How to Evaluate a Cost of Living Package
Congratulations on being offered a job or promotion that involves relocating! Depending on your employer, position, and salary level, you may receive a relocation package to assist with the costs associated with the move. These packages can come in various forms, such as a lump sum or a more comprehensive benefits package.
Some relocation packages may only cover specific aspects of the move, like providing a moving truck or covering a small percentage of overall moving expenses. Others, however, are more comprehensive and may include benefits such as hiring a full-service moving company, offering childcare assistance, providing a settling-in allowance, or even helping with a relocation mortgage or down payment on a new house. The extent of the package will depend on the company’s policies and your specific needs.
Relocation packages are designed to alleviate some of the financial burdens associated with moving, making the transition smoother for you and your family. Before accepting the offer and making any decisions, it’s essential to thoroughly review the terms of the relocation package and discuss any questions or concerns you may have with your employer. This will ensure that you are well-informed and can make the best decision for your personal and professional goals.
Cost of Living Considerations
Regardless of the initial relocation package offered, it is entirely reasonable to negotiate for better terms that suit your unique situation. When considering relocation, several factors come into play, including the distance of the move, the size of your family, and whether you will require assistance with selling your existing house.
One crucial aspect to take into account is the cost of living in your new area. This represents the amount of money needed to maintain a certain standard of living, including basic expenses for housing, transportation, food, clothing, and household goods. Comparing the cost of living between your current location and the destination can help you assess the financial impact of the move. Certain cities, such as New York, San Francisco, Honolulu, Chicago, Washington D.C., Oakland, CA, Seattle, Arlington, VA, and Boston, are known for their high cost of living.
To gauge how your salary will fare in the new city, online cost-of-living calculators can be valuable tools. For instance, if you currently earn $75,000 a year in Cleveland, Ohio, and are considering a job offer in Manhattan, New York, CNN’s calculator shows that you would need a salary of over $198,000 to maintain the same standard of living. In Manhattan, you would face 34% higher grocery costs, a staggering 564% increase in housing expenses, 18% more for utilities, 24% higher transportation expenses, and a 4% increase in healthcare costs. Similarly, if your potential job is in Los Angeles, you would require a salary of $115,000 to compensate for the 178% surge in housing costs, 14% higher utilities, 23% increase in transportation expenses, and a 5% rise in healthcare costs.
While cost-of-living calculators offer valuable insights into basic expenses, it is essential to consider other factors that will impact your overall lifestyle. These include school fees, taxes, access to public transportation, entertainment options, daycare facilities, and employment opportunities for your spouse or partner.
During the negotiation process, openly discuss your specific needs and concerns with your employer. You may be able to negotiate for additional benefits or assistance to offset the impact of the higher cost of living in your new location. By thoroughly assessing all relevant factors and engaging in constructive communication with your employer, you can make informed decisions that ensure a smooth and financially viable relocation.
Cost-of-Living Stipend
Certain relocation packages encompass a cost-of-living stipend or adjustment designed to mitigate the impact of higher expenses. This financial assistance can come in the form of a one-time lump-sum relocation bonus or an ongoing allowance for a specific duration. In the latter scenario, after a set period, your salary will ideally increase to account for the new location’s cost of living. For instance, if you are currently residing in Cleveland and accept a job in Los Angeles, your employer might provide a monthly stipend of $1,500 for three years to help offset the heightened cost of living in your new city.
Higher Salary
While some companies offer a cost-of-living stipend, others opt to provide higher salaries as compensation for increased living expenses. If you were to accept the job in Los Angeles, for instance, you could negotiate for a higher salary that takes the cost-of-living increase into account. In our previous example, you would need a salary closer to $115,000 to match your current income level.
Apart from a pay increase, your potential employer may also present a more comprehensive benefits package. This package could encompass various perks such as additional vacation days, enhanced health coverage, stock options, education reimbursement, performance bonuses, and even a signing bonus.
Negotiating for both a higher salary and an improved benefits package can significantly impact your overall financial well-being and job satisfaction. Prioritize open communication with your prospective employer to explore all available options and ensure that the relocation compensation meets your needs and expectations. Remember, the negotiation process is an opportunity to secure a package that aligns with your unique circumstances and enhances your relocation experience.
The Bottom Line
Relocating to a new city is undoubtedly an expensive endeavor, and it is reasonable to expect your company to cover these costs if they require you to move. However, it’s essential to consider the variations in the cost of living between your current location and the new destination. In some cases, a lower salary might suffice if you are moving to an area with a lower cost of living. Conversely, if you are relocating to a more expensive city, your benefits and salary package should adequately reflect that.
Your employer may enhance your relocation package in various ways to accommodate the higher cost of living. This could include offering a cost-of-living stipend, a signing bonus, or a more substantial salary to compensate for the increased expenses. However, if the benefits or salary package falls short of adequately covering the higher costs, you may need to carefully assess the long-term benefits of the move by asking yourself critical questions:
- Can I and my family financially manage until I am promoted or receive a raise to align with the new cost of living?
- What job growth potential does this new position offer? Is making a sacrifice now likely to lead to future benefits?
- Will my spouse be able to find a job that helps offset the higher cost of living in the new city?
- Will an improved quality of life in the new location compensate for a potentially lower standard of living and reduced buying power?
When it comes to negotiating your salary, your leverage is often tied to how much a company values your skills and expertise. If you were recruited for the position, having your recruiter take the lead in negotiations can be advantageous. However, if you find yourself negotiating independently, it’s essential to focus on highlighting the value you bring to the company.
Rather than simply demanding more money, take a strategic approach. Clearly communicate how your proposed salary and benefits package align with your ability to contribute significantly to the company’s success. Emphasize the impact of your skills and dedication, illustrating how it will lead to increased productivity and the willingness to work longer hours.
For example, instead of stating, “I should receive a higher salary,” consider framing it as, “My proposed salary and benefits package will enable me to dedicate additional hours to my work, resulting in enhanced productivity and better outcomes for the company.”
By articulating the value you bring to the table, you demonstrate your commitment to contributing positively to the company’s growth and success. This approach not only enhances your negotiation position but also portrays you as a valuable asset, making a compelling case for the compensation you seek.
