Need to deepen your company’s talent pool? A relocation bonus is a great way to attract talent from other areas of the country or globe.
Jesi McLellan, SPHR
What Is a Relocation Bonus?
A relocation bonus is a lump sum of money that a company pays to a new employee to reimburse expenses related to the person moving to take the position. A relocation bonus may be called a signing bonus, as the funds are not required to be spent only on moving expenses and can be used at the new employee’s discretion.
Relocation Bonus vs Relocation Package
A relocation bonus is a lump sum of money paid to the new employee, and they are responsible for allocation of the monies. In most cases, the company pays the relocation bonus in the employee's first paycheck. A relocation package is just that: a package of multiple services provided by the company. It might include assistance from pre-approved packing and transportation companies for household goods, the sale of a home, temporary housing, or free trips to the region so the new employee can familiarize themselves with the area prior to moving.
Why Is a Relocation Bonus Helpful?
A relocation bonus is helpful to both the company and the employee.
How Relocation Bonuses Help the Company
- Larger talent pool. By offering a relocation bonus, potential candidates from outside the area will be more enticed to take a new job and move for the company.
- Less time to fill. When the talent acquisition team or hiring manager are not restricted to one geographical area to find talent, the position can be filled much faster with potentially better talent.
- Improved retention rates. Hiring the right fit for the role and company increases productivity and satisfaction, and there is less turnover. Someone who relocates for a position is more motivated to stay with the company.
How Relocation Bonuses Help Employees
- Relocating isn’t cheap. Helping with the cost of relocation takes some of the financial burden of moving off the employee who is moving for the position.
- Stress relief. Not having to worry about how you are going to fund a move across the country can help alleviate the financial stress that comes with the move.
- Relationship building. By offering a relocation bonus, the company shows that it values the new employee and wants to start the relationship off on the right foot.
Types of Relocation Bonuses
Let's look at three of the most common ways of delivering relocation assistance: lump sum, reimbursem*nts, and direct billing.
Lump Sum
A fixed, one-time payment is given directly to the employee to cover moving expenses at their discretion, usually in their first paycheck.
Reimbursem*nt
The employee pays for all expenses out of pocket and is later reimbursed by the company. Companies typically set a limit above which they will not reimburse.
Direct Billing
The company hires and directly pays for a moving company and any other services required on behalf of the employee.
How to Determine What Your Company’s Relocation Bonus Should Be
Step 1: Be Proactive
Using the steps below, create a relocation assistance policy before your company needs one.
Step 2: Consider Your Company Culture
How do you want to reflect your company’s culture in your relocation assistance?
Step 3: Determine Who Will Be Eligible for Assistance
Will your company only pay relocation assistance for C-suite level positions? Hard-to-fill positions? Do you offer it to new employees living 25 miles away but who choose to move closer? Make sure your policy is clear about who is eligible.
Step 4: Determine the Amount the Company Can Afford to Spend on Relocation Assistance
Typically, a lump sum payment or a relocation bonus is cheaper than a full relocation package, so you need to determine how much the company can afford to spend per eligible position.
Step 5: Determine the Services That Will Be Covered
Again, does the company want to go with the ease of paying a monetary bonus and not worry about which services will be offered, or want to specify exactly what services they will assist with?
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Jesi McLellan, SPHR
Jesi is a certified HR Professional with 6+ years of experience, mostly in heavy manufacturing. She has been an HR Dept. of One through most of her career thus far and has had the opportunity to wear many different hats along the way. She has a BSBA and an MBA concentrated in HR Management and an MSA in HR Administration. Jesi has also successfully passed both the PHR and SPHR exams on her first attempt.
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Frequently asked questions
Other Related Terms
Cost of Living Adjustments (COLA)
Geographic Pay Differentials
FAQs
Upfront: Some employers provide a lump sum relocation bonus upfront. This is often given before the move to help cover immediate expenses like hiring movers, shipping belongings, or travel costs. Reimbursem*nt: In other cases, employers might choose to reimburse employees for their moving expenses.
Are relocation bonuses paid up front? ›
Upfront: Some employers provide a lump sum relocation bonus upfront. This is often given before the move to help cover immediate expenses like hiring movers, shipping belongings, or travel costs. Reimbursem*nt: In other cases, employers might choose to reimburse employees for their moving expenses.
How is relocation incentive paid? ›
Relocation Incentive Payment
The incentive may be paid as an initial lump-sum payment at the beginning of the service period, in installments throughout the service period, as a final lump-sum payment upon completion of the service period, or in a combination of these methods.
How to negotiate relocation bonus? ›
How to Negotiate Relocation Assistance?
- Determine and Outline Your Needs. Write down everything that you might need from a relocation package. ...
- Research Your Options. ...
- Emphasize Mutual Benefits. ...
- Get the Agreement in Writing. ...
- Check Taxes and Cost of Living in Your New Location:
How to Ask for Relocation Assistance for a New Job?
- Here are some more tips for how to ask for relocation assistance:
- Be honest. ...
- Request budget reimbursem*nt. ...
- Explain expenses. ...
- Keep a record of expenses. ...
- Receive your reimbursem*nt. ...
- Thank the employer. ...
- Follow up.
Relocation bonuses are taxable income. Most companies will gross up the amount of the bonus so the employee receives the entire bonus amount. For example, if the company offers a lump sum bonus of $5,000, the company will pay a higher gross amount to cover the taxes so the employee receives a net amount of $5,000.
How is relocation gross up calculated? ›
To calculate a relocation gross up, take one minus the tax rate and divide the taxable expenses by that amount.
What is a standard relocation package? ›
A lump sum relocation package is a standard relocation package since many employees choose this package. A lump sum package is when a set amount of money is directly given to your relocating employee so they can pay for the expenses that come with moving. The government considers this as income, making it taxable.
Do I pay taxes on relocation bonus? ›
Bonuses and employer paid moving expenses, such as house hunting relocation reimbursem*nts, qualify as additions to employees' taxable income and require employers to pay standard payroll taxes such as Federal, State, and FICA.
Are relocation bonuses prorated? ›
The full amount of the authorized relocation incentive must be prorated across the length of the service period to determine the amount attributable to completed service and uncompleted service.
The full costs and figures can vary depending on the individual and their package however, as an example, payments are typically between $2,000 and $100,000. How do you negotiate a relocation package?
How do you maximize relocation reimbursem*nt? ›
The less stuff you have to move, the less you will pay. Tip: When deciding what to keep and what to get rid of, have a floor plan of your new home or apartment handy, and refer to it often. This helps ensure you don't waste your relocation bonus moving things that will not fit in your new residence.
Does relocation bonus include furniture? ›
The specifics of a relocation package can depend on several factors, including the company's financial resources, the employee's length of service, and whether the employee owns or rents their home. Typically, a relocation package will cover several key expenses: Moving and storing furnishings and household goods.
What is a reasonable amount to ask for relocation assistance? ›
Relocation packages can range in worth from $2,000 to $100,000. What services and the amount of money you decide to cover is entirely up to you and your company. However, keep in mind that the more you are willing to give, the harder it may be for a candidate to refuse your offer when you negotiate moving expenses!
How is relocation allowance paid? ›
A relocation stipend is a set amount of money an employer provides to cover job-related moving expenses. A stipend can either be pre-fixed based on company policies or calculated based on the employee's actual expenses. Most employers offer a combination of both, with an upper limit on how much they will reimburse.
What is a relocation policy? ›
The term “relocation policy” or “relocation package” refers to both the specific financial benefits an employee receives to offset the cost of their move and the logistical assistance provided to them.
How are relocation expenses paid? ›
A relocation stipend is a set amount of money an employer provides to cover job-related moving expenses. A stipend can either be pre-fixed based on company policies or calculated based on the employee's actual expenses. Most employers offer a combination of both, with an upper limit on how much they will reimburse.
Are retention bonuses paid upfront? ›
Retention bonuses may be paid as a lump sum or in a series of payments, such as at the beginning and at the end of a specific period.
Do you have to pay back a relocation bonus? ›
Under a payback clause, a transferred employee agrees to reimburse the company all or part of the employer's expenses for the transfer if the employee leaves the company within a specified time, typically within a year after the move.
