Eddy’s HR Mavericks Encyclopedia
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Employee Relocation
Relocation can be a stressful experience. Ensure smooth moves and faster transitions for your employees to their new locations with these tips.
What Is Employee Relocation?
Employee relocation refers to the process of moving an employee from one location to another for work-related reasons. It could involve moving an employee from one company office to another within the same city, or moving an employee from one city or country to another to work in a different branch or location. Employee relocation can be initiated by either the employer or the employee, and the services involved can be carried out internally or through a third-party vendor.
What are Relocation Assistance Companies?
According to CapRelo, relocation assistance companies “...provide support in different areas, including packing and unpacking services, transportation and moving costs, temporary lodging, disposition of a residence, acquisition of a new residence, mortgage assistance, cultural training, and language training.” Essentially, these third-party vendors manage relocation support for your employees so that you are able to offer a larger variety of relocation benefits and assistance with less direct work from you. These services can be particularly beneficial when managing employee relocation out of the country.
Reasons for Employee Relocation
There’s a wide variety of different scenarios for which employee relocation can be beneficial. Here are some of the most common.
- Opening a new location. In order to help establish a new location, an experienced employee may be relocated to ensure that operations run smoothly from the start. This could be to help train and onboard new staff or to bring specialized skills or knowledge.
- Receiving a promotion. In instances where a higher-level position needs to be filled, an employee may express interest and apply for the open promotion. In other cases, the employer may identify a top-performing employee and offer them a promotion. In either case, this could be cause for an employee to relocate.
- Filling an open position. Companies may ask employees to move in order to best fill the needs of the organization. In such cases, the lateral move may be incentivized by promises of the move being a temporary steppingstone to segue an employee into a more advanced position.
- Employee request. For a number of personal reasons, an employee may want to move but continue to work with your organization. In such cases, an employee might request to be relocated to a different branch or into a remote position.
- Cultural consistency. Relocating an existing employee to a new location helps maintain consistency in company culture and values across different locations.
- Retention via career growth. Companies retain talent by offering new opportunities for career growth and advancement to skilled employees.
Components of an Employee Relocation Policy
An employee relocation policy documents:
- The company's expectations and requirements for relocating employees
- Who is eligible for relocation assistance
- Tax implications and repayment requirements
- The benefits and assistance that will be provided to the employee during the relocation process
- Whether the services will be provided by in-house or a third-party relocation services provider
The policy should clearly outline the process for requesting and approving relocations and the timelines and steps involved. Upon reviewing the policy, an employee should feel secure and confident in taking such a life-changing step. Here’s what to be sure to include.
Eligibility Criteria
The policy should define which employees are eligible for relocation and the conditions that must be met to qualify for relocation benefits. What this entails varies depending on the company and the nature of the relocation. However, here are some common eligibility criteria.
- Length of employment. To be eligible for relocation assistance, the employee must have worked for the company for a certain length of time, such as one or two years.
- Job level. The relocation policy may specify that only employees at a certain job level or above are eligible for relocation.
- Performance. The employee must have a satisfactory or above-average performance rating to be eligible for relocation assistance.
- Reason for relocation. The relocation must be for a valid reason, such as a transfer to a new position or a business expansion.
- Location of relocation. The employee may need to relocate to a specific location or region to be eligible for relocation assistance.
Relocation Process
The policy should define the process for requesting and approving relocations, including timelines, paperwork requirements, and who is responsible for managing and overseeing the relocation process. This should also define what responsibilities fall on the employee and what responsibilities fall on the employer during this process.
Relocation Assistance and Benefits
The terms relocation assistance and relocation benefits are often used interchangeably to refer to the support provided to employees who are required to move to a new location for work. However, relocation assistance generally refers to the services and resources provided to help an employee navigate the relocation process. Here are some of the more common services offered.
- Help finding a new home. Employers may offer assistance to relocating employees in finding a new home in the destination location, such as providing a real estate agent or relocation specialist to help the employee find suitable housing options. This may include assistance with searching for rental properties or homes to purchase, negotiating lease terms or purchase prices, and arranging for property inspections.
- Job-search assistance for the employee's spouse or partner. If the employee's spouse or partner also works, the employer may offer assistance in finding job opportunities at the destination location. This may include providing access to job search resources such as job boards or networking events, and offering resume-writing or interview-coaching services. Employers may also have partnerships with local businesses to help the relocating spouse or partner find employment opportunities.
- Assistance with enrolling children in new schools. Employers may offer assistance in finding suitable schools for the children of relocating employees, such as providing information on local school systems and arranging for school tours. Employers may also cover expenses related to school enrollment, such as application fees or tuition deposits. Additionally, employers may provide support to help the children transition to their new schools, such as arranging for meetings with teachers or counselors to discuss academic needs or arranging for extracurricular activities.
The term relocation benefits, however, may specifically refer to the financial or material assistance provided to the employee, such as:
- Reimbursement for moving expenses. The employer may reimburse the employee for expenses incurred during the relocation process. These expenses might include packing and shipping of household goods, transportation costs, and other expenses related to the move.
- Temporary housing. This is accommodation provided to the employee for a short period until they find a permanent residence in the new location. This could be in the form of a hotel or serviced apartments.
- Travel expenses. This includes the cost of travel to the new location, such as airfare, rental car, or other transportation costs.
- Loss-on-sale assistance. This is financial assistance to employees who are selling their homes in the old location at a loss. This may include paying the difference between the sale price and the outstanding mortgage or a percentage of the loss incurred.
In practice, the two terms are often used together in an employer's overall relocation policy.
Tax Implications
When an employer provides relocation benefits to an employee, it may have tax implications for both parties. The policy should explain how relocation benefits are treated for tax purposes, including any tax-exempt benefits and how they are calculated. The policy should also outline any taxable income that may result from certain benefits, such as reimbursement for non-deductible expenses, and how it will be reported and withheld. For example, if an employer pays for an employee's temporary housing during the relocation process, the value of that housing may be considered taxable income to the employee. The policy should explain this potential tax implication and provide guidance on how the employee can report and pay any taxes owed. Additionally, the policy should provide information on any tax deductions or credits that may be available to the employee as a result of their relocation, such as deductions for moving expenses or the foreign earned income exclusion (if they are relocating abroad). This information can help the employee understand the potential financial impact of the relocation on their taxes and plan accordingly.
Repayment Requirements
This part of the policy specifies the conditions in which an employee who has received relocation benefits and/or assistance would be required to repay the company all or some of the financial value of those benefits if they choose to leave the company within a certain time frame after the relocation. This protects the company’s investment in an employee’s relocation. Some companies require the employee to repay the full amount of benefits received if they leave the company within a certain time frame (i.e., within six months of relocation date), while others have a sliding scale system where the amount owed decreases over time (i.e., 80% repayment if the employee leaves within the first six months, 60% if they leave within the first year, and so on). The policy should also specify the repayment schedule, the circumstances under which repayment may be required, and any exceptions to the policy. In addition, the policy should address the process for handling repayment, such as whether the amount owed will be deducted from the employee's final paycheck or if the employee will be required to make separate payments to the company.
Exceptions
This part of the policy covers any circumstances or situations that may deviate from standard policy. This allows for the policy to be maintained while permitting an individual to circumvent one or more restrictions. This section should include all allowable exceptions and the circumstances under which they may be granted. It should also specify who has the authority to approve exceptions and what documentation or justification may be required to support the exception request. By outlining these exceptions, the company can ensure that the relocation policy is fair and consistent while still allowing for flexibility in unique situations. For additional guidance, see here for an excellent sample policy from SHRM.
How to Manage the Employee Relocation Process
Your role in your employee’s relocation depends on the benefits you offer, whether or not you’re using a relocation service, your company's policies and the employee’s needs. Here’s an overview of how to manage an employee’s relocation from start to finish.
Step 1: Identify the Need and Determine Eligibility
Evaluate the employee's job responsibilities and whether they require a physical presence in a new location. Eligibility is often determined based on the employee's role, level of seniority, and how critical their skills are to the company's operations. Employers may also consider the cost of relocation and the employee's willingness to relocate. By closely referencing your company’s relocation policy’s eligibility criteria, it should be clear whether or not the employee is eligible for benefits and assistance.
Step 2: Review Policy and Provide Relocation Agreement
Communication is the key to a smooth relocation process. It may be wise to schedule a meeting with the employee to review the policy together and answer any questions. From there, provide them with a Relocation Agreement. This is a document that outlines the specific obligations of both the company and the employee. Ideally, this should be approved and provided to the employee at least 10 days in advance of the relocation.
Step 3: Connect Employee to Their Relocation Point of Contact or Provide the Benefits Directly
If using a relocation service, connect the employee with their point of contact, who will handle the majority if not all of the process of moving the employee from one place to the next. If not, it’s likely that you’re offering a more simple relocation package, which typically consists of offering the employee an allowance, bonus, or reimbursement. In this case, this is where the method of paying the employee’s allowance (or managing the reimbursement) would be clearly communicated and implemented.
Step 4: Evaluate the Program and Monitor the Adjustment
Periodically evaluate the program to identify areas for improvement. This includes evaluating the policy, vendor performance, and employee satisfaction with the relocation process. The employee's adjustment to the new location and job should also be monitored to ensure that they are settling in well. If issues arise, offering additional support services to help the employee overcome those challenges may be beneficial.
Legal and Compliance Considerations When Helping Employees Relocate
There are several legal and compliance considerations that companies must keep in mind, particularly when not employing the help of a relocation expert.
Immigration and Visa Requirements
If the employee is relocating to a different country, the employee must have the necessary immigration and visa requirements to work legally in the new location.
Employment Law Compliance
Companies must ensure that they comply with all employment laws in the new location, such as minimum wage, overtime, and discrimination laws.
Tax Compliance
Companies must ensure that they comply with all tax laws in the new location. This includes ensuring that the employee is properly registered for tax purposes and that the company is withholding the correct amount of taxes from the employee's paycheck.
Data Privacy
If the employee's personal data will be transferred to a different country, the company must ensure that they comply with data privacy laws, such as the EU's General Data Protection Regulation (GDPR).
Relocation Agreement
The company should ensure that the relocation agreement outlines the specific obligations of both the company and the employee. This agreement should cover items such as expenses, repayment provisions, and duration of the relocation assistance.
Topics
Kayla Farber
Kayla is the Chief Innovation Officer at Hero Culture, where the passion is to create company cultures of retention using the power of personality.
Frequently asked questions
Other Related Terms
Eddy’s HR Mavericks Encyclopedia
Employee Relocation
Relocation can be a stressful experience. Ensure smooth moves and faster transitions for your employees to their new locations with these tips.
What Is Employee Relocation?
Employee relocation refers to the process of moving an employee from one location to another for work-related reasons. It could involve moving an employee from one company office to another within the same city, or moving an employee from one city or country to another to work in a different branch or location. Employee relocation can be initiated by either the employer or the employee, and the services involved can be carried out internally or through a third-party vendor.
What are Relocation Assistance Companies?
According to CapRelo, relocation assistance companies “...provide support in different areas, including packing and unpacking services, transportation and moving costs, temporary lodging, disposition of a residence, acquisition of a new residence, mortgage assistance, cultural training, and language training.” Essentially, these third-party vendors manage relocation support for your employees so that you are able to offer a larger variety of relocation benefits and assistance with less direct work from you. These services can be particularly beneficial when managing employee relocation out of the country.
Reasons for Employee Relocation
There’s a wide variety of different scenarios for which employee relocation can be beneficial. Here are some of the most common.
- Opening a new location. In order to help establish a new location, an experienced employee may be relocated to ensure that operations run smoothly from the start. This could be to help train and onboard new staff or to bring specialized skills or knowledge.
- Receiving a promotion. In instances where a higher-level position needs to be filled, an employee may express interest and apply for the open promotion. In other cases, the employer may identify a top-performing employee and offer them a promotion. In either case, this could be cause for an employee to relocate.
- Filling an open position. Companies may ask employees to move in order to best fill the needs of the organization. In such cases, the lateral move may be incentivized by promises of the move being a temporary steppingstone to segue an employee into a more advanced position.
- Employee request. For a number of personal reasons, an employee may want to move but continue to work with your organization. In such cases, an employee might request to be relocated to a different branch or into a remote position.
- Cultural consistency. Relocating an existing employee to a new location helps maintain consistency in company culture and values across different locations.
- Retention via career growth. Companies retain talent by offering new opportunities for career growth and advancement to skilled employees.
Components of an Employee Relocation Policy
An employee relocation policy documents:
- The company's expectations and requirements for relocating employees
- Who is eligible for relocation assistance
- Tax implications and repayment requirements
- The benefits and assistance that will be provided to the employee during the relocation process
- Whether the services will be provided by in-house or a third-party relocation services provider
The policy should clearly outline the process for requesting and approving relocations and the timelines and steps involved. Upon reviewing the policy, an employee should feel secure and confident in taking such a life-changing step. Here’s what to be sure to include.
Eligibility Criteria
The policy should define which employees are eligible for relocation and the conditions that must be met to qualify for relocation benefits. What this entails varies depending on the company and the nature of the relocation. However, here are some common eligibility criteria.
- Length of employment. To be eligible for relocation assistance, the employee must have worked for the company for a certain length of time, such as one or two years.
- Job level. The relocation policy may specify that only employees at a certain job level or above are eligible for relocation.
- Performance. The employee must have a satisfactory or above-average performance rating to be eligible for relocation assistance.
- Reason for relocation. The relocation must be for a valid reason, such as a transfer to a new position or a business expansion.
- Location of relocation. The employee may need to relocate to a specific location or region to be eligible for relocation assistance.
Relocation Process
The policy should define the process for requesting and approving relocations, including timelines, paperwork requirements, and who is responsible for managing and overseeing the relocation process. This should also define what responsibilities fall on the employee and what responsibilities fall on the employer during this process.
Relocation Assistance and Benefits
The terms relocation assistance and relocation benefits are often used interchangeably to refer to the support provided to employees who are required to move to a new location for work. However, relocation assistance generally refers to the services and resources provided to help an employee navigate the relocation process. Here are some of the more common services offered.
- Help finding a new home. Employers may offer assistance to relocating employees in finding a new home in the destination location, such as providing a real estate agent or relocation specialist to help the employee find suitable housing options. This may include assistance with searching for rental properties or homes to purchase, negotiating lease terms or purchase prices, and arranging for property inspections.
- Job-search assistance for the employee's spouse or partner. If the employee's spouse or partner also works, the employer may offer assistance in finding job opportunities at the destination location. This may include providing access to job search resources such as job boards or networking events, and offering resume-writing or interview-coaching services. Employers may also have partnerships with local businesses to help the relocating spouse or partner find employment opportunities.
- Assistance with enrolling children in new schools. Employers may offer assistance in finding suitable schools for the children of relocating employees, such as providing information on local school systems and arranging for school tours. Employers may also cover expenses related to school enrollment, such as application fees or tuition deposits. Additionally, employers may provide support to help the children transition to their new schools, such as arranging for meetings with teachers or counselors to discuss academic needs or arranging for extracurricular activities.
The term relocation benefits, however, may specifically refer to the financial or material assistance provided to the employee, such as:
- Reimbursement for moving expenses. The employer may reimburse the employee for expenses incurred during the relocation process. These expenses might include packing and shipping of household goods, transportation costs, and other expenses related to the move.
- Temporary housing. This is accommodation provided to the employee for a short period until they find a permanent residence in the new location. This could be in the form of a hotel or serviced apartments.
- Travel expenses. This includes the cost of travel to the new location, such as airfare, rental car, or other transportation costs.
- Loss-on-sale assistance. This is financial assistance to employees who are selling their homes in the old location at a loss. This may include paying the difference between the sale price and the outstanding mortgage or a percentage of the loss incurred.
In practice, the two terms are often used together in an employer's overall relocation policy.
Tax Implications
When an employer provides relocation benefits to an employee, it may have tax implications for both parties. The policy should explain how relocation benefits are treated for tax purposes, including any tax-exempt benefits and how they are calculated. The policy should also outline any taxable income that may result from certain benefits, such as reimbursement for non-deductible expenses, and how it will be reported and withheld. For example, if an employer pays for an employee's temporary housing during the relocation process, the value of that housing may be considered taxable income to the employee. The policy should explain this potential tax implication and provide guidance on how the employee can report and pay any taxes owed. Additionally, the policy should provide information on any tax deductions or credits that may be available to the employee as a result of their relocation, such as deductions for moving expenses or the foreign earned income exclusion (if they are relocating abroad). This information can help the employee understand the potential financial impact of the relocation on their taxes and plan accordingly.
Repayment Requirements
This part of the policy specifies the conditions in which an employee who has received relocation benefits and/or assistance would be required to repay the company all or some of the financial value of those benefits if they choose to leave the company within a certain time frame after the relocation. This protects the company’s investment in an employee’s relocation. Some companies require the employee to repay the full amount of benefits received if they leave the company within a certain time frame (i.e., within six months of relocation date), while others have a sliding scale system where the amount owed decreases over time (i.e., 80% repayment if the employee leaves within the first six months, 60% if they leave within the first year, and so on). The policy should also specify the repayment schedule, the circumstances under which repayment may be required, and any exceptions to the policy. In addition, the policy should address the process for handling repayment, such as whether the amount owed will be deducted from the employee's final paycheck or if the employee will be required to make separate payments to the company.
Exceptions
This part of the policy covers any circumstances or situations that may deviate from standard policy. This allows for the policy to be maintained while permitting an individual to circumvent one or more restrictions. This section should include all allowable exceptions and the circumstances under which they may be granted. It should also specify who has the authority to approve exceptions and what documentation or justification may be required to support the exception request. By outlining these exceptions, the company can ensure that the relocation policy is fair and consistent while still allowing for flexibility in unique situations. For additional guidance, see here for an excellent sample policy from SHRM.
How to Manage the Employee Relocation Process
Your role in your employee’s relocation depends on the benefits you offer, whether or not you’re using a relocation service, your company's policies and the employee’s needs. Here’s an overview of how to manage an employee’s relocation from start to finish.
Step 1: Identify the Need and Determine Eligibility
Evaluate the employee's job responsibilities and whether they require a physical presence in a new location. Eligibility is often determined based on the employee's role, level of seniority, and how critical their skills are to the company's operations. Employers may also consider the cost of relocation and the employee's willingness to relocate. By closely referencing your company’s relocation policy’s eligibility criteria, it should be clear whether or not the employee is eligible for benefits and assistance.
Step 2: Review Policy and Provide Relocation Agreement
Communication is the key to a smooth relocation process. It may be wise to schedule a meeting with the employee to review the policy together and answer any questions. From there, provide them with a Relocation Agreement. This is a document that outlines the specific obligations of both the company and the employee. Ideally, this should be approved and provided to the employee at least 10 days in advance of the relocation.
Step 3: Connect Employee to Their Relocation Point of Contact or Provide the Benefits Directly
If using a relocation service, connect the employee with their point of contact, who will handle the majority if not all of the process of moving the employee from one place to the next. If not, it’s likely that you’re offering a more simple relocation package, which typically consists of offering the employee an allowance, bonus, or reimbursement. In this case, this is where the method of paying the employee’s allowance (or managing the reimbursement) would be clearly communicated and implemented.
Step 4: Evaluate the Program and Monitor the Adjustment
Periodically evaluate the program to identify areas for improvement. This includes evaluating the policy, vendor performance, and employee satisfaction with the relocation process. The employee's adjustment to the new location and job should also be monitored to ensure that they are settling in well. If issues arise, offering additional support services to help the employee overcome those challenges may be beneficial.
Legal and Compliance Considerations When Helping Employees Relocate
There are several legal and compliance considerations that companies must keep in mind, particularly when not employing the help of a relocation expert.
Immigration and Visa Requirements
If the employee is relocating to a different country, the employee must have the necessary immigration and visa requirements to work legally in the new location.
Employment Law Compliance
Companies must ensure that they comply with all employment laws in the new location, such as minimum wage, overtime, and discrimination laws.
Tax Compliance
Companies must ensure that they comply with all tax laws in the new location. This includes ensuring that the employee is properly registered for tax purposes and that the company is withholding the correct amount of taxes from the employee's paycheck.
Data Privacy
If the employee's personal data will be transferred to a different country, the company must ensure that they comply with data privacy laws, such as the EU's General Data Protection Regulation (GDPR).
Relocation Agreement
The company should ensure that the relocation agreement outlines the specific obligations of both the company and the employee. This agreement should cover items such as expenses, repayment provisions, and duration of the relocation assistance.
Topics
Kayla Farber
Kayla is the Chief Innovation Officer at Hero Culture, where the passion is to create company cultures of retention using the power of personality.
Frequently asked questions
Other Related Terms
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