Employer’s Guide to Employee Relocation

Whilst there may be many important reasons for a business relocation, employee relocation always requires careful and sensitive handling. Failure to do so can result in damage to employee morale, employees leaving (with the associated costs of replacing them) and possibly redundancy or breach of contract claims. It’s not hard to see how a badly handled relocation project can cost a company much more than one that comes with an attractive employee relocation package. So in this article, we take a look at:

• An employer’s relocation legal obligations
• Contractual rights and mobility clauses
• What is reasonable
• Good practice and compensation  

Employer’s legal and contractual obligations

There are no statutory requirement or rules that govern relocation so both an employer’s and an employee’s obligations and responsibilities will depend on what is said about relocation in the contract of employment. Equally, there is no statutory requirement to offer a relocation package or compensation, although failure to do so may impact on how reasonable it is to expect an employee to move.

Mobility clauses

Some contracts will have a mobility clause which sets out the circumstances in which an employee will have to relocate. The requirement to relocate may be on a temporary or permanent basis but it must be reasonable. Provided the clause is reasonable, the employer can normally (but not always) insist that the employee moves in accordance with their contract. Of course, that begs the question, what is reasonable, and we’ll take a look at that in a bit more detail below.

If the mobility clause is reasonable, but the employee refuses to move, they may be in breach of contract, but bear in mind, that you may then have the costs of recruiting to replace them and it may impact badly on employee morale. In some more extreme cases, the employee may still have a claim for constructive dismissal.

What if there is no mobility clause?

If there is no express mobility clause and the employee refuses to relocate, it will be difficult for an employer to insist that they move. In these circumstances, the employer is at risk of having either created a redundancy situation or it could give rise to a claim for constructive dismissal. And whilst in some limited circumstances, an employer might be able to argue there was an implied mobility clause, this could be difficult to prove.

What is reasonable?

There is no legal definition of what is reasonable and therefore it will depend on the circumstances of the individual case. However, factors that may be taken into account include:  

• The business reasons for the relocation
• The employee’s personal circumstances
• How much notice of the move was given to the employee
• Is the move justified given the employee’s role
• Is there a compensation scheme for employees
• How significant is the relocation in terms of the employee’s commute
• Will there be significant costs to the employee
• The distance of the move and the disruption to the employee’s personal life

Good practice

Forcing staff to move, letting them go because they refuse to move and failing to provide any compensation for relocation costs all have the potential to have a significantly adverse impact both in terms of employee morale and costs, whether that is in terms of productivity, recruitment costs, redundancy costs or in the worst case, defending/settling a claim for breach of contract.

It is therefore nearly always good practice to consider providing a relocation compensation package. There are no rules about what this should include (unless it is specified in the employment contract) and it is therefore something that needs careful consideration in terms of budget and what it should cover.

As part of the relocation planning, it will be important to: 

• Allow sufficient time to discuss the move and the reason for it with the employee and take time to understand what impact this move will have on them and their family. Encourage employees to voice their objections and concerns and work with them to find a solution they are happy with.
• Consider what, if anything, you can do (in addition to financial support) to make the move easier and make the employee feel positive about it.

Employee relocations cost and compensation package

As mentioned, it is good practice in almost all cases to consider some sort of compensation package and this is likely to include both a financial element and possibly a non-financial element. Employers should decide whether to cover the entire cost of the move, a specific part of the cost (i.e. the costs of sale and purchase of a property) or a percentage of the overall costs.

Moving costs can, of course, include a raft of things such as temporary accommodation (whilst house hunting), travel back and forth to the new location whilst house /school hunting, removal costs and more. Employees might need mortgage advice or even tax advice, they might need a bridging loan, help with storage costs or financial help with school fees.

It is therefore important to identify exactly what costs are covered by any compensation package and whether there is any limit or cap on the amount which will be paid towards these.

Consideration should always be given to the tax implications of a relocation package both for employer and employee. As a rule of thumb, relocation costs up to £8,000 are exempt from reporting and paying tax and National Insurance. The costs covered by this exemption include:

• The costs of buying or selling a home
• Moving costs
• Buying certain things for a new home
• Bridging loans

However, there are strict rules which must be complied with for this payment to be tax free. Payments over £8,000 will be taxable.

Non-financial support

Again, what is appropriate non-financial support is something that should be discussed with the employee and / or tailored to the specific circumstances. But things to consider include:

• Allowing time off work to facilitate the move (for house hunting, looking at schools, etc.)
• For moves overseas, the provision of language lessons or cultural integration opportunities
• Provision of information packs about the new area, including schools, healthcare facilities, recreational activities and community resources
• Spousal support and help for them to find work

Whatever is agreed, it is important to record it in detail and in writing. It should also be fair between employees, and differences in the amount paid to different employees should be clearly justifiable. The details of the package should also include the process for payment and reimbursement and the circumstances in which an employee will be required to pay back all or some of the expenses i.e. if they leave the company between 12 months and two of the relocation.

Get in touch

Balancing the costs of a relocation can be a complex exercise but the importance of budgeting for attractive relocation compensation should not be underestimated. The process of relocation and the fine tuning of any compensation should be conducted with both transparency and sensitivity in order to avoid future issues. If you would like to discuss any of the above, please get in touch with a member of our team.

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