Does your company have an employee relocation program? If not, you’re undoubtedly wondering if you should; if so, you’re undoubtedly wondering how to make it more cost-effective.
There’s no question: relocation benefits can be expensive. Case in point: it can cost nearly $100,000 to relocate an established employee who owns a home! Move just a few people and costs add up fast.
Yet, nearly two-thirds of U.S. employers have relocation programs in place for one excellent reason: it’s crucial to attracting and retaining top talent.
With unemployment rates hovering around 4%, there’s tremendous competition for skilled candidates. Once you have star performers, you want to keep and advance them. Relocation programs help you achieve that.
Better yet, there are many effective strategies for limiting relocating costs without compromising your employees’ experience — it just takes some knowledge and creativity. In 2019, there’s no excuse not to have a relocation program, no matter how small your budget or organization.
Anatomy of a Relocation Program
Relocation programs typically include two components: specific dollar benefits to cover moving expenses and support services to help employees plan their move.
Employers can choose from several types of plans. Traditional programs break relocation expenses into categories and companies can decide whether or not to cover those services in full.
In other words, there is an uncapped amount of spending. The opposite approach to this is a lump sum of cash, which has capped spending but no opportunity for savings (and no employee support). Lastly, increasingly popular managed lump sum plans, or managed cap programs, provide a pool of funds that employees can use however they wish up to a certain dollar amount.
Whichever way is chosen, moving expenses will fall into the following areas:
- Shipment of household goods
- Shipment of vehicles
- Real estate closing costs for homeowners
- Short-term housing
- Temporary storage
- A home-finding trip
- Final destination travel or gas & hotels (if driving)
- Tax gross-up of benefits
In addition, most employees need support orchestrating their move. About 60% of employers outsource this function to relocation management companies (RMCs) instead of relying on HR.
There are two types of RMCs: traditional companies that are powered offline by assigned relocation consultants and innovative, tech-based companies that balance user-friendly software with help from live consultants.
Why Relocation is So Expensive
Moving is pricey, period. The average cost to relocate a current employee ranges from $24,216 (for a renter) to $97,166 (for a homeowner). Costs are slightly lower for new hires. Similarly, it’s more expensive to move an employee with a family than one who is single, primarily because there are more belongings to move.
Furthermore, the Tax Cuts and Jobs Act of 2017 drove costs even higher by eliminating the moving expense deductions employers relied on. (These apply to the transporting and storage of household goods and final travel.)
Many employers have elected to “gross up” their relocation benefits to cover their employees’ tax liability, significantly increasing program costs.
Cost-Control Strategies for Relocation Programs
Now, here’s the good news. There are many ways to structure a relocation program to be cost-effective yet serve employees well, including these increasingly-popular strategies:
“Right-Size” Every Move
Not every employee needs a full-service van line; a recent grad with an apartment might prefer a small DIY truck. When you build relationships with suppliers that handle moves of various sizes and types — or better yet, your RMC does — it’s more cost-effective.
Offer Tiered Relocation Packages
Relocating an intern or entry-level new hire is very different from relocating a C-suite executive. Many employers have developed three or four tier relocation programs that allow them to scale benefits to recipients.
Create Discard and Donate Incentives
Did you know long-distance movers often charge by the pound? That’s one reason why transporting household goods is so expensive. The alternative: create an incentive program for employees who donate their goods to charity instead of moving them.
Replace Storage and Short-term Housing Benefits with a Home-finding Trip
It’s more cost-effective for employers to help employees secure housing before they move than start looking after they arrive at their new destination (especially since storage is no longer tax deductible).
Finally, consider using a tech-based RMC over a traditional, consultant-based service. Relocation software can provide you with the insight you need to manage your program’s spending, and many employees prefer having more direct, real-time control over their move.
The bottom line is, for many companies, offering a competitive relocation program may be essential to continued growth. But with so many tools and choices available, it’s more affordable than you may think — no matter how small your budget or how big your goals.
