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Living Allowance: How Companies Can Help Relocating Employees

Woman's headshot with blurred background By Denise Oemig October 8, 2021

Categories: Location Services

Moving from one location to another is simple, right? Just find a home in the destination city, pack up your current belongings and transport them to your new place. Unfortunately, there are a lot of things that complicate this seemingly straight forward process. While that certainly has something to do with the housing market, this post will focus on the impact of cost of living and what a living allowance can do to help relocating employees. 

Cost of Living 

One of the biggest changes an employee faces when relocating is cost of living. A 1,500 square foot home in southern California does not cost the same as a 1,500 square foot home in northern Georgia. But cost of living differences extend beyond the home prices. 

Consider, for example, consumables. The cost of eggs or milk also vary from place to place. Those with higher salaries may frequent restaurants more often and might not feel the impact of this change as greatly, but its still very important. So is family size. It’s one thing if you intend to support yourself on your salary. Supporting a spouse and children means differences in cost of living can be very impactful. 

What can companies do to support employees moving to an area with a higher cost of living?  

Cost-of-Living Allowance 

Many employers help their employees move with relocation packages. Some also provide a living allowance. A living allowance, or a cost-of-living allowance (COLA), helps employees adjust to the prices in their destination city they didn’t experience in their original location. Depending on the cost-of-living difference between two locations, the living allowance can supplement the relocated employee on a monthly basis for a year or two. 

Unfortunately, these can cost companies a considerable amount of money. One of the biggest reasons for this is faulty data. Even decision makers with years of relocation experience may rely on inexpensive cost of living calculators found on search engines with inaccurate, out of date information. 

Where can companies find information on appropriate cost-of-living allowances? 

Consider what you’re looking to help your relocating employees with. Cost-of-living data should take into account employee income, the price of consumables, the price of housing, the impact on income taxes and family size;. It should also be sensitive to whether the employee is a homeowner or a renter. Any resource or calculator that isn’t using these data points to create a cost-of-living allowance is not to be trusted. 

Look for companies that provide up-to-date information on any domestic location. With the Motus Platform, our team can share precise calculations specific to the circumstances of each relocating individual. Depending on the moves in any given year, these calculations could result in your company saving hundreds, or even thousands, with each relocation. 

Interested in learning more about our cost-of-living allowance product? 

Learn More Here

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