Recruitment vs. Retention
Repayment Agreements are legal contracts between employees accepting relocation benefits and their company. The agreement helps companies recover all or portions of the relocation investment should an employee resign within a specific period after the relocation – usually 24 months.
But has an agreement been any more or less meaningful today, during the so-called Great Resignation?
It’s a balance as business drivers and Retention vs. Recruitment priorities dictate importance:
- Recruitment: Paying for a new recruit’s repayment agreement balance may seem like a “no brainer” to land top talent today, as a means to sweeten the offer and lure them from a competitor.
- Retention: Agreements can prove an effective retention tool and a motivational “carrot” for employees to remain in their jobs after accepting a company-sponsored relocation.
Recovering repayment agreement money can “cushion the blow” when losing talent, but not necessarily the subsequent costs of recruiting a replacement. According to Employee Benefit News, it costs 33 percent of a worker's annual salary just to hire a replacement.
Terms, Amounts and Signings
Though 96 percent of clients in NEI’s 2022 U.S. Domestic All-Benefits Survey use a payback clause, terms vary by company culture. According to the survey:
- 76 percent use a 24-month payback approach; 19 percent use a 12-month payback approach; and 67 percent prorate all or a portion of the agreement.
- In 2022, 58 percent require an agreement for international permanent transfers, 51 percent for long-term assignments; and 33 percent for short-term assignments. Terms are often for an assignment’s length, but some include a term of six to 24 months after repatriation.
In many U.S. states and EU countries withholding from a final wage payment may be against local law, requiring advance consultation with legal experts to be certain that withholding is permissible. Most companies do not withhold.
NEI recommends clients require and collect a signed repayment agreement at the same time a candidate signs all job offer acceptance papers with the company. This will minimize situations where employees claim they were not told of the repayment agreement at the time they were offered the position, which could lead to further claims that they were foced to sign the repayment document under duress after they had accepted the position and given notice to their previous employer.
Recovering funds might be challenging; employees may see them as “too much hassle” to be collected. While resources may be limited to collect on agreements, companies should be consistent: courts often seek fair enforcement towards all employee levels.
NEI recommends consistent enforcement for each employee, including company collection procedures; when follow-up efforts occur; and when legal/collections agencies should be engaged.
A final attempt to avoid an agreement’s enforcement is a formal HR exit interview to see what can be done for them to stay and to address the signed agreement. These have helped top performers to stay after grasping the balance due.
NEI can provide best practice trends to help clients attract, retain, and relocate employees, but companies should always consult with internal counsel or legal partners before creating or acting upon an agreement. Contact your NEI representative to discuss this or other topics at any time.