The Relocation Bonus, Allowance, & Stipend Guide

What is a Relocation Bonus?

Relocating for a job is a major life change that often comes with both financial and logistical challenges. For many employees, the move involves significant costs, from packing up their belongings to settling into a new home. To ease this transition, many employers offer relocation bonuses. But what is a relocation allowance or bonus, and how do they support employees throughout the relocation process?

A relocation bonus—sometimes referred to as a relocation allowance or stipend—is a financial benefit provided by employers to help cover the expenses associated with moving for a job. The primary goal of this bonus is to ease the financial burden of relocation, covering everything from transportation costs to housing-related expenses.

A company can also provide a lump sum relocation allowance to cover miscellaneous expenses, such as travel for home-hunting trips, lease break fees, or temporary accommodations while searching for permanent housing. In this case, the allowance is considered an addition to the services provided through managed relocation programs.

What Does a Relocation Allowance Cover?

A relocation allowance for employees should cover all the major expenses associated with the relocation. At the very least, it should include:

• Moving Household Goods: Shipping personal items and furniture from the old home to the new location.

• Employee and Family Transportation: Covering travel costs for the employee and their family members.

How Does a Relocation Stipend Work?

For an employee to understand how a relocation allowance works, it should be clearly outlined in the job or relocation offer. This allowance is paid to cover the employee’s moving costs and can be disbursed in different ways:

• Before Relocation: Some companies disburse the stipend after the offer is accepted, providing the employee with funds before the move so they don’t need to front the costs.

• With First Paycheck: In other cases, the stipend may be included in the first paycheck after the employee begins their new role.

• Incremental Payments: The stipend may also be paid out in installments at specific milestones or after a set period.

It’s also important to consider that some employers attach a payback policy to their relocation stipends. Under this policy, employees might be required to repay the stipend if they leave the company within a set period.

An important distinction to make is that a relocation bonus is different from a reimbursement. While bonuses are lump-sum payments made upfront to help cover moving costs, reimbursements are typically submitted after the expenses have been incurred.

What is the Average Relocation Bonus, Allowance, & Stipend Amount?

To understand what the average relocation allowance amount is, it varies widely depending on several factors:

• Company Relocation Allowance Policy: Different companies have different policies regarding relocation packages.
• Employee Role & Seniority: Higher-level employees or those with specialized skills may receive larger relocation bonuses.
• Homeowner vs. Renter: Homeowners typically incur more costs due to home sale, closing costs, etc., compared to renters who may face fewer relocation-related expenses.
• Family Size: The more family members involved, the higher the costs of moving and relocation.
• Origin & Destination: Relocations from rural areas to urban areas, or international moves, will generally have higher associated costs.

Because of these factors, there is no standard relocation allowance. However, here are some typical relocation bonus amounts:

Average Relocation Bonus For Homeowners’ U.S. Domestic Employee Moves

For homeowners, the typical relocation bonus may range up to $45,000, though this amount does not include a home sale program. This bonus generally covers:

• Household goods move
• Closing costs at both the origin and destination locations
• Temporary housing
• Transportation
• Miscellaneous expenses

The higher cost for homeowners typically results from the inclusion of home sale costs and additional real estate-related expenses.

Read our detailed breakdown of the average relocation allowance for homeowners.

Average Relocation Bonus For Renters’ U.S. Domestic Employee Moves

Renters generally have lower relocation costs compared to homeowners, primarily because they do not incur expenses such as home sales and closing costs. The typical relocation bonus for renters averages around $30,000 and generally covers:

• Household goods move
• Lease cancellation fees
• Assistance finding a new rental
• Temporary housing
• Transportation
• Miscellaneous expenses

Learn the details behind the average relocation costs for renters.

Average Relocation Bonus For International Global Mobility

International relocation is a more complex process and involves higher costs due to immigration, legal requirements, and tax implications. The typical relocation bonus for international moves can start around $77,000, but employers often prefer to provide managed relocation services for international moves instead of a simple bonus.

Learn more about the cost breakdown for international relocations.

What Are the Drawbacks of a Relocation Bonus?

While relocation bonuses can be a helpful financial cushion, they come with some significant drawbacks. For employers, managing the relocation process through bonuses alone can lead to inefficiencies and frustration. Here’s why:

Lower Relocation Service Quality

When employees are tasked with choosing their own service providers, especially without the expertise to identify quality options or understand which services they need, it can lead to a lower-quality relocation experience. This often results in delays, frustration, and mistakes. Ultimately, this jeopardizes the timely completion of the move. As a result, employees may become distracted and stressed, which negatively impacts their productivity and overall job satisfaction during the process.

Decreased Employee Productivity

If the employee is responsible for planning their own relocation or decides to pocket the relocation bonus and manage the move independently, it can be extremely time-consuming. This takes valuable time and attention away from their new role. The relocation distracts them from the responsibilities they were hired to handle, ultimately affecting their productivity.

Loss of Corporate Relocation as a Competitive Advantage

Offering managed relocation services can be a significant differentiator when competing for top talent. In today’s competitive job market, candidates are increasingly seeking companies that provide strong relocation support. If your competitors are offering a better relocation experience and your company isn’t, you may be missing out on highly qualified candidates who could choose a competitor with a more attractive relocation package.

Less Care For the Relocating Employee

Managed relocation services demonstrate a company’s commitment to supporting its employees and emphasize the company’s enthusiasm for their new role. These services play a crucial part in a company’s culture, reflecting how much they value employee well-being. By providing thorough relocation assistance, companies ensure that the transition is as stress-free as possible, allowing employees to focus on their new role without being burdened by the complexities of moving.

Unmanaged Relocation Budgets

When employees are given a relocation bonus, there’s no control over how they spend the money. They may choose to pocket the funds instead of using them for relocation expenses. If this happens, the original purpose of the bonus—ensuring an efficient, timely move that allows the employee to focus on their new role—gets lost. This essentially makes the relocation bonus a waste of money.

Surprise Taxation of Relocation Benefits

Managed relocation services typically involve handling the gross-up of the employee’s taxes to cover the additional tax burden resulting from the relocation benefits. In contrast, employees who receive relocation bonuses often face unexpected tax increases during tax season, as the stipend is considered taxable income. This can lead to an unpleasant surprise when they file their taxes.

Learn more about relocation and taxation.

Uncompliant Corporate Relocation Processes

When the employee handles the relocation process on their own, there’s a higher risk of errors and non-compliance. However, when a relocation management company oversees the move, it guarantees fair and equal relocation benefits and a consistent process. The RMC ensures that all legal and regulatory requirements are met. By leveraging their expertise, these companies maintain high-quality service and compliance throughout the entire relocation.

Switch From a Relocation Bonus to Managed Relocation Services

While many companies offer relocation bonuses to assist with employee moves, this approach can leave employers vulnerable to mismanaged budgets, unexpected expenses, and inefficiencies. Relocation bonuses often don’t cover all the costs involved. As a result, employees may end up facing tax surprises or struggle with the logistics of moving.

Managed relocation services, on the other hand, provide a more structured and organized solution. These services ensure that employees have all their relocation needs covered, helping them transition more efficiently while allowing companies to control costs more effectively in the long run.

Reach out to one of our relocation consultants today to learn how our services can improve your relocation process and help save on overall expenses.