- 11 minute read
- Last updated: 19th November 2019
Handled badly, a workplace relocation has the potential to impact morale and productivity, and key personnel may opt to leave the company, creating the additional expense of hiring and training new employees. A clear and comprehensive relocation policy is a powerful tool for ensuring both employers and employees understand their rights and responsibilities in respect of workplace relocations.
Relocation policies and the procedures they outline exist to mitigate any negative effects that a proposed relocation may have on your employees, while minimising risk and cost to the company. When developing or reviewing your relocation policy, you should consider all the ways in which a staff member or their immediate family may be affected by relocating to a new place of work.
This guide explores the core information which should be included in a relocation policy, to help employers and HR managers approach and manage any relocation project in a way that is both legally compliant and supportive of positive employee relations.
This article covers:
- Employee relocation rules
- What should the relocation policy include?
- Who is eligible for relocation benefits?
- Relocation expenses
- Relocation policy disclaimers
Employees who may be asked to relocate should be given as much notice as possible about the proposed change, to ensure they have time to consider their options, raise potential issues and prepare for the move. Employees have the right to refuse relocation if they do not have a mobility clause in their employment contract. If you wish to relocate an employee without a mobility clause, you may need to consider making the relocation a more attractive option by offering the chance for career progression, an increase in wage or other similar benefits. Any employee who does have a mobility clause in their contract is obliged to relocate providing their employer acts on the clause in a ‘reasonable’ manner. This would include giving fair notice, covering moving costs and taking steps to avoid any detrimental effect on the employee’s standard of life. The company’s approach to managing these issues should be covered in your employee relocation policy.
Should an employee refuse to relocate despite reasonable enactment of a mobility clause, the employer may consider dismissal on the grounds of misconduct. This outcome should be avoided wherever possible as it not only negatively impacts the employee but the employer themselves. Ultimately, your goal should be to encourage cooperation and good performance from your employees, by protecting their financial interests and helping them maintain a healthy work-life balance.
Relocation policies should be developed to ensure applicability for scenarios such as single employees who are being relocated within the company to fulfil specific roles, as well as large portions of your workforce who are being moved to a new area due to, for instance, an office closure.
The purpose of a relocation policy is to set out employee relocation procedures and benefits, so that individual staff members understand their rights in relation to a proposed relocation. These documents should specify how the employer will cover financial expenses to the employee incurred by the relocation if this is something your organisation offers.
When drafting the relocation policy, you should be clear about which relocation costs will be covered or reimbursed, and to what extent. While specificity is the key to effective communication with your staff, the relocation policy should also outline how unexpected expenses are to be dealt with and include a procedure to consider these on a case-by-case basis, as no two relocation experiences are the same.
When writing a formal relocation policy or adapting an existing policy, cover the following questions:
- Who would be eligible for relocation benefits?
- What are the relocation benefits offered and what are their limits?
- What must the employee do to take advantage of relocation benefits?
- What are the tax implications of relocation benefits?
- Other points which may be covered in your employee relocation policy include:
- Sub-policies for different levels of employee (i.e. management, senior management etc.)
- Situations in which the employee’s right to reimbursement would be lost (e.g. if they voluntarily leave the company or are dismissed).
- Relocation costs which implicitly will not be covered by the employer.
- Other relocation support available to the employee (e.g. employment support for their spouse or information packs about the new area).
The relocation policy should be written in clear and direct language, using as much detail as possible. The goal of the document should be to manage employee expectations and limit confusion which could result in unnecessary questions being directed toward your HR department. Below, we discuss the main sections of a relocation policy and the information these should include.
An effective relocation policy must specify precisely who would be eligible for relocation benefits. This eligibility criteria may include employment status (e.g. only full-time employees are eligible), employee role (e.g. only managers above a certain level are eligible) and relocation distance (e.g. the relocation package only applies to relocations more than 50 miles away).
The relocation policy may also set out who among the employee’s immediate family is eligible for benefits; typically, this would include their spouse or civil partner, children and other dependents.
The largest section of your employee relocation policy is likely to address the benefits on offer and how employees should go about claiming them. Outlined below are some of the main costs incurred by relocation for which the employer may wish to offer reimbursement:
- Travel, food and accommodation to seek out new lodgings. A maximum limit should be set (e.g. up to two trips not amounting to more than three days each). Childcare expenses may also be included for these trips.
- Moving of household items. Including packing, moving fees and storage, where applicable. You may wish to include exemptions such as removal of fixtures from old property, purchase of fixtures for new property, assembly/disassembly of furniture and other items, and reimbursement for services performed by the employee or a relative.
- Personal expenses for removal. This would likely include travel, accommodation and meal costs of the employee and immediate family members, which are incurred during the move itself.
- Costs incurred during the sale of a previous residence, which may include estate agent’s fees and legal fees. The employer may wish to include exemptions such as cleaning and repair costs.
- Costs incurred during purchase or rental of new property. Including estate agent’s fees, referencing fees and survey costs.
- Rental contract termination costs, if the employee is a renter who will be vacating their current property before the end of their current contract. As there are some instances in which these costs can be waived, the employer may wish to specify in the relocation policy that they will only cover early termination fees once a waiver has been ruled out.
- Miscellaneous relocation costs. This section would usually include a maximum amount that the employee may claim, for instance, up to the value of one month’s wages. Expenses not yet accounted for in previous sections may be covered here, such as phone line installation charges, washing and meal costs incurred before installation of appliances, and charges incurred by changing providers.
In addition to relocation costs the employee may claim for, this section of the relocation policy should list any other complimentary relocation services the company offers, such as spousal employment assistance, information packs on the new location, telephone counselling and other forms of non-financial support. It is essential that the relocation policy provides clear instructions to help employees take advantage of relocation services and claim relocation costs. When considering what information to include, keep the following questions in mind:
- Will the company or the employee be responsible for finding relocation providers, such as removal companies and storage facilities?
- Are there any restrictions on which providers may be used?
- Will the employee be expected to cover costs upfront and claim the money back from the company?
The relocation policy might include an expenses form to be filled out by the employee for submission to human resources. This may include estimates if the employee is initially fronting any costs themselves. Any costs which fall outside the boundaries of allowable expenses may be considered but will need approval from senior management. This may be applicable if – for instance – the employee’s travel costs slightly exceed the limit set out in the policy, or if additional unforeseen expenses are incurred as a result of the relocation.
As an employer, you have an obligation to make tax and National Insurance payments on any qualifying relocation costs you pay on behalf of an employee, when those costs exceed £8,000. You are also responsible for paying tax and National Insurance contributions on all non-qualifying relocation costs. Qualifying relocation costs include:
- Costs associated with buying, selling or renting a home.
- Purchasing essential items for a new home.
- Bridging loans.
- Moving-related expenses such as removal, van hire and storage.
- How you must report and pay tax and National Insurance on these costs will depend on whether you or your employee are responsible for arranging providers, and whether you reimburse your employee or pay the provider directly.
As covering relocation costs is a big investment for any employer, you should make clear within the relocation policy’s terms and conditions that the employee will be required to pay back all or some of the expenses they have claimed, should they voluntarily leave the company or have their employment terminated. Such clauses state that this rule would apply if the employee leaves the company within a certain time frame, typically, between 12 months and two years after the relocation.
We are experienced in working with employers to support with developing, reviewing and drafting relocation policies, as well as the planning and implementation of relocation projects. Our team comprises employment lawyers and human resource consultants, providing clients with holistic advice that encompasses both the legal risks and workforce management and engagement aspects.
If you have a question or need advice on any aspect of relocating personnel, contact us.