As an employer, the top talent isn’t always in your area code. You have to go beyond the borders of your city to find the perfect person for the job. For the right price, some parties are willing to forge new beginnings in a fresh location. But without a relocation stipend, employers could face an uphill battle.
Relocating to a new city is expensive. Rising gas prices, increased cost of living, temporary housing, moving expenses, childcare, selling your home—the list goes on and on. In most cases, the only way for a company to hire talent outside its geographic region is to offer a relocation stipend.
Also known as a relocation allowance, relocation package, or relocation assistance, a relocation stipend either provides a lump sum or reimbursement for relocation expenses. While the idea seems simple, the details aren’t so obvious — especially for companies offering this benefit for the first time.
If finding top-tier talent in your area is a struggle, learn how a strong relocation stipend can increase your chances of hiring great people.
As stated, perhaps the best reason to offer a relocation bonus is to attract top talent — especially if current employees aren’t ready for upper management or C-level positions. However, relocation costs are burdensome if the employee must pay for them, offsetting your attempt to find the most qualified individuals.
Relocation stipends are also a show of support. When you provide a relocation reimbursement or package to a new employee, you’re demonstrating your commitment to the individual. Even if the reimbursement is purely financial, employees who feel supported are more likely to have a smoother transition and quickly become a valued member of the team.
A final reason to offer a relocation stipend is that it enhances your company's reputation. In every industry, word of mouth can spread quickly. By providing a generous, supportive employee relocation package, you’re more likely to gain a strong reputation and recommendations for future employment opportunities.
Nailing down a specific relocation cost is difficult. Factors such as distance, cost of living between the old and new location, real estate prices, renters vs. buyers, and job level. Based on estimates, the average relocation package — at least on the company side — can total between $33,000 and $85,000, although the employee may not see those costs.
This may seem a bit on the hefty side, and it is. However, these aren’t necessarily costs incurred by the employee. Around $36,000 of these costs are home sale assistance, with an additional $16,500 for shipping household goods and furniture.
On a more plausible level, you only need to look at what large corporations offer in terms of relocation packages to get an idea of what your total compensation package should look like. Microsoft offers a 100% relocation reimbursement plan, Amazon offers $7,000, and Apple provides between $5,000 and $20,000. Again, the amounts vary depending on eligibility and circumstances.
Paying movers is just one of the many expenses of the relocation process. Beyond the cost of a moving company, other job relocation expenses include:
If you offer relocation assistance, you need to factor in these many expenses into your package. The size and scope of the package will depend on your budget, so you may need to work with human resources to determine it. In some cases, a standard relocation stipend should suffice; in other situations, you may want to incorporate a tiered program into your job offer that factors in position, distance, and cost of living adjustments.
How you expense and pay your relocation stipend is entirely up to you, but you have multiple options. Compare and contrast the five types of relocation stipends to decide which one works best for you.
Relocating employees has many moving parts, so if you want to facilitate the process, direct billing is a viable choice. Rather than relying on the employee to make the necessary arrangements, you choose the vendors and bill them directly. Through direct billing, the employee doesn’t receive any monetary compensation, but they’re absolved from making any out-of-pocket payments.
As the name implies, a lump sum is a set amount of money given to an employee for all work relocation expenditures. The lump sum is usually given upfront so the employee can pay for all moving and relocation expenses before their start date.
This type of stipend is common, although it’s a bit more involved than lump-sum or direct-billing options. The new employee makes all the necessary arrangements for relocation and keeps the receipts. You then reimburse them at a later date.
If you want a hands-off approach to relocation stipends, a third-party vendor is the smart choice. Hiring a relocation service specialist negates your involvement in the relocation process, and the third-party company handles all the details, including contact with the new employee. While this method may seem impersonal, it allows HR and business owners to stay on top of day-to-day tasks.
One major concern regarding a relocation stipend is how it’s taxed. According to the IRS, relocation stipends are taxable income, and thus, the government requires employees to pay taxes on them. It’s one of the rare taxable benefits offered by many employers.
As an employer, you can choose to withhold taxes from a lump-sum or reimbursement payment or have the employee pay them as part of their quarterly estimated taxes.
However, you can also choose to provide a gross-up amount for relocation expenses. This means that you essentially provide a set amount post-tax, depending on federal, state, and local taxes. For example, you could offer a gross-up relocation stipend of $10,000 — but the real amount of the relocation package would be $12,000 less $2,000 in taxes.
Make sure that your employees are aware of any taxes they have to pay on their own and which taxes you’ll pay to avoid interest and penalties levied by the IRS.
You’ve figured out the basics of your relocation stipend, but that’s not the final part of a relocation package. Providing extra resources and flexible options can keep employees happy throughout the ordeal. Add these to your relocation process to create a seamless transition from place to place.
A meal stipend or food allowance is similar to a relocation stipend. It provides a lump sum or reimbursement to employees for meals they eat during the relocation process. Typically, you allow them a set dollar amount per day or week for food. It’s taxed as income, and any amount they spend over the allowance comes out of their pocket.
One of the most time-consuming aspects of relocation is finding a home or apartment. Rather than requiring the employee to do this on their own time, you can hire a housing specialist to help them find accommodation.
Some specialists provide listings to new employees, but you can also hire a realtor to show them the houses. Including this as part of your relocation stipend can calm employees' nerves and help them find the perfect place to call home.
You can also include a short-term rental as part of your relocation stipend while your employee looks for long-term accommodation.
When an employee has a job offer, their spouse might be unemployed. In this case, you can offer spousal employee assistance. This comprehensive program provides the spouse with a list of job openings—although not necessarily at your company—as well as resume and cover letter reviews.
Unless your company offers childcare, adding a bit of cash is ideal. Childcare costs in the U.S. are surprisingly expensive, tallying between $4,800 and $17,000 per year, depending on the age of the child and the geographic location. Even a month or two of free childcare can ease the stress of your new employees, and they’re sure to be appreciative.
Even after carefully assembling a relocation stipend, incidental expenses may occur that can stymie relocation employees' finances. In these instances, having a quick, convenient way to make purchases is essential.
Digital gift cards fill the void for the unexpected or as a welcome gift in your relocation stipend. Thanks to a virtual gift card from Hoppier, you can set the amount and expiration of the card and choose suitable vendors for relocating — be it food, accommodation, or other travel costs. And with availability in more than 60 countries, you can expand your search to the far reaches of the globe.
Relocating for a job is stressful for many new hires. But with help from Hoppier, the transition is that much easier.
Ready to 2x your global engagement at your next event, with Ox stress?
Make Hoppier your unfair advantage today, schedule a demo
Ready to 2x your global engagement at your next event, with Ox stress?
Make Hoppier your unfair advantage today, schedule a demo
Ready to 2x your global engagement at your next event, with Ox stress?
Make Hoppier your unfair advantage today, schedule a demo
Ready to 2x your global engagement at your next event, with Ox stress?
Make Hoppier your unfair advantage today, schedule a demo
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