When moving their employees for work, most companies offer what is called a relocation package. This is meant to cover some to most of the expenses and services associated with a move. Not every company offers to cover the full cost of an employee’s move. The key is to offer benefits that are fair and support your company’s larger goals of attracting and supporting your talent who commit to a move of behalf of their employer.
Dwellworks' VP of Content and Research Maura Carey breaks down the components of a reasonable relocation package below.
What is a Relocation Package?
Companies have two primary choices when they elect to offer relocation benefits to their employees: a lump sum/cash benefit that the employee uses to offset their costs or a managed benefit, where the company engages professionals to deliver the services required and pays them directly. The company can define any policy it chooses, provided the benefits are consistent with its HR policies and practices overall.
Defining a Lump Sum
Lump sums can be applied to the entirety of an employee’s moving costs, or a specific portion of them. Many companies offer a lump sum intended to cover things like the cost of canceling a lease, moving a car and belongings, finding a new place to live, and making deposits. The average lump sum offered in the US is between $5,000 - $10,000, depending on the size of the company. This benefit is taxable, so companies have the option to gross up the benefit (covering the cost of taxes) or offer a benefit that nets out the cost of taxes. In general, smaller companies with fewer employees and relocation requests offer more limited lump sums, but the benefit does not have to be tied to the size of the business.
Approximately one-third of large employees offer a relocation package that is partially or completely a lump sum benefit. When factoring in all companies that offer a relocation benefit, we estimate at least half use a lump sum benefit. In most situations, companies are going to be more willing to give more relocation assistance to an existing employee than a new hire. 36% of large companies provide full reimbursement for new hires, and 64% provide full reimbursement for relocating employees. 56% will provide a lump sum payment for both relocating employees and new hires. These data points are offered as indicators and each company makes its own policy and benefits decision. Typically, an individual who is offered a lump sum benefit also manages their own move (finding a mover, exiting a lease, organizing their move and transition, finding a few places to live, both temporary and long term, and finding and moving into a new property in their destination.) If the transferring employee has school-age children, they also must sort and select those services.
Defining a Managed Benefit
Other companies offer a managed benefit. The employer pays to have a professional services firm coordinate the move and may provide a small stipend to employees to cover miscellaneous expenses. Companies who choose to outsource these services will use a third party like Dwellworks Move to manage the administration of their relocation benefits. If programs are high volume, cross-border, and otherwise complicated, the employer may hire specialists for those needs. Companies that are focused on straightforward services like finding a new rental home and coordinating the physical move have access online to vetted relocation support services suppliers like Dwellworks Move to simplify and streamline the process.
Creating a Moving Budget
With either program structure, a budget must be established by the company (typically called a cost estimate) or by the employee to define the costs associated with the move. For an employee receiving a lump sum, a budget will help them understand which costs will be covered and which will be out of pocket.
Using tools provided by Dwellworks Move, employers and employees can access calculators to estimate moving costs. In a managed move, the employer will pay for supplier-delivered services, but employees will still want to know the cost of rentals in their new city. Using Dwellworks Move's tools and services to streamline the entire relocation process will typically result in a better service experience and provide better insight into your company’s relocation costs than simply providing cash benefits to your transferring employees.
Trust us to organize the entire relocation experience and especially to help find great housing options. We’ve moved over half a million professionals and their families. Reach out today to our sales leader Hannah Sekerak at Hannah.Sekerak@dwellworks.com to get started.
