll help you identify strategies for making the most of cash-only relocation programs (even on a limited budget).
Most long-distance relocations include three categories of expenses, not to mention negative tax consequences incurred by employees if the benefit is not grossed up. (More on that here).
When it comes to transporting your employee’s belongings, there are two types of moves. First, there is a consumer move. This is what happens if your employee, as an individual consumer, makes direct arrangements with a local mover, often found through Google or word of mouth.
What are the potential issues with consumer moves? These types of moves likely do not include add-on services, such as packing help. In some cases, the move may not be insured. Consumer moves can be risky because moving fraud—where crooked companies hold your belongings hostage until you pay extra money, not in your agreement—is on the rise.
Corporate moves, on the other hand, are typically based on long-term relationships between employers (or their agents) and established moving companies that have already been vetted. Contracts generally including packing, loading and unpacking services, property damage insurance, and a guaranteed window of delivery—all conducted by thoroughly-screened, drug-tested movers.
While a corporate move delivers a much better relocation experience to employees, the cost may exceed your $5,000 lump sum right there. And if your cash-only relocation program doesn’t include a supplier network or at least some detailed recommendations, there are numerous pitfalls your employees can encounter.
If your relocating employees own a home, they will face a host of time-consuming home buying and selling tasks and fees. Even if they don’t, they may incur a lease breakage fee. Plus, few relocating employees can secure permanent housing in advance of moving. As a result, offering temporary housing is the best way to speed the move and ease the transition while employees ramp up in their new location.
The challenge: furnished housing costs 40% or more the cost of an unfurnished apartment. Hotel living can be even pricier and may translate to employees eating out every night. In which case, you’ll have to ask yourself, how far will that $5,000 relocation allowance really go?