What is a relocation package, and what should it include?

Attracting top talent in today's global market often means looking beyond your local area. When your ideal candidate lives elsewhere, a compelling relocation package can be the key to bringing them to your team. 

But what goes into such a package, what are the costs, and what are the benefits for everyone involved? This guide will walk you through crafting effective relocation packages that make a real difference.

What is an employee relocation package?

Simply put, an employee relocation package is a set of benefits an employer offers to help an employee—whether a new hire or a current team member—move a significant distance for work, usually more than 50 miles. The main goal is to ease the financial and logistical stress of moving, making the transition smoother and more appealing. Think of it as a warm welcome that shows your company values its people and invests in their successful integration.

More than just a perk, employee relocation packages are strategic tools. A well-structured package can significantly widen your talent pool, allowing you to recruit the best candidates globally. Offering relocation assistance for work signals that your company is serious about attracting top talent and is prepared to support them through a major life change.

Why are relocation packages important?

In today's competitive environment, relocation packages are increasingly crucial. Specialized roles often require a global search, and top candidates frequently have multiple offers. A comprehensive package can make your offer stand out, demonstrating empathy for the challenges of relocation and a commitment to employee well-being from day one.

A smooth relocation, aided by a good package, leads to faster onboarding and productivity. When employees aren't burdened by moving stress, they can integrate into their new team and contribute more effectively. Investing in relocation packages is an investment in your talent, your employer brand, and your company’s future.

What’s included in a relocation package?

The components of a relocation package can vary widely based on company policy, the employee's role and level, the distance of the move, and whether the employee is a renter or homeowner. However, common elements often include:

• Moving expenses: This is fundamental. It covers the cost of physically moving household goods, ranging from packing supplies and a moving truck rental to hiring full-service professional movers. Insurance for belongings during transit is also typically included in a relocation allowance.
• House-hunting trips: Companies often cover one or more pre-move trips for the employee (and often their partner or family) to visit the new location to find housing and explore neighborhoods. Covered expenses usually include travel, lodging, and meals.
• Temporary housing: It’s common to need a place to stay for 30 to 90 days while securing long-term accommodation. This could be a corporate apartment or an extended-stay hotel, with the company covering rent and basic utilities.
• Real estate assistance: For homeowners, this can include help selling their old home (e.g., covering some closing costs or realtor fees). For renters, it might mean covering penalties for breaking an existing lease.
• Travel expenses to new location: This covers the one-way cost of transporting the employee and their immediate family to the new city. This could be airfare or mileage reimbursement.
• Familial support: A move impacts the whole family. Support can include spousal job-seeking assistance or help with finding new schools.
• Miscellaneous expense allowance: Often a lump sum (e.g., $1,000-$5,000), this covers smaller, unforeseen costs like new driver's licenses or utility hook-ups.
• Visa and immigration assistance: For international moves, this is critical. It covers costs and provides expert support for obtaining necessary visas and work permits.

How much do employee relocation packages cost?

Relocation expenses vary dramatically. Industry data suggests ranges like $10,000-$25,000 for domestic renters, and $40,000-$75,000+ for domestic homeowners. International relocations are typically the most expensive, often exceeding $75,000-$100,000. 

Factors influencing the total cost of relocation expenses include the move distance, family size, and employee level. Companies must balance offering a competitive relocation allowance with their budget.

Different ways to structure a relocation package

Companies typically administer relocation benefits in one of these ways:

• Lump sum: The employee gets a fixed, one-time payment. This offers flexibility for the employee and is simple for the employer.
• Reimbursement: The employee pays for relocation expenses upfront and submits receipts for reimbursement up to pre-approved limits. However, this can be a financial burden for the employee.
• Direct billing (managed cap): The company pays vendors directly, often within a capped budget. This removes the financial burden from the employee.
• Third-party relocation management: Many companies outsource the entire process to specialists who handle everything from policy counseling to employee support.

Benefits of offering employee relocation packages

Investing in relocation packages offers significant advantages:

• Wider talent pool: By offering relocation assistance for work, you can access the best talent globally.
• Competitive hiring edge: A compelling relocation bonus will help you stand out to top candidates.
• Improved employee retention: Supported employees feel valued and are more likely to stay.
• Enhanced employer brand: Including a relocation allowance as part of the job offer boosts your reputation as an employer of choice.
• Faster productivity: Employees settle in and contribute sooner if they aren’t bogged down by the planning and logistics of a move.
• Supports diversity and inclusion: Recruiting from various regions can help you build a more diverse workforce.

Potential drawbacks and challenges

While beneficial, there are challenges to consider:

• High costs: Relocation expenses add up and represent a significant financial investment.
• Administrative complexity: Managing employee relocation policies and vendors can be time-consuming for your HR team.
• Risk of failed relocations: Employees or families may struggle to adapt to a new culture or environment.
• Ensuring fairness and consistency: Clear, equitable policies are vital to ensure that all employee relocations are handled in a consistent way.
• Tax and legal complexities: Relocation benefits often have tax implications (most are taxable income). Companies may offer a "tax gross-up" to offset this. 

5 steps to create a relocation package

A well-defined relocation policy is your roadmap. Here’s how to create one:

1. Define needs and budget: Align your relocation strategy with company goals and finances. Determine which roles or employee levels are eligible.
2. Determine covered expenses and tiers: Decide what specific benefits your relocation package will include. You might create tiers based on employee level, move distance, or family status.
3. Choose a payment and administration structure: Select the most suitable method for covering relocation expenses: lump sum, reimbursement, direct billing, or outsourcing. Consider the administrative burden versus employee support.
4. Establish clear policies and communicate them: Document everything. Your employee relocation policy should outline eligibility, covered expenses, limits, processes, and tax implications. Include a payback clause specifying if an employee must repay costs if they leave within a certain timeframe (e.g., 1-2 years).
5. Review and adjust policies regularly: The talent market and relocation costs are dynamic. Review your policies periodically to ensure that they remain competitive and effective. You can also solicit feedback from relocated employees on how to improve the process.

Simplify global mobility with Oyster

Navigating international relocations brings unique complexities. Oyster simplifies global employment and HR, streamlining benefits and compensation for distributed teams. 

While Oyster doesn't directly handle physical moves, we can help with obtaining the necessary visas as well as managing the financial and HR aspects of employing someone in a new country, such as compliant payroll, local benefits administration, and legally sound employment contracts. Whether you're supporting an international move or a work from anywhere  policy that involves relocation, Oyster ensures correct employment setup and seamless ongoing management, reducing your administrative burden.

Ready to make global talent mobility easier? Learn more about Oyster’s Talent Mobility solution.

FAQs

What is reasonable to ask for in a relocation package?

It's reasonable to ask for a relocation allowance to cover direct moving costs, a house-hunting trip, and temporary housing. For homeowners, assistance with selling their old home is also common.

What is a fair relocation bonus or lump sum?

A fair relocation bonus can range from $5,000 to $15,000 or more, depending on the employee's level and expected miscellaneous costs.

Does relocation assistance get taxed?

Yes, in most cases, employer-paid moving expenses are considered taxable income in the U.S. Some companies offer a "tax gross-up" to help cover this.

What are IRS-approved moving expenses for tax deductions?

Currently, for most civilian employees, the moving expense deduction has been suspended through 2025. Most employer-provided relocation benefits are taxable. Active-duty military members may still have some deductible expenses.

About Oyster

Oyster is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.

Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.