A relocation stipend is a set amount of money an employer provides to cover job-related moving expenses.
Whether an employee is moving across the country or the world, one thing's for sure: it's expensive. Relocation stipends can make the process much smoother.
You won't find the best talent in your backyard. Sometimes, it's a college grad from the other side of the country. And if you're expanding internationally, you might send an employee abroad to open up the new office.
If you want the best candidates to accept your job offer, you have to be willing to help them out with the relocation process.
But how do you set up a program that works for everyone? In this guide, we'll cover all aspects of relocation stipends.
Here's what is covered in this guide:
First, a quick definition:
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.
It's also referred to as:
Talent comes from all around the country. Between moving expenses, temporary housing, and even selling a home, relocating for a job is expensive (and often out of the question, even if they want to). To build a team of certified rock stars, you have to think about relocation. And be willing to pay for it.
Are you ready to set up a relocation stipend?
Employees who move for a new job would love your help covering those costs. Learn how relocation reimbursement through Compt makes life easier for you and your employees.
Like all kinds of stipends, relocation stipends are easy to implement. Typically, employers manage them in one of three ways:
Competitive employers offer relocation packages that cover all sorts of hidden costs. They also tack on benefits that make the transition to a new location a whole lot smoother, using stipends to simplify the process. It's best for high-level employees or those relocating to open a new business unit.
Example: A national US company is expanding operations to the UK. They promote their National Director to lead the team in London and offer a relocation package that includes round-trip airfare, temporary housing, moving services, real estate fees, and miscellaneous expenses associated with moving to a new country.
An easier way to manage relocation stipends is by offering a lump sum upfront. It's the most common approach companies take; it allows them to control costs without over-complicating things. In this case, employees are free to find their own moving services or stay in temporary lodging that suits their needs.
Example: A budding tech company is hiring its first CFO. Since they don't have a relocation package policy, the CEO offers a lump sum of $5,000 to cover all moving costs.
Some organizations prefer to pre-approve certain expenses and then reimburse employees for them. It's ideal when it comes to controlling costs, but it can be time-consuming for HR teams. This works best if you have a smaller, more localized workforce.
Example: A growing marketing agency wants to hire a new entry-level copywriter, but she lives in LA and the company is based in NYC. They offer to cover her one-way plane ticket, hotel costs for 3 days, and meals during the transition period.
In a highly competitive job market, offering relocation packages can be the difference between landing your dream hire and losing them to a competitor.
According to the most recent data from Levels.fyi, leading companies like Google, Amazon, and Microsoft all offer relocation packages that range from $3,000 to over $10,000.
Outside of policies for new hires, 66% of employers cover moving expenses for current employees. If you're bringing your remote team back into the office, opening a new business unit, or promoting someone between departments, you should offer situational financial assistance beyond a standard relocation program.
The exact reimbursement policies can vary from company to company, but many employers reimburse for some or all of the following:
Most companies will also provide a per diem for meals and incidentals during the relocation period. Some may even offer additional assistance such as help finding temporary housing or searching for an apartment in their new city. It all depends on the company and their policies.
In the age of flexible working arrangements, getting someone to relocate is hard. According to research from Zippia, 62% of employees say they would relocate for a career advancement opportunity or pay increase. But only 1.6% of American workers relocated for a new job in 2022.
Still, it's a requirement for any business operating on a hybrid or in-office model. Considering only 16% of companies operate fully remote as of 2023, most organizations have to do something to sweeten the deal.
The beauty of remote work is that it opens up a global talent pool. Even with a hybrid model, companies dramatically limit their reach. If someone has to come into the office twice a week, they still need to live close by.
You won't be able to attract anyone unwilling to relocate, but offering a stipend will certainly sweeten the deal for anyone deliberating between multiple job offers around the country.
The average relocation package ranges from $19,309 to $24,216 for renters and $72,627 to $97,116 for homeowners. Comparatively, replacing an old employee costs 6 to 9 months of their salary.
If an employee earns $150,000 a year, you'd be spending $75,000 to $112,500 on their replacement (assuming the role doesn't sit open). If you're deciding between giving them a stipend for relocation and replacing them, trust us. The stipend is a much better investment.
A huge problem small and mid-sized companies run into is the inability to compete with larger companies when it comes to salaries and employee benefits.
It's not easy for a startup to out-compete Amazon or Google. But offering a lump sum stipend can give you a spot in the running. Sure, it's not as big a package as Big Tech would offer, but lower figures like $5,000 are enough to sway plenty of talented workers.
And if there's one employee you really want, having a stipend program already set up will help you negotiate a one-time bonus to meet their needs.
Perhaps two of the most difficult parts of creating a job relocation package are expense management and tax reporting. When you use stipend software instead of reimbursing employees directly, it simplifies both processes.
Rather than filling out paper forms and tracking expenses, you can send the stipend directly to your employee using Compt. Then, the platform will handle all the back-office work that used to give your team a headache.
If you decide to join the majority of companies covering employee relocation costs, let us be the first to tell you you're doing the right thing.
Now, you just have to make sure you don't do it the wrong way.
You'll want to decide what types of reimbursements and stipends are worth offering before you start recruiting. When it comes to international relocations, language training should be a given. And regional moves may require additional assistance beyond just travel costs.
Also consider the value of the role. If you're talking about a VP or C-level exec, it's worth covering everything. A younger employee in an entry-level position would probably consider a $1,000 to $2,000 one-time payment enough.
After you've drawn up a list of services you're willing to give, decide on the budget for each type of relocation. This will vary based on how critical the employee is to your workforce given your limited resources (again, it doesn't make sense to pay for everyone's entire relocation on a limited budget).
After you've drawn up a list of services you're willing to give, decide on the budget for each type of relocation. This will vary based on how critical the employee is to your workforce given your limited resources.
A tip from the pros: Since relocating employees is so expensive, it probably won't make sense to cover 100% of the costs for everyone. Consider setting up a tiered system with different levels of reimbursement based on the employee's status (e.g., job title, salary).
Once you know what's included, set up a plan to handle stipend disbursements and manage expenses. Creating a spreadsheet to track everything is possible, but it's much easier (and less error-prone) to automate this process with Compt.
With Compt's stipend builder, you can:
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For current employees, it's as simple as setting up the stipend amount and adding it to their budget.
For a new employee, you'll want to make sure they understand all the terms and conditions of their relocation package before signing on. It's good practice to provide a breakdown of expenses, goods, and services covered in both the offer letter and the onboarding materials.
If you're offering relocation benefits for future new hires, it's worth mentioning in your job posting.
After your employee has accepted the package, you're ready to start disbursing their stipend.
Using Compt, you can add the stipend directly to an employee's payroll budget as a line item on their pay stub. This ensures taxes are deducted according to local labor laws and makes it easy for everyone involved to track how much was paid out and when.
A perk stipend makes it possible for companies to offer more lifestyle benefits, with less money and ensure that they are personalized to meet the needs of their people.
Are you ready to set up a relocation stipend?
Employees who move for a new job would love your help covering those costs. Learn how relocation reimbursement through Compt makes life easier for you and your employees.
