What Does Your Payback Agreement Look Like?
Payback agreements vary widely - there's no standard template. What terms should you include?
Every company approaches the payback agreement differently and that can be confusing for HR, senior management and transferees alike.
So, since there really is no one-size-fits-all approach to the terms included in a payback
agreement, I wonder what best practice might be? When I was at Maersk, we managed payback agreements in-house. Our goal in developing the terms of our agreement was to keep it fair and reasonable, while also protecting ourselves from losing the considerable investments we were making in our talent.
For the most part, all of our colleagues who relocated domestically signed a payback agreement. We did not require colleagues to sign the agreement if they relocated internationally. That’s a story for another blog post but, for now, let’s stick to domestic.
We felt that it was only fair to enforce the payback agreement if the employee resigned. We did not seek reimbursement if our colleague was terminated by the company, either for cause or due to an organizational realignment. Ultimately, we believed that if we did our due diligence in selecting the transferee the chances of needing to fire for cause would be slim and, barring outrageous events, this scenario is just as much the responsibility of the employer as it is the employee.
In most cases, we were very successful in settling the relocation expenses prior to the colleague leaving the organization. There were even times when the colleague would authorize us to take payments from their final paycheck(s). I believe this is because we were very clear about the terms upfront. We did, however, have several instances (mostly with homeowners) where a colleague ‘timed’ their resignation with the repayment terms of the agreement. Since homeowners incur more costs when they move, this was not a surprise. While we never like to lose an investment, people do leave and it’s only logical to expect them to do so once their financial obligations to the company have timed out.
We never negotiated the terms of the payback agreement, as the terms were pretty black and white and understood by all parties before the move. That’s not to say, however, that employees should not feel free to ask questions. In some cases, transferees would question the amounts because they did not understand some of the costs involved in their move. In those circumstances, we were happy to walk them through it.
There were also occasional cases employees did not pay us back before they left or they had problems paying it back. We have, in the past, agreed to a payment plan. Be warned though – payment plans are cumbersome for HR departments because the payments need to be diligently tracked.
Employees who are planning to leave despite the agreement do have an opportunity to negotiate a bonus with their new employer to help cover the costs of the relocation expenses. If a current employer doesn’t budge on the agreement (and most won’t), your employees should not overlook an opportunity with your new employer.
This article was written by Gina Fresolone for XONEX Relocation. Ms. Fresolone is currently the Relocation Program Manager, Global HR Shared Services at ADP.
Do you have any best practices for payback agreements? We'd love to hear them.