Cost of Relocating an Employee vs. Replacing Them: The CFO’s Guide

In today’s competitive job market, companies are facing a critical question more often than ever: when a valued employee needs to move, should you pay to relocate them or replace them? At first glance, relocation packages can seem expensive — especially in 2025, with rising housing costs, moving expenses, and compliance requirements. But the truth is, replacing talent can cost far more than keeping it.

Whether you’re a CFO analyzing the bottom line or an HR leader balancing budgets with employee needs, understanding the true cost of employee relocation vs. replacement is essential. In this guide, we’ll break down the numbers, outline the risks and benefits, and show you how to create a relocation strategy that supports both your financial goals and your team’s retention.

The hidden costs of replacing an employee
On paper, replacement may appear straightforward: post the role, interview candidates, and hire someone new. But behind the scenes, the process comes with significant direct and indirect costs.

Direct costs:

• Recruitment fees often range from 15–30% of a candidate’s first-year salary.

• Job ads, marketing, and sourcing campaigns require budget.

• Interview and selection time takes managers and HR away from other priorities.

Indirect costs:

• Lost productivity as it can take a new hire 6–12 months to reach full performance.

• Disruption to team collaboration and morale.

• Loss of institutional knowledge and client relationships.

For specialized or leadership roles, studies consistently show the replacement cost can reach 150–200% of annual salary. For a $150,000-per-year manager, that’s $225,000–$300,000 — not including lost opportunities and delays.

The real cost of relocating an employee
Relocation costs vary by distance, role, and market, but even comprehensive packages rarely exceed the cost of replacing a high-value employee.

Typical relocation expenses in 2025 include:

• Moving services such as packing, transportation, and storage

• Temporary housing for 30–90 days

• Travel for the employee and family

• Housing stipends or down payment assistance

• Tax gross-ups to offset relocation-related taxes

For mid-level professionals, relocation can range from $25,000 to $75,000. For executives, the cost may be $100,000–$150,000 — still typically less than replacing them.

The retention factor
Relocation is more than logistics. It’s about ensuring the employee and their family feel supported in their new environment. Without adequate support, even employees who agree to relocate may leave within a year, creating a costly cycle.

City Shift Finance’s Corporate Relocation Services help companies build packages that balance cost control with retention, using data-driven insights to ensure employees can maintain or improve their quality of life in their new location. Learn more about our corporate relocation approach here: City Shift Finance Corporate Relocation Services.

B2B meets B2C: Why relocation impacts both sides
From a corporate perspective, relocation is a financial decision. From an employee’s perspective, it’s personal. Concerns about housing affordability, commute times, local amenities, and school quality can influence whether they accept the move or stay long-term.

By addressing these personal concerns alongside budget management, companies can secure both operational stability and employee satisfaction. Tools like City Shift Finance’s Corporate Relocation Services provide localized cost-of-living and tax impact analysis, helping both employers and employees make informed decisions.

Steps to decide: Relocate or replace?

1. Calculate total replacement cost, including recruitment, onboarding, and lost productivity.

2. Estimate relocation costs using accurate local data, not national averages.

3. Weigh the employee’s value in terms of revenue, expertise, and leadership.

4. Assess retention probability after relocation.

5. Use side-by-side cost and lifestyle comparisons to guide decision-making.

Conclusion
In most cases, relocating a key employee is more cost-effective than replacing them — but only if the package is designed to meet both business and personal needs. With a strategic, data-driven approach, relocation becomes an investment in talent retention and long-term growth.