Payroll costs
Relocation Allowance
Definition
Relocation allowance refers to the employer’s coverage of an employee’s moving expenses when the employee is required by the company to relocate.
It covers the relocation of the employee and their personal belongings to their new assignment location, and, upon completion of the assignment, their return.
It is not a component of compensation: it does not reward any performance and is not tied to any specific position. It reimburses an expense that the employee would not have incurred had it not been for the employer’s decision.
1. Eligibility Requirement: An Obligation Imposed by the Employer
The allowance is granted when the obligation to relocate is imposed by the employer.
This is the decisive condition, and it immediately excludes a common scenario.
| The situation | Is the allowance payable? |
|---|---|
| The employer requires a change of residence: assignment, transfer, or opening of a new location | Yes: the move results from a company decision |
| The employee moves for personal reasons | No: the company is not the cause of the need |
The rationale behind this condition. Moving is expensive. The question is not whether the employee benefits from it, but who caused the expense. When it is the employer, it makes sense for the employer to cover the cost: the employee would not have incurred any expenses if the company had not relocated them.
The allowance therefore does not reward anything: it compensates for an imbalance created by a company decision.
2. Two Possible Forms
| Form | What it consists of |
|---|---|
| In kind | The company organizes and directly covers the cost of the move |
| Reimbursement of expenses | The employee pays the expenses, and the company reimburses them |
The choice between the two options matters. In the first case, the employee pays nothing up front: the company deals directly with the moving service provider. In the second case, the employee pays upfront and is reimbursed later: the cash flow burden falls temporarily on the employee, and justifying the expenses becomes an issue.
3. Timing of Payment
Payment is made at the time of the move, whether it’s the outbound or return trip.
Two situations are therefore covered:
| The time | The situation |
|---|---|
| Outbound move | The employee travels to the location where the employer has assigned them. |
| The return trip | The employee returns at the end of this assignment. |
Why are both trips treated the same way? The return trip is the direct consequence of the outbound trip. Covering the cost of the outbound trip without covering the return trip would leave the employee to bear the cost of the second half of a trip they did not choose.
A temporary assignment therefore consists of two phases, and the reimbursement follows this pattern.
4. The Amount: A Flat Rate, but Based on Actual Expenses
It is generally a lump sum, based on the expenses incurred.
This formula may seem contradictory. It is not: it reflects a balance.
| The term | What it offers |
|---|---|
| Flat rate | Simplicity of management: no item-by-item calculation, an amount known in advance |
| Aligned with actual expenses | Grounded in reality: the flat rate is based on what a move actually costs |
The word “based on” is the key one.
A flat rate based on the actual costs of a move remains a reimbursement: it simply simplifies the calculation.
A flat rate unrelated to actual expenses, paid on a fixed, regular, and general basis, regardless of any move, is no longer a reimbursement. It has the characteristics of a salary supplement and is subject to the same rules.
The flat rate is a method of calculation, never an exemption from justifying the principle.
The Essentials in 5 Points
- The allowance is payable when the obligation to relocate is imposed by the employer; it is never paid for a personal move.
- It may be provided in kind or as reimbursement of expenses.
- It is paid at the time of the move, both when moving out and when moving back.
- The amount is generally a lump sum, but it must be commensurate with the expenses incurred.
- A lump sum that is disconnected from any actual expenses ceases to be a reimbursement: it is the link to the expense that forms the basis of the system.