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The Pros and Cons of Employee Relocation

Jul 21, 2022

In the days before the internet, companies frequently required employee relocation services so that workers lived within commuting distance to HQ or a satellite office. The US economic boom that followed World War II meant that businesses needed more staffers. By the 1980s and 1990s, employee relocation services were booming in popularity. Without reliable phone service, communication needed to take place in person.

The internet, and improvements in broadband, changed all of that. Employee relocation continued into the 21st century, but the number of people working from home started to increase as well.

As companies enter the remote-first world, HR and finance departments are re-evaluating their employee relocation policies as more employees work from home.

What is employee relocation?

Employee relocation, sometimes referred to as global mobility or corporate relocation, is when a company or business pays for an employee to move closer towards HQ or another business branch. Employee relocation usually covers travel, storage, and housing.

Relocation is more common for major companies like Meta and Google. Many other companies, however, have instituted remote-first working policies so that they can onboard employees without worrying about moving logistics.

Global relocation, on the other hand, occurs when a company pays for an employee to move from one country to another, which usually entails visa sponsorship.

Why do companies engage in employee relocation?

Companies engage in employee relocation for a number of reasons, including:

  • Building out new office, branch, or hub with the best and brightest employees

  • Hiring people who understand the local or regional culture

  • Filling open positions that require in-person elements

What are the advantages of employee relocation?

  1. Personal performance.

    For some workers, the work-from-home grind is not conducive to productivity. For that reason, some employees benefit from the routine of commuting to the office each day.

  2. Company culture.

    For some new employees, relocating can help them feel more connected to the company’s culture and mission. If you were hired to work out of Salesforce’s office in San Francisco, for instance, moving to the Bay Area could help you understand the company’s local impact.

  3. Security concerns.

    For those working for hyper-secretive companies, like Apple or SpaceX, the office can provide a more secure space for sharing key information, without worrying about leaks.

  4. Attract top talent.

    Many job seekers are hungry for a change and open to moving.

What are the disadvantages of employee relocation?

  1. Housing costs.

    If you’re asking an employee to relocate, especially a more senior member, you will want to help them sell their home or terminate their lease, as well as provide them assistance with finding a new place to live. If they’re moving from a city with a lower cost of living like Nashville or an expensive city like San Francisco or New York, you may want to consider providing an additional housing stipend or assisting with the down payment for an employee’s new home. Some companies will buy a property upfront, which can lead to legal headaches down the road.

  2. Moving costs.

    The process of moving can be financially and emotionally overwhelming. Besides housing, you will probably want to pay for your future employee’s key moving costs, which includes renting a track or air freight to move their materials, airfare or gas costs, and other moving expenses, such as putting employees up in a hotel or Airbnb while they house hunt. Moving insurance, storage units, and other overlooked costs can add up.

  3. Filing taxes and other legal issues.

    If you’re paying for an employee’s relocation, especially internationally, it can be a headache for taxes. You will need to keep track of all expenses, as well as what is and isn’t reimbursable.

  4. Poor ROI.

    Relocation is fraught with risks, for both the employee and employer. What if, after moving across the country, the job is not a good fit for the candidate? In these cases, businesses can sink thousands of dollars with no return on investment.

  5. Unexpected costs for employees, if terminated early.

    Many companies include a clause that requires employees to pay back moving expenses if they leave the position early. However, enforcing these policies can be a legal headache for all parties involved.

  6. Family support.

    Moving children from one school district to another can be emotionally challenging

Creating a relocation plan: Industry best practices

If your company is committed to in-person experiences, then your HR team will need to build out a company wide relocation policy. Within the company, make sure that your relocation policy is written out so both the company and candidate have visibility into the process. You will also need to determine whether employees receive a single lump sum or reimbursements.

Here’s a look at the different types of relocation strategies.

Tiered approached

For companies that choose the tiered approach, the goal is to standardize the relocation process based on factors such as current location and job level. In general, companies offer better relocation packages to senior members and executives, who are likely more grounded in their current situation because of mortgage payments, schools, nannies, family, and other factors.

By standardizing packages, HR teams can streamline the relocation process and set a limit for what they will pay for each employee. On the other hand, one size does not fit all, and the tiered approach can leave less room for negotiation.

A la carte approach

Each person’s financial situation is unique, and some believe that each employee relocation package should be unique as well. Many companies, on the other hand, customize the relocation package based on the individual candidate. This option might lead to more work for HR, but it can show that the company really cares about its employees and is willing to understand their individual needs.

Group moves

Occasionally, companies will move an entire business unit from one location to another. In these cases, relocation is usually required to remain a part of the team. One of the major drawbacks of this approach is that it can hamper team progress, since they will all need to make the move at the same time.

Is partnering with an employee relocation services firm the right move for your business?

In the past, relocating for a job was a sign of your commitment to an organization. If you moved across the country for a job, the thought went, you were showing more dedication to the company.

Today, business leaders are embracing a more open view, with more companies offering remote work options in lieu of relocation, especially for employees that are based in foreign countries.

Why companies partner with Via

Companies want to hire employees abroad, but are unsure of how to navigate the tiered visa system. Via makes hiring international talent seamless. With our-easy-to-use platform, Via manages the local HR processes for employment such as work visas and permits, benefits, payroll, background checks, and more. Our team of local labor lawyers and on-the-ground experts ensure that your company remains compliant while expanding abroad. As your employer-or-record/entity, Via assumes full responsibility for employment liability, so that you can focus on what matters: recruiting and managing your team.

With Via’s transparent pricing, you can pay full-time employees or contractors across borders with no hidden set-up fees, no foreign exchange or transaction fees, and no minimums–start with 1 employee and scale up at your own pace.

Need help building your global team?

FAQ

What does a relocation service do?

If you need an employee to move to a new location, your company might partner with an employee relocation service provider to guide them through the transition, as well as things like reimbursements, temporary housing, finding a moving company, navigating a new city, home sale, purchasing household goods, choosing a real estate agent, and other parts of the relocation experience.

How much does employee relocation cost?

Employee relocation costs can range from a couple hundred dollars to over $80,000, depending on the employee’s ranking in an organization. Each employer has its own standards for relocating employees and what benefits go into an employee relocation package.

How much do companies usually give for relocation?

Today, a relocation package can vary greatly, depending on the employee’s situation. Many companies partner with an employee relocation firm to improve the relocation experience and have experts put together the relocation package.

What is relocation management services?

Relocation management services help a new hire get settled in a new city after beginning a new job. The human resources department usually manages the relocation. They are there to support you and your employees along the way.

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Gerardo Mañón Carús
I am the Global Head of Growth at Via.Work since May 2022. I like to...

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