Elements of a Comprehensive Relocation Program
During employee relocation, an organization moves employees from one location to another. This article discusses the basics of effective relocation programs, including policy development, communication issues, legal issues, and economic factors.
Relocation assistance can help bring in new hires, retain current employees by giving them career development opportunities, and advance business development and operations by ensuring the right talent is in the right place at the right time. A well-designed relocation program complements an employer's entire talent management program.
Elements of a Comprehensive Relocation Program
There is no perfect formula when it comes to employee relocation packages, but organizations should seriously consider certain elements when constructing a domestic relocation program such as:
Bonuses and pay adjustments
Relocation monetary incentives are generally the major factor when convincing employees to relocate. And, the job market will influence what incentives employees need, in order to make the decision to move or to stay. Cost-of-living adjustments and relocation bonuses are common. Organizations in states with high tax rates may need to use these incentives to lure prospects or current employees in order to relocate.
Relocation programs usually allow site visits, before the move, so that the employee and possibly their spouse can see the new office, tour the community, and learn about schools, housing, and other local services. Policies can set the lengths of these visits, but a minimum of two days is most common.
Help with buying and selling homes
Employer relocation programs include help with marketing a home that an employee needs to sell, or helping with arranging for the purchase of the employee's house if it does not sell by a specified time. Other help that policies can offer includes legal and financial help for canceling leases, or assistance with getting an employee pre-qualified for a mortgage. These incentives may make the difference between an employee or prospective employee accepting or rejecting the relocation offer.
Employers may offer reimbursement for expenses like house-hunting, temporary living expenses, and transportation of household and personal items. Some organizations forego reimbursement and instead provide lump sums, paid upfront to relocate employees to cover all expenses.
Employees keep whatever might be leftover, or pay any expenses the lump sum does not cover. The benefit of a lump sum is that human resources do not have to haggle over expenses or keep detailed records of every receipt provided by the employee.
Organizations invest a lot into relocations and frequently lose those investments when employees leave shortly after a move. Because of this, a growing number of employers include a payback clause in relocation agreements to recoup those costs.
Under a payback clause, a relocated employee will normally agree to reimburse the organization all or part of the employer's expenses for the transfer, if the employee leaves the organization within a specified period, which generally is around a year to 18 months.
Industries with high turnover rates tend to use these clauses more frequently. Some employers choose not to include payback clauses, fearing the clauses may be a disincentive to relocate. Employers must confirm that state law permits payback clauses before implementing them.
Families relocating need plenty of support from the employer. Organizations should not assume that an employee's excitement to move to a new office and new residence will offset the stress of the move for the employee and their family members. Spouses or partners who move with the employee might need help finding jobs.
Their children may face issues with relocation, such as the pressures of new schools and the loss of old friendships, which are often overlooked. In addition, a move could affect several generations, if the employee has eldercare responsibilities.
Cultural differences among geographical areas in the United States can also disrupt the family, interfering with the success of the assignment. All of these aspects must be considered when relocating a prospective or current employee.
A competitive and comprehensive relocation program might include spousal assistance services that help a spouse find work, policies that give relocating employees enough time off to scout schools and other services, or help with finding elder care.
Whatever shape the employer's support for the family takes, human resources needs to involve both the employee and the employee's partner.
Once a policy is in place, communicating the plan to the employee(s) is vital. Communicating about relocations should be a balance of two needs—one, the need to show employees they are valued, and two, they need to inform employees about the services to which they are entitled to.
Poor communication about relocation can lead to stress, performance issues, and high turnover rates for transferred employees.
Additionally, a formal letter of agreement to relocate is crucial to the relocation process, because it sets out policy and details of the move. Employee manuals and web content should include relocation policies.
Email provides a paper trail of communications to which human resources can refer during the relocation process. Communication should include a debriefing process once the move is made, so the employer can assess how the relocation went.
Communicating with vendors
Some of the most important tools needed to manage relocations and minimize the unexpected are a clear relocation policy, a reputable relocation services provider, and strong communication amongst all the parties involved.
Poor communication will overshadow even the best policy and the most capable vendor. The employer must understand the expectations of the individual being relocated to fully understand and convey those expectations.
Relocation involves costs, a toll on productivity, and stress for both the individual being relocated and the employer. There is always room to improve, streamline processes, and make better vendor selections.
Companies should survey employees about the performance of their long-distance movers and other relocation service providers to help them select effective vendors for future relocations. Surveys can help assess whether or not the service provider delivered their promised results.
Relocating employees involves more than simply moving people and their goods. Employers must also consider legal issues such as contracts, data privacy issues, and taxes.
Just as having a contract between the employer and the relocation/moving vendor is vital, it is also imperative to have a written relocation agreement between the employer and the relocating employee. This agreement should clearly state who is responsible for what and set the limits of the employer's relocation policy.
An agreement protects the employer by preventing managers from making overly optimistic statements about continued employment or advancement that could be implied.
Human resources must protect employees' personal information. Using a vendor involves the transfer of the employee's personal data, and HR must perform due diligence with its vendors to ensure security.
Taxes can be a complicated issue when relocating employees. Tax considerations for temporary relocations of less than 12 months are different from tax issues related to permanent moves. Taxes vary by state and can be complicated by other factors, such as a home sale. Appropriate experts should review tax and legal issues to make certain that policies and practices are in line with the employer's legal obligations.
The real estate market has a tremendous effect on an organization's relocation program, which can influence both the relocation budget and employees' willingness to move.
Some organizations will help list/sell employees' homes, cover an employee's loss on a home sale, and/or pay for temporary housing. When considering the real estate market, employers must look at increased costs such as duplicate housing costs with the use of incentives to generate demand and stimulate the sales of homes.
Other tools to speed relocations include buyer value options, where the buyer sells the home to a third-party relocation company. In some situations, employers will even buy the employee’s homes themselves, in order to secure much-needed talent.
When making decisions, HR must also consider the real estate market on a regional basis. Because markets vary in different areas, HR may have to develop distinct relocation policies for separate locations.
Willingness to relocate
Employees are sometimes at risk of taking a loss on their homes or at the worst, being unable to sell them at all, they will be hesitant to take a relocation opportunity. But some employees, and the unemployed, hurt by recent tough times and a tough job market, are more willing to pull up their ground roots and move for a job opportunity.
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