There is no as such fixed criteria of making a policy for compensatory allowance on transfer. Companies does that towards the betterment of employees and to support the increased cost of living of the transferred person. If the person is transferred on his/her own request or as a part of disciplinary action then the allowances can or cannot be paid upon employers discretion.
In order to understand how much to compensate, there is no formula for that. You need to understand the cost of living of the city and price index and accordingly you need to draft your policy. Its always better to put such policies as such allowances as a part of compensation and benefits increase the morale of the employee and gain confidence in the company. Good employees are the biggest asset of the companies which cannot be purchased.
21st June 2017 From India, New Delhi