Managing Employee Relocation

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Scope—This toolkit provides an overview of effective practices for relocating employees within the United States. It does not include global relocation practices, relocation data, or state and local laws such as tax or contract laws that may affect relocations.  

Overview

In an employee relocation, an organization moves employees from one location to another. This toolkit discusses the basics of effective relocation programs, including policy development, communication issues, legal issues and economic factors. It covers elements of an employer relocation program such as relocation agreements, moving expenses, support for families, and housing and real estate issues. This toolkit also discusses how to outsource the relocation program and how to select a vendor.

Background

Attracting and retaining talent is the number one concern facing organizations, according to the Conference Board's C-Suite Challenge 2018. To attract and keep talented employees, human resource professionals must ensure they have competitive relocation packages and effective relocation practices and policies. Relocation assistance can help lure 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 talent management program.

As the economy continues to improve, organizations are expected to maintain or increase their relocation volumes and budgets. Atlas Van Lines' 2018 Corporate Relocation Survey found that roughly half of the surveyed firms saw an increase or maintained their relocation volume and budgets. See Corporate Relocations Continue to Grow.

Business Case

An employer's best resources—and its largest costs—are the people who bring creativity, productivity and ultimately profitability to a company. A good talent management program can improve an employer's competitiveness, but it does not ensure that the talent is located where it is most needed. Employers might want new hires and current employees to relocate for continued career development or to bring their knowledge to different subsidiaries or locations. These moves can be a daunting task for the employer and a high-stress situation for the employee. If a relocation is not handled successfully, it threatens the employer's ability to retain the employee—and it risks losing someone the employer has devoted time and money to develop and move.

Relocation is fraught with risk. An employee's willingness to relocate does not mean the employee has a high level of commitment to the organization. Employers know that employee retention rates drop after relocation. Employees who adapt well find themselves in new locations with new opportunities that can draw them away from the employer. Employees whose moves go badly, or who conflict with their new bosses or clash with their new locations, can end up leaving the jobs they moved to take.

HR's Role

Human resources  departments frequently manage organizations' employee relocation programs. Relocation is no longer a matter of human resources or a hiring manager approving moving expenses. Relocation now requires a strategic focus on the company's business and finances to ensure that the relocation program advances the company's strategy. HR must work with other parts of the organization to ensure relocations are managed consistently. See Mobility Professionals Take on HR-Like Qualities.

The business of relocating employees requires human resources or relocation/mobility managers to do the following:

  • Set and manage policies by working directly with internal business partners and chief operating officers.
  • Identify employees best suited for mobility opportunities by working with talent officers and managers.
  • Select and manage a portfolio of vendors and external service providers by working with procurement or financial officers.
  • Identify and mitigate legal issues, such as tax or immigration questions, by working with the legal department.

Human Resources  must consider the total program strategically, financially and operationally. As with any human resources  program, evaluations and metrics are essential to proving the program's strategic value.

Policy Development and Design

Written policies establish clear rules to ensure that all employees are treated consistently and fairly. A written policy prevents favoritism and pressure from managers to provide different treatment for their own hires or preferred employees. A policy also lays out information so that employees who relocate know exactly what is included and can make informed decisions.

Relocation policies generally have three levels of coverage, depending on the group to which an employee belongs:

  • New hires, typically young recruits or those with limited experience.
  • Experienced employees, such as those who have been in the workforce for some time and who are more likely to be settled with a home and/or a family.
  • Executives and other high-level employees, who are likely to be deeply entrenched in their current locations and have family and community ties.

Employers adopt policies to fit their circumstances and could have policies for all three levels.

Employers want to offer attractive relocation packages to executives and high-level employees, but are faced with the high costs associated with such packages. The key question is whether the financial gain of hiring or transferring an employee will outweigh the cost of the relocation. There is considerable pressure on HR to trim costs and tweak polices so employees can still be relocated to where they are needed. Using metrics such as cost/benefit analysis, for example, when analyzing real estate costs, helps create a picture of the total costs of the move.

More companies are offering flexible relocation packages to contain costs by offering core relocation benefits and optional benefits based on employee need according to Aires, a relocation company. See More Companies Offer Flexible Benefits for Relocating Employees

Elements of a Comprehensive Relocation Program

There is no magic formula when it comes to relocation packages, but organizations must consider certain elements when constructing a domestic relocation program.

Bonuses and pay adjustments

Relocation monetary incentives are generally the "tipping point" in convincing employees to relocate. The health of the job market will influence what incentives employees need to make the decision to move. Cost-of-living adjustments and relocation bonuses are common.  Organizations in states with high tax rates may need to use these incentives to lure employees to relocate. See High-Tax States Could Struggle to Lure Out-of-State Workers

Site visits

Relocation programs usually allow site visits so the employee and possibly a 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 common.

Help with buying and selling homes

Employer relocation programs include help with marketing a home an employee needs to sell or with arranging for purchase of the employee's house if it does not sell by a specified time. Other help that policies can offer include 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 accepting or rejecting the relocation offer. More about the impact the economy has on housing and relocations is in the subsection "Housing markets."

Moving expenses

Employers may offer reimbursement for expenses like house-hunting, temporary living expenses and transportation of household goods. Some organizations forego reimbursement and instead provide lump sums, paid upfront to relocating employees to cover all expenses. Employees keep whatever might be left over or pay any expenses the lump sum does not cover. Lump sums mean human resources does not have to haggle over expenses or keep detailed records of an employee's every receipt.

Payback clauses

Organizations invest a lot on relocations and frequently lose those investments when employees leave shortly after a move. A growing number of employers include a payback clause in relocation agreements to recoup those costs. Under a payback clause, a relocated employee agrees 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, usually 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 this practice. See Relocation: Moving and Relocations Expense Agreement.

Family support

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 his or her family. Spouses or partners who move with the employee might need help finding jobs. Children's issues with relocations, such as the pressures of new schools and loss of old friendships, are often overlooked. In addition, a move could affect several generations if the employee has elder care responsibilities. Cultural differences among geographical areas in the United States can also disrupt the family, interfering with the success of the assignment. See At Some Companies, You Can't Hire One Spouse Without Helping the Other Job Hunt

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 spouse.

Communication

Once a policy is in place, communicating it to employees is vital. Communicating about relocations should balance two needs—the need to show employees they are valued and the need to inform employees about the services to which they are entitled. Poor communication about relocation can lead to stress, performance issues and high turnover rates for transferred employees. Employers must properly communicate to employees the services to which the transferee is entitled, and they should continue communication through the entire process.

A formal letter of agreement to relocate is an important initial communications tool because it sets out policy and details of the move. Employee manuals and intranet sites should make relocation policies available. E-mail provides a paper trail of communications to which human resources  can refer during relocations. Communication should include a debriefing process once the move is made, so the employer can assess how the relocation went. See Words to Move By.

Special Circumstances

This toolkit focuses on the permanent relocation of individual employees, but there are two special circumstances that HR should consider when creating relocation policies.

Group moves

Group moves involve entire organizations or business functions that move far enough away that employees and their families must relocate as well. Group moves can strain an organization's relocation resources and preoccupy a large portion of the workforce for a long period, all while the organization tries to maintain its normal business production. Group moves have their own dynamics that HR must address, such as explaining why employees are moving (typically not for a promotion) and handling employee gossip about the move. See Managing HQ Relocations.

Temporary relocations

Temporary relocations are on the rise in corporate America. Employers find that this strategy is a great way to reduce costs while increasing productivity around a particular business initiative. Having a transfer of less than one year is financially advantageous because a family move for such a short period is rare, and it offers a significant tax savings to employers and employees as these expense reimbursements are often excludable as business expenses rather than as relocation expenses. See Short-Term Domestic Relocations Are on the Rise

Outsourcing

With the high cost of relocation and the risk of lower employee retention, relocation has become a high-stakes game. Because of the risks, relocation service outsourcing is gaining in popularity as employers turn to these services to manage the details and make moves successful.
See Relocation Partners Help HR Move Business Forward.

Vendor selection

Employers often outsource relocation because it allows them to retool their relocation programs, enhance services or cut costs by reducing internal head count. Although hundreds of companies offer services, choosing the right vendor can be difficult and depends on the organization's specific needs. Employers should begin by understanding their own goals for relocations. Proper planning and preparation—such as assembling an internal team that includes HR, finance, recruitment and procurement—will ease the vendor selection process for employers. See SHRM's Guide to Relocation Systems and Relocation Management Providers Go Digital.

Contract negotiations

The process does not stop once an employer chooses a vendor. Contract negotiation requires information and planning. For example, organizations must consider several issues when negotiating a relocation contract with a household goods (HHG) carrier: Does the carrier have sufficient backup in all parts of the country, and can the carrier be reached at any time? Does the carrier offer discounts for multiple moves? Knowing what to look for in an HHG carrier gives the employer an advantage.

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 practices among 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 convey those expectations to the vendor.

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 in the future. Surveys help assess whether the service provider delivered its promised results.

Legal Issues

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.

Relocation agreements

Just as having a contract between the employer and the relocation vendor is vital, it is also imperative to have a written relocation agreement between the employer and the relocating employee. An agreement clearly states who is responsible for what and sets 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 considered oral or implied contracts.

Personal information

HR 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.

Tax considerations

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. After December 31, 2017, the Tax Cut and Jobs Act suspends both the business deduction and the exclusion from taxable income for recipients of employer-paid moving expenses for taxable years 2018 through 2025, except for certain active-duty members of the armed forces. See President Signs Tax Bill Altering Employee Benefits and Financial Planning for Relocating Employees Can Save HR from Headaches Later.

Economic Factors

Housing markets

The real estate market has a tremendous effect on an organization's relocation program, influencing both the relocation budget and employees' willingness to move.

Some organizations help sell employees' homes, cover an employee's loss on a home sale and pay for temporary housing. When considering the real estate market, employers must look at increased costs such as duplicate housing costs and use of incentives to generate demand and stimulate 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 even buy homes themselves 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 each region. See Housing Crunch Elevates HR's Role and Improved Housing Market Calls for More Flexibility in Relocation Programs.

Willingness to relocate

Employers report that more employees are declining relocation offers, according to the Atlas survey. And when employees are 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 stakes. They may want to move out of geographical areas hit particularly hard or may just be seeking better or more stable employment options.

See:

Americans Most Often Move for Work

Don't Assume Job Seekers Will Relocate

What to Consider When Relocating Millennial Workers

Templates and Tools

Samples

Relocation Expenses Policy

Relocation Expenses Policy (Exempt)

Relocation Policy and Procedures

Temporary Assignments Policy

Relocation Expense Reimbursement Request Spreadsheet

Information tools

2017 Employee Benefits

SHRM Research Spotlight: Housing and Relocation Benefits in California

Agencies and organizations

U.S. Census Bureau—Housing Topics

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