Before you begin setting domestic relocation policies or revamping your existing relocation policy, it's important to find out what's most important to your employees. You'll probably discover that home sale, spousal support, and finding a good neighborhood and a new home at a fair price rank near the top of the list for many mid- and top-level employees.
Domestic relocation policies are broken into a few main categories based on how much involvement the employer has, and how much of the burden of managing relocation is placed on the employee. Any type of program may use tiers to determine either how much money the relocating employee will receive (in the case of lump sum reimbursement policies) or what expenses are covered in a direct reimbursement or managed package. Let's look at the pros and cons of each type of domestic relocation policy.
Lump-sum relocation policies
In a lump sum relocation policy, the employer issues a single check to cover the employee's moving expenses. The burden is on the employee to list and sell his home (either on his own or with a real estate agent), line up household goods movers, help his spouse find a job, and even organize his own scouting trips. The employer has no say as to how the lump sum package is spent.
The benefit to this type of domestic relocation policy, of course, is it's easy for the employer. The employee handles all the stress of selling his home, buying a home, and moving. It may take a long time for the employee's home to sell, dragging out the move to the detriment of the employer. And it may take longer for the employee to return to full productivity; managing a household move can be a full-time job in itself, especially if it involves placing children in new schools.
If the lump sum allocated for domestic relocation is not generous, the employee may want to cut corners, choosing lower quality service providers. This will make the move even more stressful and cause an even slower return to productivity. Many employees who find the relocation process stressful leave the company within the year, and the employer is back to square one, recruiting (and possibly relocating) new talent.
Direct reimbursement relocation policies
In a direct reimbursement relocation policy, employees are reimbursed for each item that is part of their move. In many cases, the employer, or a relocation firm acting on behalf of the employer, will offer assistance with lining up service providers, including real estate agents and household goods movers.
The employee will pay expenses out of pocket, but will submit receipts and be reimbursed. Expenses must be “grossed up” so the employee does not lose out or incur a tax liability from his domestic relocation package.
This type of relocation policy can work well, especially if the employer has a hand in lining up service providers. Employees don't feel a burden to stretch their dollars, and can be assured good service to sell their house quickly and move with less stress.
Managed relocation policy
In these type of domestic relocation policies, the employer or a corporate relocation firm handles every aspect of the move for the employee. Virtually all the employee has to do is pack his boxes and be available on moving day. The employee doesn't actually receive any money, so tax gross-up isn't required. The employer can work with the relocation firm to assure relocation service providers offer the best service available, resulting in a happy employee who can get back to work faster, with less stress.
Managed and direct reimbursement relocation policies may be more challenging for the employer to manage, but that's where a corporate relocation firm can help. In the end, you may save money and keep your key talent happier. If an employee is worth moving, he's worth keeping—and worth keeping happy!