Corporate Relocation: Managing Costs, Benefits and Risks
This article was updated on June 29, 2018.
Corporate relocation is a strategy that many businesses use, especially global organizations, to help address their biggest HCM challenges. Some offices in given countries may be overstaffed, while others are suffering employee shortages. Though it's not always easy to pull off because of language barriers, different job functions or overall fit with a new team, supervisor and colleagues, when possible, businesses often decide to offer employees a relocation package instead of eliminating jobs.
From an HCM perspective, there are a few key issues finance leaders should keep in mind when managing corporate relocation.
Tracking and Measuring Costs
The cost of relocation is not as simple as just paying the employee's salary in a new currency. There are various relocation costs that employers are responsible for covering, often including travel expenses, moving expenses and perhaps even helping the employee sell a house in their current city.
Depending on the organization's policies and standard procedures, an employee might also expect to receive a pay raise, additional paid leave, ongoing relocation assistance, family support or subsidized housing in the new city or country, especially if the new location has a higher cost of living or presents intense cultural adjustments or certain hardships for expatriates. It's important to look at the full picture of the costs of managing corporate relocations before your organization dives in.
Benefits of Corporate Relocations
In addition to the costs, however, there are significant benefits to the organization from a well-managed corporate relocations program. For example, according to the Society for Human Resource Management, many businesses are starting to relocate their younger employees, instead of their more seasoned veteran employees. This is partly because younger employees are often more likely to be willing to relocate, while older workers are more likely to decline relocation offers because of family commitments.
In fact, according to the ADP Research Institute's® Evolution of Work: The Changing Nature of the Global Workplace report, younger workers are excited by a future where global recruiting lines are blurred. Relocating younger workers can be a good way to train future emerging leaders and expand the organization's talent pool by offering unique new career opportunities to ambitious new hires.
Risks of Relocation
Along with the overall costs of corporate relocations, there are a few notes of caution and key risks that finance leaders should keep in mind. First, make sure that employees are a good fit for the job, regardless of location. Especially for international relocations, even if employees have the right job skills, they also need to have the ability and openness to adapt to a new country, new supervisor, new language and culture.
Work with your HR leaders to vet your employees carefully for overall fit prior to offering a relocation, and be sure to provide adequate training and orientation programs to prepare them for a successful move, especially when moving to another country. Also, if possible in your jurisdiction, consider implementing a payback clause in your employment agreement to require employees to reimburse the business in case they quit their jobs within a certain time period — such as 12 to 18 months. If the business invests in paying the employee to move to a new city or country, it's worth protecting that investment by giving employees additional incentives to stay.
Managing your human capital is an ongoing challenge, especially for global organizations. Instead of suppressing employment or cutting jobs, corporate relocation can be an effective strategy. Finance leaders need to be aware of the whole picture of costs, benefits and risks affecting relocations as they help put the right people in the right places to move the organization forward.
