Last updated: July 18, 2024
Paying to relocate an employee represents an investment in that team member—especially where international relocations are concerned. Estimates suggest corporate relocation packages may cost employers as much as $100,000 when everything is said and done.
To help you get the most out of your investment, we’ve put together three key best practices for international employee relocations. After helping tens of thousands of individuals and families make long-distance moves—many of which were employer-sponsored—we’ve seen what works and what doesn’t.
Our best practices will help you make the most of your relocation budget. They’ll also help you create a smooth, seamless move for your employees, fostering good will, boosting productivity, and promoting long-term employee retention.
Let’s start by reviewing how employers benefit from successful corporate relocation programs.
Why Pay to Relocate Employees Internationally?
Given the expense associated with international employee relocations, it’s only reasonable to ask: Does it make sense for a company to pay employee relocation expenses? Can’t they hire locally? Or expect employees to pay their own moving costs?
- Talent can be hard to come by in certain areas. This is especially true if the position you’re filling requires specialized expertise or significant leadership experience.
- Current talent may outgrow their location. Consider a talented employee who wants to move up in the company but their current location doesn’t offer the right advancement opportunities. Rather than losing that employee to a competitor, you may choose to transfer them to another location—with relocation benefits—so they can continue their upward trajectory.
- Certain tiers come with certain expectations. If you’re hiring for a senior manager or a high-level executive, covering relocation costs may simply be part of the associated expectations.
- Relocation packages can give you a recruiting edge. If your competitors offer relocation packages, you may lose out on the best talent. Alternatively, if you’re the only company offering relocation benefits, you may be able to stand out and attract top talent more easily.
Now that we’ve covered some of the key reasons companies offer international relocation benefits, let’s talk about a few best practices to get the most out of this investment in your employees.
International Relocation Best Practice #1: Understand Your “Why”
Corporate relocation benefits packages come in many different forms. (More on that to follow!) If you’re creating one from scratch—or simply evaluating the one you have—it’s important to get clear on your specific goals.
For example, what’s most important to your organization?
- Employee retention?
- Employee satisfaction?
- Attracting top talent?
- Improving performance at your various locations around the world by bringing in new talent?
Although all of these benefits can be nice-to-haves, it’s important to focus on the top one or two goals that will really move the needle. That way, when you’re faced with the myriad decisions regarding the particulars of your relocation benefits package, your goal can guide your decision.
Even better, attach one or two key performance indicators (KPIs) to your top goal. For example, if you’re targeting employee retention, start tracking average employee tenure. Or, quantify how much it costs your company to train an employee and get them up to speed and track that spending year over year. When you compare the cost of bringing in a new employee versus retaining them via a corporate relocation program, you’ll understand the true value of that expense.
Ultimately, by choosing goals and attaching KPIs, you’ll have a quantitative yardstick to evaluate the effectiveness of your relocation benefits package—and justify the cost of the benefits you provide.
International Relocation Best Practice #2: Choose the Package That Fits Your Organization
If you’re setting up an international relocation package for the first time, start by evaluating the four standard options that most programs fall into. Consider your organization’s goals, your competitors’ packages, and your budget to help select the right package for your organization, which you can customize as needed:
Reimbursement
How It Works: Your organization issues a list of covered relocation expenses, and your employee coordinates and manages their own move. Afterward, your employee submits receipts and documentation for reimbursement.
If you plan to go this route, a couple of notes:
- International relocations can get complex, fast. Your employees may need more support in order to make a smooth transition to a new country.
- Make sure you’re as specific as possible when creating your reimbursement policy. For example, if you’re covering a professional move, will you also cover packing and unpacking services? What about storage while your employee looks for a permanent place to live? If employees have items requiring special handling—such as fine art—would the expense to move those also be covered? It’s important to think through these details carefully. Otherwise, you might create confusion or even frustration for your employees—the exact opposite of your intentions.
Flat-Dollar Amount
How It Works: Employees are offered a lump sum to cover their various relocation expenses, and they’re expected to manage the move on their own.
If you plan to go this route:
- You’ll need to consider setting a different flat-rate payment for each destination. The cost of a move to Paris versus a move to Zurich versus a move to Barcelona can vary considerably. Although a flat-dollar reimbursement was designed to be easy on the employer, the difference in costs between international countries can mean extra legwork on your part to come up with a “fair” lump sum for each destination.
In-House Coordination
How It Works: You partner with an international moving company who can simply handle all of your employees’ relocations. You set the parameters with the moving company in terms of what you’ll pay for, so you control the costs you’re willing to reimburse.
If you plan to go this route:
- You’ll need to designate another employee to coordinate between the moving company and the employee. Often, this function falls to the HR department. Whoever you choose will need to offer oversight, answer questions from the moving company and your employees, and ensure that your program is hitting its goals of delivering simple and smooth relocations for your organization.
- When you choose the right moving partner, it can be a fairly seamless partnership. Look for a moving partner with excellent communication skills. Otherwise, your employees may get frustrated and your internal go-between can get stuck in the middle—a task that can quickly wear on anyone.
Outsourcing to a Relocation Management Company
How It Works: You partner with an international moving company who can simply handle all of your employees’ relocations. You set the parameters with the moving company in terms of what you’ll pay for, so you control the costs you’re willing to reimburse.
If you plan to go this route:
- You’ll need to designate another employee to coordinate between the moving company and the employee. Often, this function falls to the HR department. Whoever you choose will need to offer oversight, answer questions from the moving company and your employees, and ensure that your program is hitting its goals of delivering simple and smooth relocations for your organization.
- When you choose the right moving partner, it can be a fairly seamless partnership. Look for a moving partner with excellent communication skills. Otherwise, your employees may get frustrated and your internal go-between can get stuck in the middle—a task that can quickly wear on anyone.
Employee Relocation Programs: Tax Implications & Gross-Ups
However, for moves after 2018, employees may owe taxes if their employer either 1) reimburses them for moving expenses or 2) pays a third party to relocate the employee. The idea of an additional tax bill accompanying an employee benefit can sour even the sweetest relocation package. And, when employees are moving internationally, the tax matters get even trickier.
To compensate, some employers offer “tax gross-ups” to cover the tax burden the employee will face as a result of their relocation package.
The Bottom Line: Make sure your employees and potential hires are fully aware of any potential tax implications associated with their relocation benefits—and be clear how your organization will (or won’t) assist with any relevant tax burdens. Otherwise, your employee may face an unexpected tax bill, which can be an unwelcome surprise.
International Relocation Best Practice #3: Consider “Extra“ Perks Aimed at Assimilation
Any relocation can put stress on an employee and their family. For some, moving is one of the most stressful life situations out there. (Even more stressful than divorce!)
International relocations come with additional challenges. Cultural differences and language barriers can leave your employee and their family feeling isolated. Homesickness and even culture shock are a real possibility.
Given all of the potential issues employees face when moving abroad, many employers supplement their relocation packages with additional benefits aimed at creating a smooth transition. After all, the sooner your employee (and their family!) feels settled, the sooner they can start making an impact in their new workplace.
For example, consider the following:
- Healthcare: How will your employees access medical care abroad? What do they need to know to effectively navigate the healthcare system in the destination country? Will your current insurance plan cover them, or do you need to obtain additional coverage? If the destination has a public healthcare system, would providing supplemental private insurance add another layer of certainty and protection, especially for employees with young children?
- Cultural Training and Language Classes: To minimize culture shock and get your employee up to speed quickly, you may want to offer cultural training and language classes as soon as your employee has accepted the new position. Additionally consider making these opportunities available to employees’ spouses/partners and children. In addition to generating good will, helping your employees’ families acclimatize will allow your employee to focus on their job, rather than worrying about their loved ones.
- Career Assistance for Spouses/Partners: Having the full support of a partner/spouse in a new location can make all the difference to your employee. Consider a relocation package that offers career support for partners and spouses. This can be particularly important in a new country where business norms are unfamiliar.
- Advance Visits: If your employee (or their family) isn’t fully sold on a destination, paying for an advance visit could help seal the deal. It can also give families the chance to look for housing, tour schools, and nail down other details, so they’re ready to settle in quickly after the move
- Transportation: For some destinations, transportation benefits might take the form of providing a car the family can use until they find one of their own. In other destinations where the cost of a car might be prohibitive, you could consider subsidizing the purchase of a vehicle. And in still other destinations, hiring a driver may be the right move to help a family acclimatize. Although the ability to get to and from work easily may be your top priority, the family’s ability to explore their new destination can be just as important for settling in.
Looking to Trim Some Costs?
Here’s why:
- The cost will be well worth it. Rather than getting pulled into the minutiae of their move, packing and unpacking services allow your employee to keep their focus on the bigger tasks at hand, both at work and at home.
- The pros know how to pack. Your employee’s personal belongings will travel a long distance in an international move. The pros who pack international moves know how to wrap everything safely for transit.
- You’ll avoid customs snags. Boxes not packed by professional movers are marked PBO (packed by owner). Because there’s no independent verification of what’s in these boxes, shipments with a lot of PBO boxes can get flagged by customs, which can mean delays—and unhappy employees.
- You can take advantage of full replacement value protection. Some people think of this as “moving insurance,” because it protects your employees’ belongings in transit. However, this coverage doesn’t extend to PBO items. If these items get lost or damaged in transit, coverage won’t apply.
Creating Smooth International Transitions Has Plenty of Benefits
Whether you’re trying to attract new talent or retain the talent you’ve already hired, creating a smooth and simple international relocation experience can go a long way toward meeting your organization’s goals. Plus, by putting a little extra thought into your benefits package, you’ll create an easy experience from start to finish, allowing your employee to hit the ground running in their new position.
Looking for an international relocation partner to move your employees abroad? As an approved Transportation Service Provider through the GSA’s Centralized Household Goods Traffic Management Program (CHAMP), we’ve moved Department of State employees all over the world. For more than 30 years, we’ve provided specialized relocation services to household, corporate, and military clients. We’d love to partner with you to create a simple, easy, and affordable solution for your international employee relocations.
Just reach out to start the conversation, and one of our international relocation experts will be in touch.
Tell us about your move!