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What is a Relocation Policy? All you need to know [template]

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Creating a Relocation Policy can be difficult with many nuances involved. With employees returning to office or relocating post pandemic, relocation policy has gained more importance. Today, I write about all considerations you need to create a template.

In this blog, I will cover the following:

What is Job Relocation?

A relocation occurs when you move to another city or state for a job and must leave behind your present life; your home, family and friends. People relocate for jobs every day for a variety of reasons. A relocation takes a lot of thought and planning. Fortunately, you can take certain steps to evaluate whether a job-related move is right for you. And, if it is, you can begin to plan for your next home.

Many relocations occur when companies transfer employees to other cities. A company might decide to consolidate operations in one facility, and if you still want your job, you must relocate. Or, to receive a promotion, you might be required to move to a regional office in another town. Moreover, you sometimes will choose to move on your own. Often for a better job or especially if you can’t get a job in the city in which you live. Whatever the situation, relocations require money, time, effort and a big decision.

What is Relocation Allowance?

Relocation allowance also is money provided as part of a company’s relocation policy. It is provided to an employee who has transferred locations or moved as part of a new job. A relocation allowance may be given as a lump sum; or later reimbursed by the current or new employer upon submission of related receipts.

It might be used for expenses such as:

  • temporary lodging,
  • meals,
  • storage of personal belongings,
  • other incidental costs of settling in at a new location.

Under some circumstances, relocation expenses may be considered taxable and included on an employee’s W2 Form.

Objective and Scope of Relocation Policy

The objective of the relocation policy is to provide financial and administrative relocation assistance. It is provided to a salaried employee in order to maximize their performance and minimize their inconvenience during the relocation.

This policy applies to exempt employees who are required to relocate; because they are being transferred (for no less than 12 months) at the Company’s request; to a location within the Company. The relocation policy is set in accordance to the leave policy if the employee relocates during the time of a holiday.

The new Work from Anywhere policies are not a new concept. With traditional Work from Home policies, employees are typically within commuting distance of their office. In recent years, Work from Anywhere policies have begun to emerge. Under this type of arrangement, employees have greater flexibility to choose where they live and work.

What is the role of HR in employee relocation policy?

The HR department has countless tasks when it comes to staff relationships; from approving applications for relocation to helping an employee relocate. The relocation program can assist or hinder the hiring and/or retaining skilled employees. A competitive relocation package is a necessity; as some employees and/or their relatives are often naturally reluctant to relocate to a new place.

The HR plays a big role in helping the employees relocate; and support them during the transition. They have to ensure the employee is having a smooth relocation and be there when in need.

HR plays an important role in the following ways:

  • The HR needs to come up with greater ideas when it comes to employee relocation. Relocation for an employee must be taken care of appropriately.
  • To design a relocation package that addresses and minimizes stress on employees and HR personnel.
  • The relocation policy must be attractive to transferring employee at all authority levels on the organization chart.
  • Connecting the employee with personnel  familiar with the need for relocation and familiarity with sources; from expert suppliers often removes worries about housing problems from the transfer.
  • In Asanify HRMS, you can actually store the policy within your Team documents for easy access to all employees. Otherwise, policy pdf sent on email gets lost.

HRMS

Who approves the relocation?

All requests of employee relocation must be approved by the following:

  • Supervising manager
  • Functional Vice President
  • HR Department

prior to actual relocation or commitment to the employee. In addition, any exceptions to this policy require the prior written approval of the HR Department. The Relocation Expense Estimate form must be approved prior to relocation expenses incurred.

What are the Expenses that are covered under the Relocation Policy?

Trips to Locate Living Accommodations

Reimbursement will be made for reasonable and actual expenses; incurred by the employee and also their family for travel to the new location to locate living accommodations. This reimbursement includes meals, lodging, and also the transportation.

In some instances, the employee may wish an additional family members to accompany them. In such cases, approval by HR would be required. We also realize that it can be difficult to house hunt with children.

Arrangements for these trips should receive prior approval by HR. All accommodations should also be booked through the in house travel department.

Movement of Household Goods

Usually, the Company will contract with a moving van lines to provide services to you at a discounted rate.

Expenses for which the relocation policy is provided are as follows:

  • Interim living expenses at the new location, including meals and lodging, until the new residence is occupied.
  • Car rental, laundry, telephone and other incidental expenses incurred during interim living.
  • Telephone installation charges.
  • Cleaning costs at the former residence and any cleaning cost which may be incurred at the new residence.
  • All structural changes and/or repairs to the new residence.

Tips to write your relocation policy

How is your company communicating relocation benefits to your employees? Are you providing information via email? Verbally? In the offer letter?

A relocation policy also helps standardize the process of relocation for your internal teams and your relocating employees. It helps your relocating employees prepare for their move, establish internal processes for distributing benefits; and can even reduce questions back to you and yo your team.

Here are a few tips to help you get started writing your company’s relocation policy.

1. Start Early with creating the relocation policy

Crafting a relocation policy isn’t something you can also do overnight. Relocation is an endeavor that also involves a number of different roles. Writing the policy is only one part of the process.

You have to:

  • Get approval from various groups.
  • Ensure your payroll and/or finance teams are equipped to distribute the benefits.
  • Communicate the new policy to hiring managers.

Starting to build your relocation policy early; even before you have relocated someone, is key in making sure your company is prepared to handle a relocation.

2. Set clear expectations about what, when, and who in the relocation policy

A relocation policy should be considered an extension of your organization. So, consider using the same writing style that is used in other company communications and documents. Just be sure to balance this with using clear, direct language that’s also easy for relocating employees to understand.

A relocation policy should clearly articulate the following:

  • What benefits are being offered.
  • When the employee will receive those benefits.
  • Who they can reach out to for assistance.

3. Plan for the future

Finally, keep in mind that your relocation policy may need to change as your company grows. The policy that works now; for your new college hires may not be scalable when you need to relocate a senior manager or executive-level employee. For this reason, consider building flexibility into your relocation first policy.

If you are planning to offer a lump sum, consider setting different tiers for different populations of your employees. Even though a new hire and a senior manager receive a lump sum; doesn’t mean they should be the same amount.

How are relocation allowances used and paid?

There is some variation in the way that relocation packages are distributed, calculated and spent. Some companies may simply offer a cash package, which the assignee uses to manage his or her own move. While this may seem attractive to companies with; neither the time nor the expertise to calculate and manage a relocation package; it has serious downsides. It can be highly tax-inefficient and, by putting the work on the employee to self-manage, creates stress which impacts on the effectiveness and productivity of the employee at work. Not only that, the ad hoc nature of cash bonuses often leads to disagreement; as employees realize they are not all given the same bonuses.

What should be covered in the relocation policy and allowance?

These are the items that relocation packages should provide for:

Moving costs

The bulk of the expense of moving involves transporting household goods to the new place. It includes packing and unpacking, as well as the management of the shipping process. If arranged through an experienced relocation partner, a single, fixed fee is paid to cover all services.

Travel

Airfare for all members of the family. This will usually cover a reasonable amount of trips back home, especially at holiday times.

Storage

It may not be possible to coordinate the arrival of the employee with the arrival of their goods. In such cases, temporary household goods storage should be covered.

Accommodation costs in relocation policy

While the overall compensation package is calculated to cover cost of housing; there are also one-off costs associated with selecting a place to live. Help with other details such as signing a lease and inspecting a home may also be provided. If accommodation is not agreed before departure date, temporary accommodation should also be covered. These costs may also cover services such as cleaning, electrical, heating, telephone and broadband set-up.

Home sale/lease break costs

Relocation allowances may cover the cost of arranging for the rental or sale of the employee’s property. Or they cover the costs of terminating a lease. This may also include the cost of tasks such as cleaning. And the termination of services and subscriptions (broadband, phone, etc.).

Medical costs in relocation policy

Vaccinations and any other medical arrangements should be included in negotiations.

Documentation

Typically, the company will arrange for necessary visas, work permits and other paperwork related to the move. If not, any costs arising from this should be covered by the relocation allowance.

What does a relocation package include and what does it cover?

While it’s difficult to know the specifics of the relocation assistance package until you know the employee and the project. It’s important to have an idea of what you want the relocation package to include. Here are a few examples of relocation expenses commonly paid for by the employer through relocation assistance:

Moving company costs/shipment of household goods

Professional movers, packing & unpacking services and other moving-related expenses like boxes and tape are often a part of a relocation package.

Travel to the final destination

Companies often times pay for the travel expenses to the new location including airfare, cost of gas, or train tickets.

Short term housing

It’s common for companies to cover the costs of 30, 60 or 90 days of short-term housing; while an employee searches for more permanent accommodation. This can include hotel stays, temporary residents or corporate housing.

Which factor effects relocation assistance costs?

You must also state if you plan to cover the entire cost of the move; or if you simply plan to assist with some expenses. However, the actual cost to relocate an employee depends on a number of different factors like:

  • How far are they moving? Is it to a different state, a different country?
  • Do they own a home?
  • Do they have a family?
  • How much luggage do they have? What is the weight of all that luggage?

How can HR convince an employee to relocate?

It’s rarely an easy task to convince your employees to relocate—even when the advantages seem obvious to you. Whether you’re opening a new office, staffing a remote location, or moving your entire company; relocation can be a tough sell to even the most loyal of employees.

That doesn’t mean it’s impossible, however. And also offering an increase of salary or benefits isn’t the only leverage you have.

Listening to your employees’ concerns about relocation; should be the first thing you do after you bring the subject up. Even before you tell them on all the benefits of moving. That doesn’t mean you also have to agree with them. It does mean that you should listen to their concerns.

Let your employees know that it’s a tough decision and a tough process; also let them know that it is a decision worth making.

You’ll find that they’ll make the decision you want them to make, more easily and more quickly; if you first listen to their fears and concerns and don’t try and pass off those fears and concerns.

Are relocation packages good for both the employer and employee?

Most companies also want to save as much money as possible in the course of job transfers while still ensuring that the employees and their families are comfortable and ready to get to work as soon as they arrive in the new location. When you also use a proper tool, a good relocation package can make a difference in attracting the best job candidates.

FAQ

What is a relocation allowance?

A relocation allowance is the payment made by an employer or the government agency; to cover transfer expenses and other costs incurred by an employee who is required to take up the employment elsewhere. 

How do I ask for relocation expenses?

The only way to ask for relocation expenses is to ask directly or be upfront about your needs. If receiving relocation assistance is non-negotiable for you, it’s best to be upfront about it. You can ask the HR what the relocation policy is in your company.

What part of relocation expenses are taxable?

When you also give a relocating employee any sort of relocation benefit, whether it’s in the form of a signing bonus, reimbursement for moving expenses, or even when you book a flight or pay for a transfer service on behalf of your employee, that money and those services are considered as taxable income.

What is a relocation grant?

Relocation Grant is usually provided for Low-Income People in some countries.
As a means to help this the the employees with lower incomes, the government usually creates programs to provide them with grants for their move. The aim of the programs is to aid low-income families through their move and do this by reducing their financial burdens

Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant  or Labour Law  expert for specific guidance.

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