How to Negotiate a Relocation Package with a New Hire

If you’re hiring an employee who lives in another city or state, chances are you’ll need to include a relocation package in your offer. The relocation package will be negotiated to find a plan that not only suits the new hire but also your company.

Every company has a process they go through in the decisions about what to include in an employee relocation package. Every type of employee is approached differently, with C-suite personnel requiring maximum support, followed by management personnel, and then onto other employees. The most appealing packages, no matter what type of employee, will cover three vital basic points:

  • The package will reflect the individual needs of the prospective employee.
  • The package is appropriate when considering increases in the cost of living in more expensive urban areas.
  • The package must be affordable in terms of the cost to your company when balanced against the talents, expertise, and skills the potential hire will bring to your enterprise.

In order to negotiate the terms successfully as the employer, you must address these points equally for a win-win solution.  

Address the New Hire’s Needs

To make an offer that will inspire a potential hire requires that you understand the person’s individual needs. The relocation package offered can cover all, most, or some of the costs associated with a move to your area. Making your relocation offer competitive is one of the critical points in sealing a deal. The relocation allowance should make the move a comfortable process but should also be beneficial on your end. The more support you provide during the relocation process, the easier it will be on the employee and the more positive the experience, setting the stage for a long and successful future with your enterprise.

Consider Cost of Living & Expenses

A major consideration point for any employee reviewing a relocation package is cost of living and expenses. The cost of living will vary greatly depending on the city your company is relocating an employee to. A city like San Francisco, for example, will be much more costly than Indianapolis. Be sure to have a clear picture of what it would cost the new hire to move to the new city and adjust. Offering too low of an offer and not considering actual living expenses may instantly make your relocation offer, and thus your work offer, unacceptable.

Account for Company Budget

The steps involved in negotiating the terms of a relocation package requires establishing the top limits of what your company can afford – but you must be realistic. In a competitive job market, lowball offers will rapidly kill a deal. Once you have firmly established your top limit, the negotiation process can be initiated. Calculate the actual costs of relocation prior to opening discussions by researching the facts to establish real-world numbers.

Setting parameters is important; you never want to make verbal or written promises that your company may be unable to keep. Never be ambiguous in emails or verbal discussions with the potential employee. If you plan on covering the cost of two or more weeks of temporary housing while the employee searches for a more permanent home, ensure the number of weeks are clearly stated so there is no question that the employee will then be responsible for covering the cost once the time has expired, but be fair in your offer. Some cities have far fewer rental properties and finding housing is more difficult, so take that into account. Offering support from vetted real estate professionals to assist the new hire to find appropriate housing can be important in this situation.

Listen and Respond to Suggestions (Bonus)

New employees will tell you their concerns. Making a positive first impression includes being open to suggestions when negotiating the terms of a relocation package. When you approach negotiations with an inflexible attitude, you pose the risk of losing an employee who may been a real benefit to your company. Avoid a close-minded attitude when working on negotiating a package that will entice the top talent in your industry. Ensure you have the resources to offer added funds if this is what is necessary to inspire an individual who looks like the ideal fit.  

Creating the Right Impression Matters

Generally, the most effective way to manage relocation includes creating a good impression, responding quickly to their individual needs, and ensuring they are happy and feel that you recognize what they can bring to your company. If you fail on that score, you are likely to lose the perfect employee to another company where they feel their talents are valued. At the end of the day, a lump sum package is generally the most appealing, and more likely to result in a positive outcome in negotiations. There is no real harm in attempting to offer another option such as a capped allowance plan or a flexible allowance plan in the process of coming to an agreement as long as you remain flexible and prepared to go lump sum when this will close the deal.

Michael Krasman is a serial entrepreneur who has co-founded five high-growth businesses over his fifteen-year career. He is currently the CEO and Co-founder of UrbanBound, a cloud-based Relocation Management Software company that is reshaping the way employers offer and administer relocation benefits to their employees. 

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