Should Your Corporate Relocation Packages Include a Salary Increase?
Should Your Corporate Relocation Packages Include a Salary Increase
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Should relocation packages include a salary increase? If your employees are relocating to a region with a higher cost of living -- such as a big city versus a rural area -- you may think a pay raise is a given. But that's not necessarily true.
Cost-of-living is one factor that should be taken into consideration when setting salaries for transferred employees. But it's not the only consideration. Salaries for transferred employees should be in line with market conditions in the region. Rather than measuring the salary against the CPI (Consumer Price Index), you should also look at the labor market, which calculates salary based on employee wages and salaries paid and supply and demand for specific jobs in that market.
Often, the CPI and labor market show conflicting results. If your relocation packages include new salaries calculated based on CPI, transferred employees may be making more than other employees in the same position at the new location. This can lead to low company morale, resentment and even legal issues.
Here are some additional factors to consider when determining new salaries as part of relocation packages:
Are salaries set based on tenure, performance, or a combination of the two?
Does the relocation also involve a promotion or change in duties?
Length of experience, level of education and job performance being equal, what are employees doing the same job in the same location being paid?
Having standards and benchmarks in place for salary raises as part of your relocation packages can help employees feel they are being treated fairly.