When sending an employee overseas for an international transfer, it is common practice for companies to include a clawback clause in the agreement.
A Clawback clause outlines if the employee would be subject to refund the company (fully or partially) for the cost of relocation expenses incurred for moving them to a new location.
This may include costs toward visa sponsorship, airfare, accommodation, etc.
There is typically a 12-month clawback period applied; which means that if the transferee voluntarily leaves the company within 12 months from their effective start date in the new location, the clawback clause would apply.
If the clawback policy is for a partial refund, that normally means the transferee will repay the pro-rated portion of the total expense based on the number of months not served.
Relocation Clawback
Some food for thought
Is it Necessary?
There are several tools to motivate people; and while one may argue that rewards and recognition are a more welcome way of motivating employees to stay in the company; having a clawback clause is a practical means to discourage immediate resignation from people have recently been granted an international career opportunity.
Is it Effective?
I have seen people abuse the system when there is no clawback clause. If a company has no systems in place to carefully select which talent gets to be rewarded the investment of being sent to an international location, and if the system is overly supportive of voluntary transfers; a company could quickly find itself struggling with workforce planning.
Is it Fair?
The cost of moving people involves more than just the relocation expenses. There are headcount and operational cost of the people who were involved in processing the transfer (HR, Business Managers, Vendors, Payroll, Finance, Accounts Payable), and the taxes borne by the company for the provision of benefits.
I am of the opinion that it’s fair for a company to expect an employee to stay, for an agreed minimum period of time, to be a net contributor before leaving the company.
