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Need to deepen your company’s talent pool? A relocation bonus is a great way to attract talent from other areas of the country or globe.

What Is a Relocation Bonus?

A relocation bonus is a lump sum of money that a company pays to a new employee to reimburse expenses related to the person moving to take the position. A relocation bonus may be called a signing bonus, as the funds are not required to be spent only on moving expenses and can be used at the new employee’s discretion.

Relocation Bonus vs Relocation Package

A relocation bonus is a lump sum of money paid to the new employee, and they are responsible for allocation of the monies. In most cases, the company pays the relocation bonus in the employee’s first paycheck.

A relocation package is just that: a package of multiple services provided by the company. It might include assistance from pre-approved packing and transportation companies for household goods, the sale of a home, temporary housing, or free trips to the region so the new employee can familiarize themselves with the area prior to moving.

Why Is a Relocation Bonus Helpful?

A relocation bonus is helpful to both the company and the employee.

How Relocation Bonuses Help the Company

  • Larger talent pool. By offering a relocation bonus, potential candidates from outside the area will be more enticed to take a new job and move for the company.
  • Less time to fill. When the talent acquisition team or hiring manager are not restricted to one geographical area to find talent, the position can be filled much faster with potentially better talent.
  • Improved retention rates. Hiring the right fit for the role and company increases productivity and satisfaction, and there is less turnover. Someone who relocates for a position is more motivated to stay with the company.

How Relocation Bonuses Help Employees

  • Relocating isn’t cheap. Helping with the cost of relocation takes some of the financial burden of moving off the employee who is moving for the position.
  • Stress relief. Not having to worry about how you are going to fund a move across the country can help alleviate the financial stress that comes with the move.
  • Relationship building. By offering a relocation bonus, the company shows that it values the new employee and wants to start the relationship off on the right foot.

Types of Relocation Bonuses

Let’s look at three of the most common ways of delivering relocation assistance: lump sum, reimbursements, and direct billing.

Lump Sum

A fixed, one-time payment is given directly to the employee to cover moving expenses at their discretion, usually in their first paycheck.

Reimbursement

The employee pays for all expenses out of pocket and is later reimbursed by the company. Companies typically set a limit above which they will not reimburse.

Direct Billing

The company hires and directly pays for a moving company and any other services required on behalf of the employee.

How to Determine What Your Company’s Relocation Bonus Should Be

Step 1: Be Proactive

Using the steps below, create a relocation assistance policy before your company needs one.

Step 2: Consider Your Company Culture

How do you want to reflect your company’s culture in your relocation assistance?

Step 3: Determine Who Will Be Eligible for Assistance

Will your company only pay relocation assistance for C-suite level positions? Hard-to-fill positions?  Do you offer it to new employees living 25 miles away but who choose to move closer? Make sure your policy is clear about who is eligible.

Step 4: Determine the Amount the Company Can Afford to Spend on Relocation Assistance

Typically, a lump sum payment or a relocation bonus is cheaper than a full relocation package, so you need to determine how much the company can afford to spend per eligible position.

Step 5: Determine the Services That Will Be Covered

Again, does the company want to go with the ease of paying a monetary bonus and not worry about which services will be offered, or want to specify exactly what services they will assist with?

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Questions You’ve Asked Us About Relocation Bonuses

Yes. Relocation bonuses are taxable income. Most companies will gross up the amount of the bonus so the employee receives the entire bonus amount. For example, if the company offers a lump sum bonus of $5,000, the company will pay a higher gross amount to cover the taxes so the employee receives a net amount of $5,000.
No. Relocation bonuses are not and should not be expected from all companies.
A typical relocation bonus can vary from $2,000 to more than $10,000 depending on the company and the position.

Jesi is a certified HR Professional with 6+ years of experience, mostly in heavy manufacturing. She has been an HR Dept. of One through most of her career thus far and has had the opportunity to wear many different hats along the way. She has a BSBA and an MBA concentrated in HR Management and an MSA in HR Administration. Jesi has also successfully passed both the PHR and SPHR exams on her first attempt.

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