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Agenda: Relocation
All the Right Moves
Vol. 58   No. 10

By Antonio Franquiz  10/1/2013
 

The average midsize company (500 to 4,999 salaried employees) relocated 20 to 49 employees to meet its talent needs in 2012, up from 10 to 19 employees in 2009. Relocation numbers are even higher for large companies and companies operating in industries such as energy, technology and pharmaceuticals, according to a recent study by corporate relocation vendor Atlas World Group.

The transferees’ destinations were as diverse as the companies they work for. The Midwest proved to be a hot spot for moves within the U.S., while Asia and Western Europe were the most common destinations for international relocations.

According to Weichert Relocation Resources’ Employee Mobility Survey 2013, 93 percent of respondents expected the number of employee relocations within their organizations (both global and domestic) to either remain the same or increase in 2013. The 200 corporate relocation managers and HR professionals surveyed are responsible for managing 40,000 employee moves a year. The survey found that 36 percent of companies expect the number of employee relocations to rise through 2014.

"We’re starting to see increases among employers that need to mobilize employees to locations where they need the talent, particularly in industries with critical needs or specialized needs like oil, gas and some of the technology industries," says Jennifer Connell, director of consulting services at Weichert.

The uptick represents a significant departure from the decrease in overall relocations after the 2008 financial crisis and the sluggish growth thereafter. It also reflects the fact that global workforce mobility remains a critical strategy for business growth.

In a 2013 survey of more than 600 global organizations, auditing firm KPMG LLP found that 83 percent of multinational companies expect the number of their global employee relocations to increase or remain the same, presenting challenges to HR and relocation coordinators in charge of facilitating smooth transitions.

"If you move an employee internationally, you always have to deal with two jurisdictions from a tax compliance and immigration perspective," says Achim Mossman, principal of global mobility advisory services at KPMG. Mossman recommends that companies have a guiding framework that outlines the terms and conditions of each relocation. Such a framework should address:

  • Visas and work or residence permits for employees and their families.
  • Payroll issues, including which jurisdiction or jurisdictions the employee’s income is taxable in.
  • How the employer will determine which jurisdiction or jurisdictions the employee’s benefits will come from.
  • The process of recording and reporting earnings in compliance with the applicable payroll withholding requirements.

Cost Controls

Although the real estate market continues to recover from the historic lows of 2008, homeownership still represents the highest cost companies incur when relocating an employee. A Worldwide ERC study revealed that respondents transferred more than 35,000 employees domestically in 2012, averaging 230 relocations per U.S. company. At a cost of roughly $97,000 to transfer a homeowner and roughly $24,000 to transfer a renter, employers must weigh the talent management benefits against the monetary costs of moving staff.

"There’s definitely a correlation between the state of the economy and the number of corporate relocations," says Kerri Hart, manager of marketing communications at Atlas Van Lines, a moving and storage company owned by corporate relocation vendor Atlas World Group. "Companies are trying to do more with less."

Some employers are proactively trying to reduce homeownership costs by turning over transferees’ houses sooner in the relocation process rather than later. In a typical full-service relocation, companies shoulder the burden—financial and otherwise—for buying and selling a transferee’s home. Often, this guaranteed buyout means taking the home into the company’s inventory while it waits for a new buyer, during which time "carrying costs" accrue.

"We were paying about $3,000 a month [per home] in carrying costs—and when you’re keeping a house for one or two months in inventory, that’s substantial," says Michelle Imobersteg, SPHR, corporate relocation coordinator at FirstEnergy Corp. in Akron, Ohio. Her company implemented several strategies to offer incentives to real estate agents and buyers intended to spur home sales.

One of those strategies is for the employer to provide an upfront market allowance to bolster a home’s marketability. In this approach, the vendor offers money to potential buyers to help pay down a portion of closing costs or uses the money to touch up a home for increased curb appeal.

"A market allowance is something that we have seen companies use in the past once the home has gone into inventory, and we are seeing more companies that are putting this right up front at the beginning of the [relocation] process," Connell says.

At FirstEnergy, Imobersteg has seen this policy pay off. She says it has saved the company $30,000 this year and cut the number of houses in its inventory from 15 to three, even as the number of employee relocations has increased by 22 percent since 2012.

Another cost-saving strategy that some employers are using before making relocation decisions is a broker market analysis that provides the company with an expert appraisal of the estimated cost of a home given its location and the current real estate market.

Such an analysis "tells employers what the real estate piece is going to cost them if they choose to offer to transfer an employee," says Donna Miller, SPHR, director of relocation services at Ewing & Associates/Sotheby’s International Realty. This information can highlight potential expenses that an employer may not have anticipated.

According to Weichert’s 2013 mobility survey, 82 percent of companies also contain costs through the use of caps on at least some relocation benefits, such as loss-on-sale. In 2013, 63 percent of companies surveyed by Worldwide ERC offered to assist transferees with any loss on home sale costs—almost unchanged from 2008, when the figure stood at 64 percent.

Mossman recommends that employers consider setting caps on any benefits in their relocation policy that do not have monetary limits. He notes that the most common cap for the loss on the sale of property is $50,000.

Cindy Madden, director of consulting services at relocation vendor Cartus Corp., says employers should weigh the amount the company can save by capping losses on home sales against the need to transfer talent.

Program Flexibility

Relocation experts recommend using a tiered system of mobility services as a cost-effective way to transfer employees ranging from the new-hire level to the executive level.

Worldwide ERC found that 84 percent of companies surveyed have tiered transfer policies. Of those, 79 percent split transferring employees into categories determined by job or salary level, and 54 percent divided transferees by homeowner vs. renter status.

FirstEnergy uses a tiered program divided into an executive plan, professional plan, basic plan and new-hire plan, each with a subcategory based on the employee’s status as either a homeowner or renter.

Like FirstEnergy, 69 percent of companies surveyed by Worldwide ERC have three or more relocation policies designed for different levels of employees, with 16 percent offering a-la-carte-style relocation services.

Staggered policies contain costs by limiting the most expensive services and relocation benefits to top-tier employees like executives and senior vice presidents. Executive packages often include significantly higher loss-on-sale maximums, all-expenses-paid house-hunting trips, and generous family services like tuition coverage and concierge services.

But employers generally try to ensure that positive relocation experiences aren’t reserved for the top tiers. Offering fair mobility practices to all levels of transferees pays off in terms of long-term talent retention.

"For new hires in competitive industries, a relocation is the first experience that they’re going to have with an employer, and if it doesn’t go off on the right foot, then that’s the impression that they’re going to have with the company," Connell says.

She explains that relocation can be a strong incentive in attracting and retaining talent at all levels. Millennials, who are often willing to work and live in different locations, may see it as a critical part of their career development, while older workers may regard a transfer as a temporary alternative to retirement.

To appeal to younger workers, companies are increasingly turning to nontraditional relocation packages that give transferees greater freedom to choose the benefits they want.

According to Weichert’s 2013 survey, more than half of companies are seeking more-flexible ways to deploy transferees. For example, 12 percent offer programs in which certain core benefits (like temporary living, final move expenses and finding homes) are provided and others (like miscellaneous allowances and home purchases guaranteed by companies) can be chosen or bypassed at the employee’s discretion.

Antonio Franquiz is an intern for HR Magazine.

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