5 Considerations for Your Company Relocation Policy

With the race to attract and retain employees as competitive as ever, companies have learned that great talent knows no borders.

Today, it’s not uncommon for remote hires to agree to work from home and travel to the office when needed. But for many roles, regular in-person interaction might be preferable. In situations like these, a company relocation policy is an important tool to have on hand.

Consider these five elements when building your relocation policy to ensure it aligns with your company culture and hiring strategy.

1. Recruiting Guidelines

It’s important to clearly define provisions for when it is acceptable to pursue out-of-state candidates. Whether it’s always an option for any role, only permissible once the search for a local candidate has been exhausted, or only an option for highly competitive departments (ie. engineering or executives), your policy should clearly state the terms and conditions under which a hiring manager is permitted to offer a relocation package.

This provision will ensure that every department is treated fairly, and no promises are made during recruitment that cannot be kept. This should also include guidelines for interviewing out-of-state candidates, such as what expenses will be covered for travel and accommodations. Work with your finance team to determine a fair budget for employee relocation.

2. Reimbursement Package

The reimbursement package is the most important element of a relocation policy, but it is often vague when it should include the bulk of the policy’s specifics. Depending on how you approach it, you may decide to create an accountable plan, where the employee must adequately report their expenses and provide receipts. Alternatively, you might offer a nonaccountable plan, providing a fixed amount to spend as they see fit on relocation expenses.

Consider these questions you’re crafting your reimbursement provisions:

  • What amount should employees receive at each level of experience (e.g., entry level, management, etc.)?

  • What aspects of the relocation should be covered (e.g., movers, housing, transportation)?

  • How will we handle household relocations (e.g., temporary housing, spouse job assistance, childcare support)?

Once you have an idea of the different factors you may encounter, you can begin to establish guidelines for what you will and will not cover. For example, you may be willing to cover any fees associated with the termination of their current lease, but you will not provide reimbursement for vehicle relocation. You may also categorize different employee types to account for things like job level or role type. This will differ from company to company, but we suggest you work closely with your finance team and legal advisor to ensure your policy is comprehensive and compliant.

3. Market Salary Averages

A role in the suburban midwest may receive a significantly lower salary than the same role in a more urban area, and it is important to be aware of these discrepancies when hiring an out-of-state employee. While $35,000 may represent a comfortable income in Kalamazoo, Michigan, that salary would not allow for the same quality of life in San Francisco or New York. On the flip side, someone relocating from a metropolitan center might be facing a pay cut to relocate to a more rural area.

It’s important to talk through market averages with your candidates and be prepared to make adjustments to ensure their quality of life will not suffer from relocation. However, be careful not to offer an unfair advantage in your negotiation. A new hire should not make significantly more than their direct peer simply because they came from an area with a higher cost of living.

4. Taxation

Whether you offer an accountable or nonaccountable reimbursement plan becomes especially important when it comes to taxation. Relocation reimbursement is considered taxable income to employees, and you can choose to deduct the taxes from the fixed amount up front, otherwise you must report the amount of this benefit when you complete the employee’s Form W-2.

5. Internal Relocations

When you open up multistate office locations, it’s likely that some of your existing employees will relocate to the new office. Ideally, this relocation will follow the same provisions as new hire relocations, but if there are any amendments or exceptions, be sure to highlight them with your employees. As relocation can be expensive, you might consider adding a condition that an employee who leaves the company, voluntarily or involuntarily, within a certain period of time will agree to return the final reimbursement to the company.

Relocation policies look different at different companies, but it is crucial to document your unique conditions for relocation so that you’re prepared when teams seek to bring on an out-of-state candidate. If all candidates and employees understand your policy, there is less room for error and more opportunity to enrich your candidate pool.

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