Relocation costs agreement

If you’re intending to contribute towards a new recruit’s or an existing employee’s home base relocation expenses, consider asking them to sign a relocation costs agreement.

Relocation expenses

If you’re willing to offer relocation assistance to new recruits so that they can move near to their new place of work, or you’re offering such assistance to an existing employee who is changing their normal place of work and so also needs to change their home base, consider asking them to sign our Relocation Costs Agreement. Without it, you could find yourself out of pocket if you agree to fund some (or all) of the employee’s relocation expenses, only to find they then leave your employment shortly after you’ve paid them the monies.

Contents

Our agreement enables you to claw back the funded relocation expenses from the employee’s wages if either they resign or are dismissed within two years of when you paid them the monies. Bear in mind that the agreement must not simply be a confirmation that the employee owes you money; it must be a signed consent that the owed monies can be deducted from their wages, so this is clearly reflected in our agreement. However, if the employee’s final salary payment isn’t sufficient to cover what they owe, there’s also a clause stating they’ll repay you the balance within one month of their employment termination date.

Proportionate penalty

It’s legitimate for you to require a reasonable minimum period of service after you’ve paid the relocation expenses to the employee, but the contractual provision for repayment must not act as an extravagant penalty on the employee out of all proportion to your loss, as penalty clauses are unenforceable. So, any tie-in should be on a sliding scale, with the result that the longer the employee remains employed, the less they will have to pay back if they leave. We’ve drafted our agreement on the basis that the amount owed by the employee reduces by 1/24th for each complete calendar month following your payment of the expenses, up to two years. Finally, to comply with the statutory provisions, the agreement authorising wage deductions must be signed by the employee before the event giving rise to the need to make the deduction takes place, not just before the actual deduction itself, i.e. probably before any relocation expenses are paid, so ensure you make signing the agreement a condition of providing funding for their move.