Have you just been offered a job or promotion that involves relocating? Congratulations! Depending on your employer, position and salary level, you may be offered a relocation package to help cover costs associated with moving, either in the form of a lump sum, or a more defined benefits package. Some relocation packages cover just a single aspect, like a moving truck. Others cover just a small percentage of your overall moving costs. Others are comprehensive, paying for a full-service moving company, childcare assistance, a settling-in allowance and a relocation mortgage or down payments on your new house.
Regardless of the relocation package you are offered, it’s well within your right to negotiate for better terms. There are many factors to consider, like the distance of the move, the number of family members and whether you’ll need assistance selling your existing house.
Cost of Living
It’s also important to consider the cost of living in your new area, before accepting the salary and relocation package. Cost of living is the amount of money it takes to sustain a certain level of living, including basic expenses for goods and services such as housing, transportation, food, clothing and household goods. Cost of living is frequently used to compare how expensive it is to live in one city versus another. Among the most expensive U.S. cities, New York, Los Angeles, San Francisco, White Plains, Chicago, Washington D.C., Honolulu, Miami and Boston top the list.
Online cost-of-living calculators can help you project how far your salary will go in another city. Assume you live in Cleveland, Ohio, and you’ve been offered a job in Manhattan, New York City. Using CNN's calculator: If you currently make $75,000 a year in Cleveland, you would need a salary of $165,049 to keep up with the cost of living in Manhattan, where you would pay 37% more for groceries, 373% more for housing, 40% more for utilities, 24% more for transportation, and 5% more for healthcare. If your new job was in Los Angeles, you would need a salary of $97,817 to compensate for the 109% increases in housing, 13% spike in utilities, 8% hike in transportation, and 7% increase in healthcare. Interestingly, groceries in Cleveland and Los Angeles cost the same.
While cost-of-living calculators can help you compare basic costs, don't forget to consider other factors like as school fees if you intend to send your kids to private school, daycare, taxes, leisure and entertainment, and the employment outlook for your spouse, if he or she will be working outside the home.
Some relocation packages include a cost-of-living stipend (or cost-of-living adjustment) to help cover increased expenses. Your company may offer a one-time lump-sum relocation bonus or pay an allowance for a specific period of time, after which time your salary will have (theoretically) increased to accommodate the new location. For example, if you are a Clevelander and you take the job in Los Angeles, your employer might offer a monthly stipend of $1,500 for three years to help offset the increased cost of living.
While some companies provide a cost-of-living stipend, others offer higher salaries to compensate for increased living expenses. If you accept the job in Los Angeles, you may be able to negotiate for a higher salary, based on the cost-of-living increase. In our example, it would take a salary closer to $97,817 just to match your current salary. In addition to a pay increase, your employer may offer a more comprehensive benefits package, that could include more vacation days, better health coverage, stock options, education reimbursement, performance bonuses and a signing bonus.
The Bottom Line
Moving is always an expensive endeavor that should be covered by a company that relocates you to a new city. But it’s important to consider differences in costs of living. A smaller salary may be sufficient if you're going to an area with a lower cost of living. But if you’re relocating to a more expensive city, your benefits and salary package should reflect that. Your employer may sweeten a relocation package with a cost-of-living stipend or offer a larger salary to compensate for a higher cost of living. But if a benefits and/or salary package doesn’t adequately cover the higher costs, you may have to weigh the longer-term benefits of making the move by asking yourself questions such as:
- Can I/my family financially get by until I am promoted or given a raise?
- What type of job growth can I expect from this new position? If I make a sacrifice now, could I benefit later?
- Can my spouse find a job that will help compensate for the higher cost of living?
- Will my improved quality of life compensate for a lower standard of living and less buying power?
The more a company needs your talents, the better positioned you are to negotiate. If you were recruited, have your recruiter take the lead. If you're negotiating on your own, focus on what you can bring to the company. Instead of declaring that youshould get more money, try saying: “This salary/benefits package will allow me to work longer hours and be more productive.” To learn more, read 5 Things to Consider Before Relocating for Work.