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Employee Transfers
Employee transferees sometimes receive raises or cost-of-living allowances. But these can throw off a geographic salary structure.
Example: The manager is transferring two employees:
- Amelia is transferring from Kansas City to San Francisco.
- Frank is transferring from Chicago to Kansas City.
The San Francisco and Chicago branches obviously have higher costs of living than the Kansas City branch. Both employees expect a salary increase for their transfers. The manager thinks the easiest solution is to give Amelia and Frank an increase in pay. But look closely. There's a good chance that Frank's salary will be above that of others in the Kansas City branch.
What can the manager do? Let's take a look…
| Low salary | High salary |
|---|---|
| This one is easy. Simply raise the transferring employee's salary to be consistent with the branch office's salary structure. | Lowering salaries is never popular, but neither is keeping the employee's salary above others. So, one option is to freeze the employee's salary until the salary range exceeds the employee's salary. Still, this is not ideal. |
Relocation bonus
Relocation bonuses can also come in handy when transferring an employee to a location with a higher cost of living.
The employer provides the transferred employee with a lump-sum bonus upon moving.
Let's take a look at both sides of the coin…
| Advantage | Disadvantage |
|---|---|
| It provides the employee with cash at a time when he/she is experiencing a lot of out-of-pocket expenses. | The bonus may appear large, but it's actually very small compared to continued higher living costs. |
Cost-of-living allowance
Another option is to provide a temporary cost-of-living allowance that's clearly identified as separate from base compensation.
Cost-of-Living Allowances are usually:
- established for a specified time period - up to three years
- AND
- reduced over time
Why? The employee adjusts to the cost differential between their former and new city over time and doesn't need the allowance anymore.
Memory Jogger
The best solution for a high cost-of-living situation is to: