What’s a payback agreement and why might your company want
to use one?
Payback agreements are a common part of the relocation process to minimize losses due to attrition. Consulting Services Specialist Gina Grover has the scoop in this Relo Tip Tuesday.
Complete transcript: “Hi, I’m Gina Grover, a consulting services specialist here at Plus Relocation. Today I’m going to share some information with you about payback agreements, which are also known as clawback agreements.
Sometimes a relocation just doesn’t work out. Whether the relocating employee voluntarily leaves the company or is terminated within a certain period of time, you may feel the need to recoup some of that investment. That’s where a payback agreement comes in.
A payback agreement is a contract between the relocating employee and their company which stipulates the terms of recouping some of that investment. Payback agreements are a common part of the relocation process to help minimize the financial loss due to attrition.
There are three questions to consider when developing your company’s payback agreement policy:
One, what will be your company’s policy and process for collecting on payback agreements, and how will terminations be reported so that collection can begin? Policy considerations to keep in mind include whether there is a minimum amount required for collection to begin, and whether you will allow a relocating employee to negotiate the amount that they need to pay back due to their ability to pay.
Two, how will your company report on relocation spend and make the employee aware of that figure, so they know why they’re being asked to repay any given amount?
And three, if you’re sending relocating employees to different countries, what are the legal issues that need to be considered when developing payback agreements in those different countries? It’s also important to consult with your legal and tax teams when developing your payback agreements. This will ensure that you’re complying with any and all local regulations.
Thanks for watching.”
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