3 Common Mistakes in Designing Relocation Packages

With the U.S. unemployment rate at 3.7 percent, it’s unlikely that the perfect professional for your open position lives just down the street. Increasing competition for talent means your offer must meet or exceed a potential hire’s needs and expectations, and the farther away the candidate is the more likely it is that those needs and expectations will include a relocation package.

You might think that any assistance is good assistance, but prospective employees may see things differently. “If a company is cheap about relocation, they are cheap about everything,” Liz Ryan, CEO and founder of Human Workplace, wrote in Forbes.

Here are three major mistakes to avoid so no prospective employee sees you as a company that undercuts its job offers with poor relocation packages.

Skipping Rental Support as a Housing Option

Traditional relocation packages often focus on purchasing a home, which is costly for both the company and the employee. You can adjust by considering rental support, especially if you’re planning to relocate millennials or baby boomers, which The Washington Post notes are “two of the fastest-growing groups of renters.”

“As employees evaluate a corporate relocation, housing is generally their number one issue,” says Ben Creamer, co-founder and managing broker at Chicago-based Downtown Apartment Co. “Leasing often better suits an employee’s needs and budget. Additionally, leasing supports the practice of many companies leveraging short-term and temporary assignments as a cost-effective way to balance talent development and the employee experience with workforce needs.”

Consider the cost of renting and homeownership in your area to determine if this might be a suitable option.

In both 2017 and 2018, the Urban Institute found that it was more affordable to rent instead of own in 16 of the 33 largest U.S. cities. The group notes that in general, the cost of home ownership has been rising over the past year. These costs could make rental assistance cheaper for both the new employee and your company.

Not Keeping Offers Up-to-Date

The topic of renting versus buying should bring up thoughts of mortgages, monthly expenses and taxes. The package you offer could have major implications in each area, but these implications may have changed since you last looked. Last year’s package might not be as attractive as it needs to be.

Before offering any relocation package, HR professionals should review workforce trends plus local and national laws to see if any changes could affect the value of benefits or an employee’s ability to use them.

“For example, a change in the tax code in 2018 means relocation expenses paid by employers are now taxable, so there is an additional incentive for both employers and employees to forgo big real estate expenditures in a move,” Creamer says.

Paying for services directly might mean less cash in your new hire’s pocket, but it also changes some of the taxation considerations for both you and them. Major changes happen each year, but there are often caveats around the date of the move and the date of the reimbursement.

Katleen De Stobbeleir, an associate professor of leadership and coaching at Vlerick Business School, says this also applies to larger workforce trends. “Increased mobility and the importance of expertise in our labor market is changing incentives. My experience is that experts value portable benefits,” De Stobbeleir says.

Relocation packages could be structured so they are similar to the time-based and universal-application nature of portable benefits. To make these adjustments, you’ll need to understand the value your company wants to offer and how to negotiate the finer points to stay within that cost.

Defining value ranges for packages can make it easier to offer a benefit that fits the prospective employee’s needs and ensures you make offers that leadership will support.

Failing to Support Employee Choice

As you narrow the scope of your relocation benefit, take care not to limit it so much that it ceases to be attractive or useful. A more flexible package can help.

“All too common are relocation packages which are tailored for the masses without care for the individual’s needs,” says Rand Fandrich, founder of the Expatriate Foundation. “A well-crafted relocation package allows for the soon-to-be-uprooted employee to choose from specific items that address their needs. When they aren’t allowed to take part in choosing which benefits would best suit them, much of the otherwise great package has gone to waste.”

Companies should create a package that prioritizes supporting work-life balance, and that starts with focusing on employees’ family needs, Fandrich says. Consider offering allowances for child-care or elder-care assistance, spousal job support, or funding a home-finding or apartment-finding trip ahead of the needed move-in and start dates. He also suggests discussing the pending move to find out the employee’s specific concerns, whether it’s large issues such as overall housing costs or incidentals like support for vehicle registration, carpet cleaning or funds to pay for breaking a lease.

HR professionals already know that human capital is a diverse resource. If policies aren’t built to match, they run the risk of alienating that capital. Personalization and choice in how a package is offered and applied are at the heart of avoiding all three of these common mistakes for relocation efforts.