Your company might call it a mobility allowance, hardship premium, or hardship allowance. The name might be different, but the reasoning for offering an allowance to employees in transition is the same.
This article will walk you through what is considered a hardship allowance, why you should offer one, and the difference between a hardship allowance and a relocation bonus.
What is Hardship Pay or Allowance?
When forcing an employee to relocate or lose their job, a company might offer them a hardship allowance as well as a relocation bonus or relocation reimbursement.
A hardship allowance is a bonus. The company is saying to the employee; we appreciate you staying with us through this stressful time of transition. The hardship allowance can be used for anything by the employee. It is their money to do with as they please.
A hardship allowance should not be considered a relocation bonus or a relocation reimbursement. All three plans have their specific benefits and drawbacks for the employee as well as the company. Knowing the differences between each of the three can help you save your company and your employees thousands of dollars.
Why Should Your Company Offer A Hardship Premium?
A company should offer a hardship premium when they force the employee to move their family or lose their job. Offering the employee extra money to cover moving expenses or a bonus to take the family on vacation can boost morale and work productivity.
The employee will be less resentful and will have an easier time convincing their significant other that moving is their best option when offered a hardship premium. One of the highest stressors in someone’s life is money. Giving your employee a reasonable hardship premium will help to relieve that stress. A less stressed employee means they can better focus on their job.
You might be thinking, “ But I’ve already covered most if not all of their relocation expenses. Why should I give them more money?”
If you are asking the employee to relocate, they are a valuable part of your company. It will cost more to train someone else in their position than to pay for their move and include a hardship premium as a thank you. Don’t forget you’re asking this human being to leave a well-established life for the unknown.
Their kids will have to move schools and make new friends, their spouse will have to find a new job, and they will have to make new friends in the new location. A hardship premium shows you recognize all the difficulties that come with moving, and you appreciate this employee and their family for choosing to embrace it.
Hardship Allowance Vs. Relocation Bonus
A hardship allowance is not the same as a relocation bonus. A relocation bonus or relocation allowance pays for the expense of the move. A hardship allowance is like compensation for the life they are leaving behind, and will now need to rebuild.
The employee is given a relocation bonus in one lump sum for the cost of the entire moving process. It is up to them to manage the money to ensure it covers the entirety of the move. The company determines the specific amount upfront for the relocating employee, meaning less work for the HR department on the back end.
The employee wins because they do not have to spend their money and wait for a reimbursement initially. However, this money is taxable, so the employee must keep that in mind (be sure to make them aware of this).
An employee should get a hardship allowance when the employer forces them to choose between losing their job or moving to keep their job. The hardship allowance is additional money on top of the money the company provides for the cost of the move.
It doesn’t matter if a relocation bonus or a relocation reimbursement plan is what your company chooses to do. A hardship allowance will cost you extra money. However, you will get a return on your investment into your employee. Your employee will be thankful and less stressed.
When you give your employees a hardship allowance, you will deepen the respect they have for you. They will know that you care about them and their family, which should increase their productivity at work.
If you have any questions concerning a hardship allowance or other relocation concerns, do not hesitate to contact us!