What is employee relocation?

Employee relocation happens when your company moves workers to a different location for business reasons. This move may take workers to a new city, state or country. Relocated employees still work for your business, and they typically keep the same position or begin a new one.

When relocating employees, companies commonly pay moving expenses and offer salary adjustments or benefits and perks. Financial support can make a job in a new city more appealing to experienced workers, especially if their families would need to move, too.

How do companies handle relocation expenses?

You can handle employee relocation costs by offering a relocation package. This may be a fixed-rate package, such as a lump sum for moving-related costs, or a tiered relocation model.

Depending on your business, you might offer the same relocation benefits regardless of the distance or the employee’s position. Or, you could adjust relocation package amounts based on moving distance or the number of household members relocating.

Relocation packages often have specific requirements for how employees can spend the funds. For example, a package may cover the cost of hiring a moving team and staying in a hotel during the trip to a new city, but it might not cover meals. You may ask workers to submit receipts for expense reimbursement.

You can work with employees to adjust their relocation package based on their circumstances and your budget.

Types of employee relocation

The relocation process and the support you offer may vary depending on the type of employee.

New hires

When you’re hiring, you may not always find local candidates with the skills your company is seeking. In that situation, you can recruit from other locations and relocate the selected candidate to your city.

Relocating new hires might be worth considering when:

• The job requires specialized skills, licenses or certifications
• The local labor market is small or highly competitive
• You’re hiring for an executive role

Expanding your search can give you access to job seekers from across your state, the country or the world. With more people to consider, it may be easier to find a candidate whose skills and experience align with the role.

Current employees

Two main factors may lead your company to relocate existing employees:

• Employee request: Team members may request a relocation for a range of personal or professional reasons. Some people may want to move closer to loved ones, while others may request a relocation to a part of the company with more advancement opportunities. The employee may be open to a new position without an increase in salary or benefits.
• Company request: Your company might offer to relocate an employee when you want to fill a high-level position at another branch. Relocating an employee may be more cost-effective than hiring and training a new worker, especially in areas with limited talent pools.

Employees relocating for a partner’s job

An employee tells you their partner has accepted a job in another city and that they plan to move together. The employee wants to stay with your company, so a transfer to an office near their new home may be an option if a suitable position is available.

You may handle the costs differently when an employee asks to move rather than when your company requests a transfer. For example, you could pay some moving expenses or set a transfer date that leaves enough time for the employee to get settled.

Interns and independent contractors

Many of the people your company relocates will likely be full-time employees. In some situations, however, you might also pay to relocate interns or independent contractors.

This could happen when:

• You want to hire an intern or independent contractor into a full-time position
• You want a consultant or contractor to work in person at a different location
• Your intern is working closely with an employee who’s relocating
• You’re closing a branch and relocating all employees
• The local talent pool is limited for an open job

As with a standard employee relocation, it’s common to pay for relocation expenses.

Why employers relocate employees

Your business might decide to relocate employees to speed up the hiring process. If your area has a limited pool of people with the desired skills, relocation can be a useful option. It’s particularly attractive when the open job is central to company operations. If you operate in a highly regulated industry, for example, it may be worthwhile to relocate an experienced compliance manager.

When your team has limited capacity, training a new hire can take time away from other responsibilities. Transferring an experienced employee from another office can help fill the position sooner and reduce the training required.

Relocating experienced employees can help you staff new offices or fill positions in areas with limited talent pools. These employees can also train new hires, helping them become productive sooner.

In rare cases, relocating one employee may help resolve a workplace conflict while allowing both employees to remain with the company. A transfer can separate the employees’ day-to-day work without ending either employment relationship.

What can companies consider when creating a relocation policy?

A relocation policy can outline how your company will reimburse employees for expenses related to a move. You might reimburse workers for their costs or provide a lump sum before the move. Here are some expenses to consider covering.

Travel expenses

Travel expenses can add up for employees who are relocating, especially if they’re moving to another state or overseas.

When reimbursing employees for travel, you may use the IRS standard mileage rates as a reference. The IRS publishes rates for business use, charitable service and medical care, as well as qualifying moves by active-duty military members and certain intelligence-community employees. Because rates and eligibility requirements can change, check the IRS mileage guidelines for the most recent figures.

Consider other expenses employees may incur during the trip, such as gasoline, tolls and parking. If the trip takes multiple days, include hotel costs. Ask workers to save receipts for these expenses so you can provide appropriate reimbursement.

International travel expenses may include airfare, train or boat tickets, rental cars and passport fees. Depending on the destination, employees may also incur customs-related charges. Costs vary by destination.

Home sales

Homeownership can create additional steps for employees who are relocating, especially if they are planning to sell their home. To support the transition, consider covering some costs of buying or selling a home when employees relocate. You may want to partner with a local real estate agent to simplify the process for your workers.

Moving costs

When an employee relocates, consider covering moving costs such as packing supplies, movers and temporary storage. If the move is unexpected or requires a fast relocation, a worker may also benefit from packing and shipping services. You might also pay for car shipping so the employee can avoid a cross-country or international drive.

For most employees, employer-paid moving expenses are taxable income, and employees generally can’t deduct moving expenses on their federal tax returns. Exceptions apply to active-duty members of the U.S. Armed Forces who move under military orders because of a permanent change of station, and to qualifying employees or new appointees of the intelligence community who move because of a change in assignment that requires relocation.

Certain moving expenses may qualify for exclusion from income under these exceptions. See the IRS guidance on moving expenses for eligibility requirements and details. Consider working with a tax professional to understand how relocation expenses apply to your business and employees.

Short-term housing

Temporary housing, such as a condo or apartment rental, can give employees a more comfortable place to stay after they relocate. You can make these arrangements in advance so workers don’t have to find a rental on their own.

Meal allowance

During a move, relocating employees may not have access to a kitchen. To make the process easier for them, consider providing a daily, weekly or monthly meal allowance during relocation. You might reimburse them for food purchased at gas stations, restaurants, airports or grocery stores.

Paid time off work

Preparing for relocation can be time-consuming for an employee, even with a generous relocation package. To help them reduce stress during packing and moving, consider offering additional paid time off (PTO). A week or two of PTO can give them the flexibility to complete relocation tasks without losing income.

You can also offer PTO upon arrival in the new location so they can complete tasks such as obtaining a new driver’s license or registering to vote.

How to choose between outsourcing and in-house options for employee relocation

Your human resources (HR) team may not have the time to manage employee relocations while completing their other tasks. If relocating employees is common at your company, you might consider outsourcing HR tasks such as finding housing, completing paperwork or managing relocation plans. This allows your current employees to focus on everyday tasks.

Even if you don’t relocate employees often, outsourcing services may still be helpful. Employee relocation can involve many details and costs, and an experienced relocation professional can streamline the process. They can answer employee questions, support fair compensation and help your company stay within its relocation budget.