Today’s installment is courtesy of guest blogger Jon Fishman. Jon is a Relocation Coach with Recruiter Relocation, a firm that provides relocation support for recruiters and their candidates domestically and internationally. Jon has over 10 years of combined service in the real estate, relocation and customer service industries. Jon is considered a subject matter expert in relocation placement best practices. For more information, contact Jon at www.recruiterrelocation.com
Payback agreements are always recommended due to the high cost of relocation programs. In the event the employee voluntarily resigns or is terminated, the company is left footing the bill and looking for another candidate, who will incur further relocation spend. A payback agreement acts as a contract between the employer and new employee that states the employee will pay back part or all of the relocation costs if they leave the position within a specific amount of time. The payback agreement can be pursued for years after the employee terminates based on the laws within the state. Typically, a repayment agreement is included at the time the offer letter is given to the candidate.
The current trend in the industry is 100% payback the first year and pro-rated the second year. Further, some of our clients have made the effective date of the repayment agreement the date the last expense was paid out. Based on an Employee Relocation Council trends survey, an increase from 49 percent to 61 percent in executing payback agreements was seen in long term international assignments and 36 to 41 percent in short term assignments. In some instances, if the assignment duration is extended the employee is asked to sign a new agreement.
Payback agreements are not only another example of how companies are protecting their investment, but also how they are sending the message to employees that they expect long-term loyalty.
Jon, some of our members have heard that payback agreements are illegal in some states. Can you shed any light?
Hi Veronica,
Our experience in terms of legality has centered on the whether the contract could be enforced. The enforceability of the agreement will depend on the contract of law in that particular state, which I unfortunately don’t know for every state. I would always encourage a client to consult with their internal counsel before developing, or acting on, a payback agreement.