Employee Relocation 101
Everything You Need to Know
What is Employee Relocation?
Employee relocation occurs when a company chooses to move a new or existing employee from one location to another, and will often entice them with certain benefits to help make the move smoother and more affordable. The reasons for relocating an employee can include to open a new location, fill an open position in another location, career development, and more.
Employee relocation, also known as global mobility and corporate relocation, is an important task that allows employers like you to remain competitive in your search for top talent. The relocation industry exists to help you manage and move your best and brightest talent to wherever they need to be in order to increase personal performance and company revenue.
Relocation benefits often include pre-decision counseling (i.e., is this move right for them?), departure and destination assistance (such as selling a home, finding a new home), and a household goods move (which can be via rental truck, van line, or air freight). However, you can choose the level of benefits each relocating employee will receive based on criteria important to you, such as employment level, homeowner status, or any other criteria you deem critical in creating what we call relocation policies. Relocation policies are like workflows that dictate what each employee will receive for benefits, typically based on tier.
The myths surrounding relocation are vast, but you don’t have to be an expert or work for a relocation management company, or RMC, to understand everything. The industry is constantly changing based on current trends and best practices in the global workplace, which is why companies typically contract with an RMC to manage relocations for them.
History of Employee Relocation
The employee relocation industry grew as a post-World War II movement following a skyrocket in business and increased staffing needs throughout the United States. Demand escalated in the 1960s with companies growing to assist the “transferee” who, at times, was expected to be in a new location with very little notice.
The Employee Relocation Real Estate Advisory Council (ERREAC) (now the Worldwide ERC®) was founded in 1964 in Chicago to address the growing needs of a nation that was increasingly moving employees for development and stronger productivity. The 1980s and 1990s saw the height of relocation volume as companies continued to grow and were relocating thousands of employees annually.
After the turn of the century, and due to enhanced technology and costs, relocation activity subsided, but it was still a strong benefit in many industries, especially the U.S. Government. International activity has grown substantially with extensive benefits and the need to provide extraordinary customer service to those willing to take on these unique assignments.
Today, forty-five percent of employers say they can’t find the skills they need. That’s why WHR Global supports its clients in expanding job searches beyond local regions, as the best person for the role isn’t always in your city.
Employee Relocation Services
Employee relocation services, or benefits, are typically outlined in a relocation policy. This takes the guesswork out of handling each individual relocation, and allows consistency within your program.
For employee relocating within the US, these services might include a combination of any of the following:
For those relocating internationally, services might include a combination of any of the following:
International Tax Compliance
Regardless of whether an international relocation is permanent or simply a short-term assignment, all relocation-related expenses will likely raise tax issues in both departure and destination countries. This is why it is critical that the potential tax exposure from relocation reimbursements be monitored so that accurate tax returns can be filed in both the old and new country locations.
US citizens are required to file taxes on their global income regardless of where it was earned and in addition to the tax filings required in the country of assignment. When an employee transfers out of the US, they must still file a US Federal Income tax return. However, the US does provide a foreign tax credit that can be applied to the employee’s return, which means the amount owed in the US could be nothing or a negligible amount, but they are still required to file.
It is strongly suggested that the employer provides tax equalization for employees relocating internationally. This allows employees to pay taxes as they would in their original country, with you covering the difference.
Building a Relocation Policy
Now that you understand a bit more about the relocation industry, you can start thinking of how to structure those relocation policies. Two of the most common approaches in creating successful relocation policies are the tiered approach and the a la carte approach.
The Tiered Approach
A set, tiered policy gives a company the ability to easily select which employee will receive which benefit package. Our research indicates an average of four tiers within any relocation policy. This allows for enough variation between each benefit package while not creating too much complexity for administration.
While a tiered policy gives the ability for a company to be selective regarding which benefits are offered and to whom, some benefits may be offered to all packages. For instance, a household goods move may be offered to all relocating employees, but only certain employees might receive a homesale benefit. You will need to consider which benefits make the most sense for your different levels of employees.
Companies also use policy tiers to keep an eye on relocation costs. Some companies offer homesale benefits to all relocating homeowners while others prefer to restrict that offering to higher-level employees, as homesale is one of the most expensive and complex (yet helpful) benefits you can offer.
Building Your Tiers
There are several different factors companies use when creating a tiered policy. In fact, most companies use multiple factors. The most common criteria for determining an employee’s relocation benefit is job level. This is largely tied into the rarity of the skill set required and impact the individual will make to the organization in the new role. The next most common factor is homeowner status as the costs and timeline to move renters versus homeowners consistently differ.
The A La Carte Approach
An alternative approach to having a tiered policy is using an a la carte, or menu, policy. This can be ideal for companies that like to be extremely selective about which benefits are given on an individual basis.
Building A La Carte Benefits
The discretion used in deciding which benefits to offer are up to you for each relocation and can be based on the need for the employee to relocate, the distance in which the employee is moving, or simply based on budget.
The employees themselves can also be in charge of deciding which benefits they receive. The company may offer an employee a specific lump sum amount or use a “points” system. The employee can then determine, based on the dollars or points being received, which benefits he or she would like provided by the employer versus what the employee would like to manage on his or her own.
Your company’s culture, talent development strategies, and much more need to be taken into consideration when you’re deciding how to develop your employee relocation policy. Offering too many benefits can prove costly to your organization while not offering enough can negatively impact your success in recruiting and retaining your employees.
Why You Should Outsource Your Employee Relocation Efforts
In the days of low volume, Human Resource professionals comfortably managed the relocation of a few key employees without the aid of a specialist. These moves might have been a generous lump sum with access to a preferred household goods carrier, but while this worked in the past, relocation best practices and the workforce industry itself have changed significantly.
In order to source the very best talent for the job, it has become essential for companies to have a global relocation program that adheres to today’s best practices while also staying up to date on tax and legal requirements.
Creating and successfully running a relocation program that competes in today’s global market is a demanding task that requires more time and understanding than ever before, which is why HR departments traditionally outsource the relocation process. Using an RMC eases the burden of meeting the demand for top talent by providing these fundamental benefits:
- Access to knowledgeable relocation experts
- More time for you to focus on your other job duties
- Connection to a vast network of third-parties, at discounted rates, for services like homefinding, temporary housing, and household goods moving
- Opportunities to benchmark your relocation program against other clients to ensure best practices and competitiveness for top talent
- Increased cost savings with the leveraging of discounted third-parties and tax benefits
- Access to a relocation-dedicated technology to keep your program operating at its most efficient
To better understand the advantages of outsourcing your relocation program to a relocation expert like WHR Global, check out our 7 Benefits of Outsourcing Your Relocation Program.
Selecting an Employee Relocation Supplier
Before you even begin looking for a employee relocation company, you and your business’ other decision-makers need to define what you’re looking for most in a supplier.
Make a list of your top wants and needs, and stick with this list throughout your selection process. Start by considering your own company: Is cost your company’s most important motivator? Is service satisfaction? Is it both, or something else entirely—like the RMC’s management structure or years of experience?
Also take into consideration your company’s size and anticipated number of relocations per year. RMCs range in size from thousands of employees across multiple continents or companies located in one office to streamline delivery and communications. Do you want to be a small fish in a big pond, or do you need to be a big fish in a smaller pond? Really get to the heart of what your company values most in a supplier.
To help get you started, here are some important elements to look for when selecting an RMC:
- If the RMC functions as just another vendor for your company, or a partner in your relocation efforts
- The RMC’s ability to remain flexible and responsive to change as your company or your employees’ needs evolve
- Efforts to go above and beyond when it comes to customer service, as it’s costlier to hire a new employee than relocate an exceptional one
- Ability to marry customer service efforts with cost savings initiatives to justify the expenditure of such an important resource for your employees
- Supply chain management experience, as RMCs use their own network of on-the-ground suppliers for tasks like apartment tours, pet transportation, and language training for your employees
For more help in selecting a relocation supplier, check out these 8 Things to Look for in a Relocation Supplier.
Employer Experience with Relocation
When outsourcing your relocation program, your RMC will assign you an account manager. This person is your dedicated contact for program management, service performance monitoring, and ongoing policy consulting and benchmarking. Having this resourceful and knowledgeable point of contact is one of the most critical elements in a successful relocation program.
Responsibilities of your account manager might include:
- Account monitoring and quality assurance
- Knowledge of industry best practices, trends, tax, and legal
- Monthly, quarterly, and annual client meetings
- Policy consulting
- Policy benchmarking
- Third-party oversight (e.g. employees’ real estate agent or household goods mover)
You can expect your account manager to provide regular updates on VIP employees/relocating executives, exception requests to your policy (e.g. an employee needing an extra month of storage), and help coordinating custom reports.
Their main goal is to be proactive and work in your best interest throughout the relocation experience.
Employee Experience with Relocation
The relocation experience itself begins after you authorize an employee for a relocation—usually through the RMC’s technology or by email. Within 24 hours, the assigned counselor will reach out to the employee, introduce themselves as the main point of contact, and schedule a time for an in-depth initial phone call.
During this call, the counselor conducts a needs assessment of the employee and/or family while explaining all services eligible. This provides the opportunity for the counselor to align the employee’s expectations with your policy, such as:
- Home sale or rental lease-break assistance
- Home marketing and homefinding
- Household goods moving process, whether through truck rental, full-service van line, or international freight carrier
- Destination services overview, including storage, temporary housing, and language training
- Final equity funding when applicable
- Expenses eligible for reimbursement or tax exclusions
After the initial phone call, the counselor ensures all information is stored and secured within the relocation technology to drive the process until close of the last service.
Throughout the relocation, the counselor coordinates each service as the employee’s advocate, setting appointments, confirming status updates, and ensuring they provide consistent and timely updates on each service along the way, such as:
- Finding temporary housing
- Booking a real estate or rental agent
- Sourcing appraisers and home inspectors
- Booking and overseeing the household goods/freight forwarding crew
Most RMCs work out of some form of relocation-specific technology. This could be something their own developers created, or there are off-the-shelf products available for purchase, which are then customized to the RMC’s brand.
The employee’s relocation counselor works out of the technology, which typically triggers action items for each service authorized. From marketing assistance to spouse/partner services, each item is mapped with system touchpoints and triggers along the way to ensure consistent follow-through from the counselor.
Keep in mind that your RMC’s technology should not take the place of regular and consistent communication with the employee. Rather, it should allow for a proactive service approach rather than being reactive to the employee needs, wants, or concerns. The underlying factor in any relocation technology is to drive assigned services and deliver outcomes that avoid any missteps or lapsed timeframes before they occur.
You and any other member of your relocation management team should be given secure access to custom client technology. This technology will provide access to features such as:
Employees are usually given access to their own relocation technology. Their access is customized to show only the services available to them. Employees can expect the following from their relocation technology access:
Relocation Cost Structure and Transparency
There should never be a surprise when you review a relocation invoice, which is why we’ve created this list of common fees to help you better understand and negotiate a reasonable contract for relocation services. While fees vary from company to company, they are, in general, similar across all RMCs.
Service fees: Costs charged by an RMC for overall program administration, including salaries, overhead, and profit
Referral fees: Income received by you or the RMC for tasks like procuring a real estate agent or van line that specialize in corporate relocation
Fixed fee: Generally found in government contracts, this type of fee reflects the expected operating costs in the resale of the property and includes the costs found in servicing the move
Non-compliance fee: Additional fee that may be charged when a property does not meet the stipulations of your relocation policy or RMC contract
Other fees: Takeover, cancellation, or extended market time fees
Transparency is a key component in understanding how the third-party supply chain is being compensated for services related to moving your employees.
Global Mobility Benchmark Study
Homesale Benefits Guide
Relocation Benchmark Comparison
Relocation Request for Proposal Generator
U.S. Domestic Policy Designer
U.S. Domestic Relocation Cost Estimator
Sample U.S. Domestic Relocation Letter
Sample International Relocation Letter
Sample Relocation Policy Grids
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