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Global Immigration

Employee Relocation Policies: Strategies, Challenges, and Best Practices

Professionals are more willing to relocate for work than ever. Serve the business and your employees by creating a comprehensive relocation policy that addresses compliance, follows relocation best practices, and saves room for flexibility.

Table of contents

Key Takeaways

  1. Relocation can benefit your business, but only if you have the right policy
  2. The right relocation policy can streamline application processes, help companies stay on budget, give employees a better experience, and more
  3. A fool-proof relocation policy will address compliance considerations for the new location, economic and cultural factors, expectations and responsibilities for both parties, and leave room for amendments as laws or circumstances change

Americans are still frequently changing jobs, but they’re not relocating as often.

A survey by Challenger, Grey, and Christmas that polled more than 3,000 Americans in Q1 2023, found that only 1.6% of job seekers relocated for their new position (not to be confused with global immigration, where workers arrive in foreign countries for work).

According to the survey, these are the lowest relocation levels for any quarter since 1986, but that doesn’t mean professionals aren’t interested in global mobility.

Wakefield Research for Graebel Companies Inc reported that 59% of workers said they were more willing to relocate for work in 2021 than in previous years, with 31% willing to relocate internationally.

The gap in relocation numbers and those interested in relocation could be explained by company relocation policies.

A relocation policy is an employer-sponsored benefit package that covers the financial and logistical factors that help employees seamlessly move for work. The policy may also cover legal, economic, cultural, and communication factors.

Employers often have specific goals they want to achieve through their corporate relocation policy. This is different from a work-from-anywhere (WFA) policy, where employees choose to work in a different location for personal reasons, such as improved happiness or financial reasons.

Additionally, WFA policies don’t typically include company-provided benefits, where relocation policies may.

With workers willing to relocate, organizations may want to create or revisit their company relocation policies to ensure it contains important facets that protect employers and employees.

What are the key components of a comprehensive relocation policy?

A comprehensive company relocation policy will cover elements such as scope, eligibility, benefits, costs, return date, and so on. See below for a breakdown of the most important factors to outline:

  1. Purpose and scope: clearly articulates why the policy exists and whom it covers
  2. Eligibility criteria: defines which employees qualify for relocation assistance
  3. Relocation benefits: outlines the support and services provided (ex. moving expenses, housing assistance, travel allowances and more)
  4. Cost coverage: specifies what costs the company covers and any limits or caps
  5. Duration of benefits: stipulates how long the benefits last post-relocation
  6. Return obligations: details any commitments the employee must fulfill if they leave the company after relocation.

Beyond setting expectations around eligibility, responsibilities, and finances, refining a relocation policy provides additional positive outcomes.

Benefits of a well-defined relocation policy

A clear relocation policy not only helps employers ensure they treat all relocated employees fairly, but also creates:

  • Consistency in applications: a standardized application process means all employees receive the same benefits, fostering fairness and transparency.
  • Smart cost management systems: methodized relocation policies help organizations budget and control relocation costs.
  • An enhanced employee experience: a defined plan and structure alleviates the stress of moving, which leads to higher employee satisfaction and retention.
  • Streamlined decision-making: clear guidelines provide HR and management with a reference for decisions, reducing administrative delays.

Any business that allows or encourages relocation opportunities can see improvement in areas from retention to market penetration, as long as they have the right policy.

Crafting the perfect employee relocation policy: a step-by-step approach

There are five steps to building a sustainable, successful employee relocation policy. Here’s a list of must-haves:

1. Understand the Business Needs
Before developing a policy, management will want to deeply understand the organization’s needs. Factors such as frequency of relocations, types of roles that typically relocate, and the destinations involved are good places to start.

2. Research and Benchmark
It’s always helpful to see what other companies are doing to get an idea of where to begin. Narrow down on competitor policies or industry standards to learn about common benefits and how to set the company apart from competitors.

3. Collaborate with Stakeholders
A solid policy loops in HR, finance, legal, and management teams and includes their input. Their feedback ensures the policy is comprehensive and aligned with organizational goals.

4. Clearly Define Terms and Conditions
Businesses will want to steer clear of ambiguity to avoid broken processes. Instead, clearly state which expenses are covered, the required documentation, and any other terms that employees need to know.

5. Review and Revise Regularly
An effective policy is dynamic. Review and adjust it periodically to accommodate changing business needs and feedback.

Depending on the location, replication policies may differ. Organizations that allow employees to relocate outside of their home country will need a different checklist than those moving from state to state.

When relocating employees internationally, additional layers of complexity emerge. Considerations include:

  • Visa and work permits: understanding the legalities can ensure timely processing
  • Cultural training: equipping employees with knowledge about the new culture, etiquette, and language will create a smoother experience
  • Tax implications: informing employees of potential tax liabilities in both the home and host countries helps them plan financially for the move. The tax issues for global mobility have to be addressed, for a smooth relocation.
  • Healthcare and insurance: Ensuring employees have access to quality healthcare in their new location benefits employers and employees

The process of employee relocation:

Legal and Compliance Challenges

When relocating employees, businesses must adhere to local laws and regulations in order to avoid financial, reputational, or structural repercussions. A shortlist of compliance-related responsibilities includes:

  1. Creating legal entities for new locations
  2. Understanding and following immigration processes and requirements
  3. Gathering all information needed for tax compliance in each location
  4. Ensuring employment contracts and agreements are aligned with local regulations
  5. Enlisting the help of legal teams and relocation management companies to stay compliant

One of the biggest factors for companies is the employee relocations is cost. Planning company’s relocation has to respect the budget limitations, but also to navigate global immigration with compliance. For example, companies may want to budget for relocation allowance (payments made by an employer or the government agency to cover transfer expenses) or understand which—if any—relocation expenses are taxable to know how much they’ll spend on relocation.

Costs of Employee Relocation

Any comprehensive company or corporate relocation policy will outline elements such as 1. what the move costs for employees and employees, 2. how the cost factors into the overall business strategy, and 3. how to estimate future expenses.

Let’s break down each element.

  1. An expense breakdown for companies and employees

    It can be much harder for finance teams to track corporate spending than in smaller companies, but it’s a must to help the business remain profitable. Corporate relocation relocation expenses include, but aren’t limited to:- Relocation budget for employers (for example, creating a protocol for relocation expense reimbursement or preparing for relocation bonus taxes)
    – Taxable relocation expenses (office spaces, office equipment, expensed business dinners, and more)
    – Cost of benefits during relocation (flights back to main office, health insurance, pension, and more)
    – Employee relocation allowance (defining a relocation allowance amount for employees for housing, household goods, travel, etc)

    A detailed list of expenses will help both employers and employees financially plan for the future.

  2. Need for alignment with business strategy

    To maintain the business’s financial health, managers will need to understand how the relocation policy costs factor into the overall budget for the year. If relocation costs are too high and won’t allow other teams to grow, management may need to reconsider their policy or revisit business objectives and KPIs.

  3. Use of tools for cost estimation

    Financial budgeting tools, cost analysis tools, relocation income tax allowance calculators, or cost estimation software’s can help companies get a clear idea of what they’ll spend on relocations, allow organizations to stick to the yearly budget, and know exactly where the money is going.

Professional relocation of your employees

Employee relocation policies shouldn’t be static. With dynamic laws, budgets, markets, talent, and so on, the most comprehensive policies will include best practices and current legal considerations and bureaucratic processes while making room for changes.

Papaya Global’s platform offers global immigration, legal, and compliance expertise allowing the business to focus on growing while the software handles the red tape. From legal entities to EoRs, Papaya Global is businesses’ one-stop-shop for global immigration. Schedule a demo to learn more.

Is relocation reimbursement taxable?

If employees receive relocation benefits, the benefit amount is taxable, but they may need to pay income and FICA tax on the amount. The IRS mandated that through 2025, unreimbursed moving expenses aren’t longer deductible.

These expenses could include any moving costs the employee pays. Of course, this will depend on the new location. The following states allow companies to deduct moving expenses: Pennsylvania, New York, Massachusetts, New Jersey, Arkansas, California, and Hawaii.

Is a relocation package considered a bonus?

In many cases, a relocation package is considered a bonus. The relocation package will consist of a lump sum of money the employee can use to supplement their move.

Many companies will pay the relocation package in the employee’s first paycheck after relocation. Some employers may decide to reimburse relocation expenses instead of offering it as a package. Bonuses are taxable income, while reimbursement terms are negotiated and written in the employee’s relocation package.

What are relocation allowances?

Relocation allowances or lump sum bonuses is when a company gives each relocating employee a fixed amount of money based on several factors. Allowances usually cover the employee’s moving and other work-related expenses (within reason) and if applicable, accommodate for higher living expenses.

Relocation allowances can also cover: House hunting expenses, travel, storage, and breaking of a lease. Including criteria and considerations for the allowances within a relocation policy can help companies stay within budget.