- Employee relocation allows companies to move or hire top talent to new jurisdictions, and to attract top specialists that are not available in a given local talent pool.
- Employee relocation services are third-party service providers that assist with some or all aspects of relocation in order to reduce the burden of moving on both employees and employers.
- Employee relocation services can include packing and shipping, dual-career assistance for working spouses or partners, immigration assistance for international relocation, tax assistance, home sale and home buying assistance, cost of living assessments, and more.
- Employee relocation can be costly, but it can also be the most effective way for a company to grow quickly in a new area.
In today’s globalized world cities, states, and countries compete on an international field to attract new business investment. This creates a plethora of enticing options for businesses contemplating opening a new branch office, building a new manufacturing facility, or moving operations to a more competitive jurisdiction. While new locations can offer many cost-saving incentives, they often lack the specific talent needed for business owners, however.
In other cases, a business may grow in size and complexity and find that they do not have the right employees internally (or even in the area of operation) to facilitate further growth. Though remote workers can often help businesses expand without the need for relocation, many business functions still require trained specialists on-site.
In these circumstances, employee relocation can be more attractive than hiring and training less qualified employees from the local area.
What is employee relocation?
Employee relocation is when an employee is moved from one location to another by their employer. Employee relocation may be from state to state, or international. It could apply to new employees or existing employees that are being transferred.
Employee relocation started becoming common following World War II, as growing businesses needed to bring in out-of-state employees for new offices and factories. By the 1960s, employee relocation services (also known as ‘relocation management companies’) had become thriving businesses in their own right. The American relocation boom peaked in the 1990s, however, it is picking up again as businesses expand overseas and use employee relocation (alongside remote work) to make up for talent shortages. According to recent surveys, 75% of companies report talent shortages. Additionally, in a 2020 study, 38% of Americans signaled an intention to move, 36% of those moves being work-related
Today, some professional employer organizations (PEOs) are offering employee relocation services as part of their offerings. This allows businesses to smoothly add employee relocation to a mix of strategies that already includes remote workers, outsourced human resources, and Employer of Record (EOR) services.
What is included in employee relocation services?
For some companies, employee relocation packages are as simple as a lump sum to be spent at the employee’s discretion towards their own relocation. Most companies, though, will outsource their employee relocation services to a third party that can provide a more comprehensive service. These services can include:
- Household moving services. This could include transportation of family members and pets to the new destination, and packing and moving services.
- Home sale and home purchase assistance. For homeowners, this can be one of the biggest headaches involved in relocation, which is why it is offered by many employee relocation services. The service may also provide mortgage assistance, appraisal management, house hunting assistance, closing services, and temporary housing. For renters, employee relocation services can assist employees in exiting their lease and finding a new property at their destination.
- Dual-Career assistance. For families with two working partners, a spouse or partner’s career will be of primary concern when contemplating a move. Dual career assistance could come in the form of counseling or coaching, assistance with job searches, resume preparation, training and assessment of interview skills, or assistance with business networking.
- Tax or “gross-up” assistance. As of 2017, reimbursements or direct payments relating to moving expenses are treated as taxable income. Gross-up assistance helps ease this burden on the employee.
For international employee relocations, additional services will often be provided, such as:
- Cost estimations and candidate assessments before the move. Relocating an employee Internationally is much more difficult and costly than within the US, so some employee relocation services can help the employer decide whether the move is worthwhile and if the candidate has the right personality for the position.
- Cost of Living Assessments (COLAs). Many international destinations will have very different costs of living than the US. COLAs can help determine what changes should be made to salaries and benefits in order for an employee to maintain their lifestyle.
- Housing assistance. International moves are often temporary. In these cases, the relocation service may assist with temporary local housing and rental of the employees’ property back at home, if desired. When the employee returns to their country of origin, the service may also provide repatriation services.
- Immigration and tax services. International employees require working visa arrangements and local tax reporting. An employee relocation service will often assist with this aspect of the move for both the employee and their spouse or partner. US employees must also report their income earned abroad (though in many cases they will not be taxed on this income) and may require assistance with proper filing.
- Destination services. Relocating abroad can be both exciting and difficult. The experience can be made more enjoyable and easier with language training, cultural education, area orientation, and other services intended to make the employee feel at home in a new country.
Employers often create tired relocation assistance packages for employees at different levels in order to stay competitive while keeping control of expenses.
What are the benefits of using employee relocation services?
For employers, employee relocation services can make it easier to attract top talent to any location. There can be many advantages to opening up branches in new jurisdictions (lower tax burdens, or cheaper rent and utilities, for instance), however, those new locations may not have the local talent pool needed to run the business. Employee relocation services can help bridge this gap by bringing highly talented employees from areas with a high cost of doing business to more competitive locations.
Employee relocation services bring many benefits to employees as well. A skilled employee may benefit from selling their home in a high-cost area, for instance. Relocation services can also help employees move to higher-paying or more fulfilling positions that may not be available in their existing locations. International relocation is often a once-in-a-lifetime chance to experience a new culture, without sacrificing career goals and way of life. Employee relocation services make these benefits possible by taking the burden of relocation off of the employee and allowing them to focus on their new position.
Are there any disadvantages to using employee relocation services?
Employee relocation services do charge for their work, which is an added cost to employers. Whether employee relocation is managed in-house, by an employee relocation service, or shouldered by the employee themself, it can be quite costly. Before engaging an employee relocation service, employers should learn which services are necessary to attract and retain the talent desired.
Video — what does an employee relocation company do?
Employee relocation – top four service providers
Once you have made the decision to outsource employee relocation and go with an employee relocation company, which one should you choose? Here are our top 4 picks:
- Velocity Global — as well as being a top global Employer of Record (EOR) company, Velocity Global offers world-class employee relocation support. Their specialty is visa and work permit support, including sponsorship.
- Sirva — with 177 countries covered, Sirva is a full-service corporate employee relocation company. Alongside visa issues, they support temporary accommodation searches, transporting belongings and compensation advice. the own multiple subsidiaries (such as Global Van Lines and Allied Van Lines), to handle each section of the employee relocation journey.
Expat Management Group — a specialist in the legal and compliance aspects of employee relocation. Expat Management Group manage visas around the world, take care of translation and documentation processing, and provide strategic advice on expat relocation.
Cartus — the widest international coverage of all. Cartus serves 185 countries, and can manage all aspects of corporate relocation. This includes physical transportation of goods and accommodation, as well as visas and expat compensation advisory.
Employee Relocation — Your Next Steps
Employee relocation allows companies to move top talent to new locations, take advantage of cost savings offered by other jurisdictions, open up new markets, and operate multi-nationally with their existing specialists. Employee relocation services can help employers reap these benefits with minimal friction by shouldering the difficulties involved in relocation. For jobs that require a specific skillset and cannot be managed remotely, employee relocation can be easier and carry less risk than hiring and training less qualified employees from the local talent pool.
When contemplating an expansion into a new area, or when searching for new talent from out of state or abroad, the costs of employee relocation should be factored into the equation to ensure cost management and accurate forecasting.
Employee relocation services handle some or all of the tasks involved in moving an employee from one working location to another. This could be limited to physical moving services, or include more advanced services such as tax assistance, language training (for international relocation), home selling and home buying assistance, and a whole range of other services designed to make employee relocation as frictionless as possible. The costs incurred by these services are generally paid for or reimbursed by the employer.
An employee’s relocation package is the collection of total relocation assistance offered by the employer. When considering a move for work, an employee will compare the relocation packages offered by competing employers before making their decision. Employers and employees should both keep in mind that reimbursements given by employers for relocation costs are now considered taxable income.