Organizational Wellness

The Ultimate Guide to Relocation Bonuses (Structures & Advantages)

Last Updated Mar 7, 2025

Time to read: 9 minutes

Two months ago, you posted a job opening for a new bilingual data analyst. You've received only a handful of resumes from people hoping to fill it. Even worse, no applicant has the exact skillset you're looking for.

You decide to search online and find a candidate who looks like an excellent fit. Unfortunately, they live in Paris, and your organization is in San Francisco. You need someone in the office, so a remote hire won't work. How can you entice the candidate to take a leap of faith and move halfway around the world?

Offering a relocation bonus might help. A combination of extra money and other incentives can spur the candidate to accept your open role — a major win for your company. Discover how relocation bonuses work and ways to use them in your organization.

Relocation Bonuses, Explained

A relocation bonus compensates a new or existing employee for moving to a new location for a job. The bonus helps pay the employee's moving costs, short-term housing, and travel expenses.

Offering a relocation bonus gives employees an extra incentive to accept work in a new location since they won't be out of pocket for the move. It may make it easier to attract and retain people with niche skills who don't live near your organization.

Types of Relocation Bonuses

You can structure a relocation bonus in several different ways. Consider your company's policies and goals when deciding on a bonus structure.

Lump-sum payments

This is a one-time payout covering all expected relocation costs. It's the simplest type of relocation bonus, and it's highly flexible since the recipient employee can use it how they like. Keep in mind that it's taxable, so employees usually won't receive the gross amount.

Reimbursement programs

These repay employees for actual relocation expenses. Employees don't have as much leeway to use the relocation funds how they like. Instead, your company compensates workers for their actual expenses associated with the relocation. That may include moving, travel, and temporary housing. You can use receipts and similar documentation to verify costs and reimburse employees.

Tiered systems

In this approach, the relocation bonus varies based on an employee's seniority and job level or by the distance of the move. You might offer smaller bonuses for junior employees and larger ones for mid-level or executive team members. Similarly, an international relocation bonus might be higher than one for someone moving from a different city in your state.

Capped vs. uncapped bonuses

Companies can cap relocation bonuses or leave them open, or uncapped. Capping your bonus structure limits the amount your organization can offer for relocations, which keeps costs within your budget.

If your company opts for uncapped bonuses, you won't set a maximum payout for relocation bonuses. That may be helpful if you want to attract people with exceptional skills for competitive roles. But there's a potential for overspending or pay inequity between employees.

What to Include in a Relocation Package

Most relocation packages seek to attract new employees by covering traditional moving expenses, travel, and temporary housing. They may also include home-finding assistance for employees who want to buy or rent a place to live.

You can level up a relocation package with a few optional benefits that employees may appreciate. One option is job search assistance for spouses or partners. Helping the worker's significant other find work can ease the transition and eliminate the potential for lost income caused by the move.

Another option is school search assistance. Employees with kids might need help finding a school that provides the academic programs, extracurricular activities, and extra support they want. Your team might advise them on local schools that fit their needs.

If you're relocating an international employee, consider offering special support to help them assimilate within your city. Language classes and cultural training can help them learn the local language and societal norms. That may make it easier to meet locals and integrate into the community.

Why Offer Relocation Bonuses?

Providing a relocation bonus can be costly, but it comes with a few benefits for employers.

Attract Top Talent in a Competitive Market

Companies in highly competitive or emerging industries rely on outstanding talent to meet goals and thrive. Offering a relocation bonus and an attractive salary may convince talented job-seekers to work for your company rather than a competitor.

Fill Critical Roles in Challenging Locations

Are you planning to open a new branch in a rural area or another country? You'll need employees to fill management roles and other critical positions. Offering a relocation bonus might entice workers to make the transfer. It can also attract new employees willing to move to an out-of-the-way location.

Improve Employee Morale and Retention

Sometimes, companies decide to transfer a department to another location or relocate an entire office to another area. If that's the case for your company, there's the possibility you'll lose experienced employees with critical knowledge. You can improve retention and boost morale by giving employees a chance to move with you and a relocation bonus to pay for their costs.

Enhance Employer Branding

A generous benefits package makes a company stand out in the sea of employers. Adding relocation bonuses as a benefit can bolster your image as a company that wants the best employees and doesn't mind paying a premium to attract them. You can encourage internal mobility by allowing your existing team members to use the bonus if they successfully apply for a job with your company at a different branch or location.

Drawbacks of Relocation Bonuses

Like any employee benefit, relocation bonuses come at a cost. A single relocation can reach into the thousands of dollars. That might not be an option for budget-strapped startups or companies seeking to minimize hiring expenses.

Another consideration is tax implications. Employees and employers may incur income-related taxes on any relocation bonus payout. The amount of tax depends on the worker's tax bracket. Unless the move is for a military relocation, moving expenses usually aren't tax deductible.

Some employers gross up lump-sum payments so the employee receives the full amount of the bonus they can use for their moving expenses. For instance, if you know $1,500 of a $5,000 relocation bonus would go to taxes, you could increase it to $6,500 or more so the employee receives the entire $5,000 in cash. A gross-up enhances the value of a relocation bonus for employees, but it also increases company costs.

There is also the potential for inequity among workers. Other employees may feel left out if they didn't receive a relocation bonus or their package was less. If you opt to provide differing bonus amounts, take care to follow anti-discrimination and equal employment regulations.

Determining the Right Relocation Bonus Amount

You'll want to consider several factors when deciding on an employee's relocation bonus amount.

Cost of Living

What's the cost of living look like in your city? Is it significantly higher than where your employee currently lives? If so, you might want to factor the difference into the relocation bonus.

As an example, an employee living in Wichita, Kansas, will likely have a much lower cost of living than one in New York City. You can use a cost-of-living calculator to determine cost differences in housing and transportation and work those into the relocation bonus. You can also accommodate the cost of living in their salary so their paycheck is in line with their new position.

Industry Benchmarks and Salary Data

Consider data from other companies that offer relocation bonuses. You'll want to compare the employee's position and salary to available data for the best result.

For example, assume the typical relocation bonus for a sales director earning $100,000 is $10,000. If you're relocating someone with a similar title and salary, it might make sense to offer the same amount.

Seniority and Employee Experience

Generally speaking, junior-level employees with minimal experience do not warrant a large relocation bonus. It might be cheaper to hire someone with a similar skillset in your area or go with a smaller bonus amount.

That might not be the case for an executive-level employee with significant industry expertise. Offering a larger relocation bonus might help convince them to take the job in a new location.

Distance of the Move

Where is the employee moving from? Transferring from a city within 100 miles of your location is much different than bringing in a new employee from another country. A long-distance move comes with costly shipping and travel expenses that local and regional moves may not require. Factoring in distance can help you arrive at a reasonable bonus amount that's considerate of an employee's costs.

Family Size and Needs

An employee with a spouse or partner and kids may require more support than single workers. Consider factoring in lost spousal income and any special costs for children into your relocation bonus.

Legal and Tax Considerations

If you decide to offer relocation bonuses, contemplate drafting an agreement that clarifies terms and eligibility. A contract would outline the benefits included in the relocation package and the amount of the bonus. To deter employees from quitting soon after they relocate, you might incorporate a repayment stipulation if a worker leaves without good cause within a specific timeframe, such as 12 months.

As with any form of employee compensation or benefits, it's important to comply with anti-discrimination and equal opportunity regulations. You might want to seek legal counsel before offering a relocation bonus to make sure it doesn't run afoul of the law.

Also consider the tax implications of relocation bonuses. IRS Publication 525 outlines employer and employee tax responsibilities concerning moving expenses and similar costs. In general, the IRS includes moving expenses and relocation bonuses as taxable income. There may be state implications, too, depending on whether your state has a personal income tax.

Draw Top Talent With Wellness Benefits

A relocation bonus can certainly attract people on the fence about working for your company because of location constraints. The bigger the bonus, the easier it may be to bring in highly skilled employees, either regionally or internationally. It also signals that your organization wants the best workers and you're willing to pay more to entice them.

You can pair a relocation bonus with other attractive benefits, like a wellness program. Benefits that support your employee's physical and mental wellness can boost productivity and employee retention. According to Wellhub data, nearly 100% of companies that invest in a wellbeing program see both those benefits and much more.

To explore how Wellhub can elevate your company's benefit package, speak with a Wellbeing Specialist today.

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[*] Based on proprietary research comparing healthcare costs of active Wellhub users to non-users.