Relocation packages: the four-tier model and what to actually pay for
Relocation is part recruiting tool, part operational headache. Here's the four-tier package design — early career, individual contributor, leadership…
- Four tiers, four budgets — don't negotiate per offer.
- Lump sum + managed services usually beats fully managed for cost AND satisfaction.
- Tax gross-up on relocation matters; many jurisdictions treat it as taxable income.
- Clawback clauses: 12 months prorated. Anything stricter feels punitive.
Relocation is one of the highest-friction parts of a new hire's experience. Get it wrong and they show up resentful in week one. Get it right and you've bought a year of goodwill.
Four-tier package design
| Tier | Audience | Typical budget | Includes |
|---|---|---|---|
| Tier 1 — Starter | Early career, domestic | $3-7k lump sum | Moving costs, 2 nights temp housing |
| Tier 2 — IC | Mid-senior IC, domestic or short international | $10-25k | Moving, 30 days temp housing, house-hunting trip |
| Tier 3 — Leadership | Director+, international | $40-80k | Above + shipping, school search, tax assistance, spouse support |
| Tier 4 — Executive | VP+, international | $80k-200k+ | Above + ongoing tax equalisation, home-sale assistance |
Lump sum vs managed
Lump sum: employee chooses how to spend. Lower admin, often higher satisfaction. Managed: company contracts movers and providers. Useful for executives where logistics complexity > cash value. Hybrid is most common: lump sum + a managed services menu for tax + immigration.
Tax gross-up
In many jurisdictions, relocation payments are taxable income to the employee. A $20k lump sum becomes $12k net. If the package isn't grossed up, the employee feels short-changed. Decide gross-up policy per tier and write it into the offer letter.
Clawback design
- Prorated over 12 months — fair and standard.
- Trigger: voluntary resignation or termination for cause.
- No trigger: layoff, role elimination, or termination without cause.
- Written into the offer, signed before the move. Don't enforce surprises later.
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