Summary: Employee relocation can include domestic moves within the home country, but the term is usually used when referring to international relocations.
Employee Relocation
Employee relocation can be a strategic tool for organizational growth, particularly when seeking to hire top talent in key positions. You may have found the right fit for your role, but they might not be located in the right place. Offering employees relocation assistance helps attract and hire talent. Employee relocation is not simple; it involves a lot of communication, understanding the cost and impact, and ensuring compliance.
In this blog, we will talk about what employee relocation is, the process, and the risks and costs associated with it. Read along to find more!
What Is Employee Relocation?
Employee relocation is the process of transferring an employee from one workplace to another, either temporarily or permanently.
Employee relocation is often assisted financially and logistically by the employer. Employee relocation can be within the same country, state, or international. It is not only applicable to new hires, but can also be for existing employees in case of promotions and a shift of workplace.
Types of Employee Relocation
Employers may relocate employees for many reasons, some of which are:
- Opening or relocating offices
- Filling skill gaps
- Promotions
- Location-specific assignments or projects
- Extensive training & workshops
- Transitioning remote employees to office locations
- Consolidating teams after a merger or acquisition
Employee relocation comes in three types, these are:
Temporary
Temporary relocation usually happens when employers need specialized assistance for a specific period from their existing workforce. It can be from a few weeks to a few months. Employers are supposed to provide temporary furnished accommodation and local transportation. Mileage or airfare is also to be considered for relocation.
Permanent
Permanent relocation is when employers need employees to move to a specific location for a long-term role and a long-term commitment. Permanent relocation may mean providing a residence, moving costs, spouse job support, and cost-of-living adjustments, if applicable.
International
International relocation means an employer is moving an employee from one country to another for work purposes. This is also a long-term commitment and similar to permanent relocation.
International relocation is more complicated because the employer also has to provide immigration assistance and bear the cost of visa sponsorship in addition to housing, dependent support, healthcare, and education support.
Risks of Employee Relocation
Employee relocation is not simple; it comes with different risks that employers need to consider before relocating an employee.
Here, we will talk about the potential legal, retention, and tax risks associated with employee relocation.
Legal
When an employee is relocated, employers should be aware of the legal implications it may have. For example:
- Employers should be familiar with the minimum wage and leave laws in the state where their employee is relocating.
- Depending on the laws of the countries involved, if employee relocation is not explicitly mentioned in the employment contract, employees might not be obligated to relocate, unless mutually agreed. If an employer demands that the employee relocate when it is not in their agreement, they might be breaching the contract.
Retention
Employee relocation is a sensitive matter that must be carried out carefully to avoid retention risks. If your employee relocation is poorly planned, it may affect the employee’s morale and lead to them quitting rather than working for you.
Providing support to existing employees during the relocation process helps reduce stress and sustain morale, often making it a cost-effective option for employers compared to recruiting and onboarding new talent.
Tax
Employers need to evaluate the tax implications that may apply for employee relocation. Some of them are:
- All moving expenses are taxable. According to the IRS, for 2018 through 2025, employers are required to include moving expense reimbursements in employees’ wages.
- International relocation may trigger dual taxation. Employees working abroad for extended periods may trigger tax obligations in both their home and host countries. While the general threshold is around 180 days, some countries apply different rules.
For example, Switzerland may tax individuals after just 90 days, whereas South African tax residency can end after 330 days overseas.
To help avoid double taxation, many countries have Double Taxation Agreements (DTAs), but it’s important to consult local tax laws before relocating employees internationally. - It’s important to understand the factors affecting or creating the status of Permanent Establishment. When an employee conducts business in another country, it may unintentionally create a Permanent Establishment (PE) for the company in that location. This means the business could become subject to corporate taxes in the host country.
Employee Relocation Expenses
Moving from one state or country to another can be very expensive. Employers need to have a well-structured policy and system in place to support employee relocation.
Generally, here are the responsibilities of the employer for employee relocation:
- Temporary housing
- Moving services
- New accommodation support
- House sale support for employee (if applicable)
- Mileage or airfare and any other travel costs
- Visa and immigration (if applicable)
- Spouse job support
- Family support services
- Relocation bonuses
International employee relocation can cost a lot more than temporary and permanent relocation within the same country. The cost of employee relocation varies greatly depending on the region and can cost anywhere from $25,000 to $100,000.
Employee Relocation Process
1. Planning
You need to assess your workplace and think about relocation. Is it actually necessary? Think about your employees and whether they will be willing to relocate for potential roles and projects.
Plan out your relocation needs, budget, and timeline as the first step in the process.
2. Policy Creation & Communication
You need to have a clear written relocation policy to ensure expectations are clear for both employees and employers.
Ensure your policy outlines all relevant details, including employer responsibilities, duration of support, reimbursement timeline, and any additional family support provided.
It’s also recommended to talk about compliance of both the home and host countries, where applicable.
3. Review Employee Contracts
Look at your employees’ current contracts to know whether there are legal risks of relocation.
For example, do their contracts state remote work only, or do they have a clause for a possible move? If not, you might not be able to push an employee for a move, or you might be at a legal risk of contract violation, depending on the laws of the jurisdiction.
If employee contracts are for only remote work or working at one location without a mobility clause, you need to draft and have new agreements.
4. Relocation Agreement
Employers should draft and provide a written relocation package or agreement to the employees detailing the benefits offered, responsibilities, and duration. The relocation agreement helps employees understand what will be covered and the expected timeframe for reimbursement.
5. Logistics Coordination
It is essential to make sure employees understand the timeline for moving. Employers should coordinate with employees and moving companies to ensure a smooth transition.
It is recommended to assign a single point of contact from both the employer and the moving companies for the employee to contact for any support needed.
6. Arrival & Settling In
Employer support shouldn’t end once the employee has moved to the new location.
Conduct regular check-ins in the first few months to ensure the employee has settled well into the new home and new office.
Ask if they have received the proper support or if they need more help settling in.
Offer resources for spousal employment, childcare, community integration, and cultural training, especially for international relocations.
Employee Relocation Challenges
Employee relocation doesn’t come easy. Here are some challenges employers and employees may face during or after relocation.
Different Visas
During international relocation, employers should consult immigration lawyers and carefully choose the right kind of visa for the move.
If the employee is moving with their family, what kind of visa would be best, and what additional support will the employer need to provide to ensure a smooth transition? What kind of work visa is required for the employee? For example, in the U.K., you need to have a skilled worker visa.
Family Adjustment
Relocation affects entire households. Resistance may come from a spouse’s career disruption, children’s schooling, or overall discomfort with the new environment. Employers should offer counseling, school search assistance, and relocation support for families to minimize resistance.
Cultural Differences
If the employee is relocating internationally, it may come with numerous cultural shocks and difficulty adjusting to a new place. Employers should offer cultural training to help employees ease into the new environment and succeed.
Conclusion
Employee relocation can be tricky and may involve retention, legal, and tax risks. Employers choose to relocate their employees for multiple reasons, such as business expansion and filling key positions.
If you know the types of employee relocation and how to support and coordinate the process, the relocation becomes a little easier.
Authors:
Charlotte is an Human Resources Information Systems and Martech expect, Charlotte has worked for major brands in the industry including FactorialHR and Tooltester. Originally from Manchester, UK, with a Bachelor's degree from the Manchester Metropolitan University, Charlotte currently lives in Barcelona, Spain.
