The practice of offering relocating employees a core set of benefits plus optional, flexible add-ons is gaining popularity, according to research conducted by Aires, a relocation services provider based in Pittsburgh.
Approximately 25 percent of Aires' clients use a flexible approach to create customized relocation packages, a practice that has been steadily increasing over the last few years "as programs grow and cost-containment and flexibility become a focus for transferees," said Stacy Baker, manager of consulting services for Aires.
Common core benefits include reimbursement for expenses related to travel, household goods, automobile and storage options, and miscellaneous cash allowances.
The flex benefits could be reimbursement for home-finding expenses, temporary housing, help with lease cancellation, home sale and home purchase assistance, spousal assistance, and paid return trips home.
Baker said the combined core and flex benefits approach is used more often in international programs and by companies with a large transferee population.
Most of the companies that use a core-flex model set parameters around the flex benefits. About one-third of 100 companies using core-flex models place the ability to decide what is in the benefits package in the hands of the employee, according to Aires.
"People like them because it's a customized situation," said Romayne Dillner, senior policy consultant for Aires.
When core-flex benefits programs are properly designed and maintained, relocation packages should be customized to what the transferee's true needs are and unnecessary benefits should be removed from the package, explained Dan Gerlich, director of client services at Cartus Corp., a global relocation services provider based in Danbury, Conn.
Industry experts point out that allowing employees to have a say as to what relocation benefits are offered increases engagement and satisfaction. The talent acquisition team will also feel more empowered if it has the ability to customize a package to close a deal with incoming talent.
But there are challenges. Core-flex models have been shown to increase the time it takes to administer a mobility program due to the ability to negotiate benefits. The variability of the packages make it more difficult for workforce planners to budget and forecast.
"Companies often find core-flex difficult, both to develop as well as to implement," Gerlich said. "The end result of a core-flex program is that each individual employee has his or her own relocation policy. Although these are set clearly within the core-flex parameters, this can make it difficult to stay on top of what was authorized for each employee, especially if the program is being managed as an in-house program."
Consistency among offers is also difficult to manage. "Once employees realize they did not receive the same benefits, they often will start to compare notes on what was offered and may have questions on why things were different," Gerlich said. "It is important that employers prepare for this type of response and have a strategy for how to handle situations in which employees may feel that the flexibility of a core-flex approach has harmed their benefit package in some way."
Relocation Policy Tiers Grow
Nine out of 10 organizations surveyed by Aires utilize more than one relocation policy, with an overall average of 4.5, an increase from 4.1 in 2013. Only 6 percent reported having a single policy.
The most common number of relocation policy tiers is four, used by 27 percent of employers.
"We're finding that an overwhelming majority of companies are using a multiple-policy approach, and the number of policies employers use to manage mobility programs is showing consistent growth," Dillner said.
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The most common tier approaches are segmented by salary grade (53 percent), employee level or position (42 percent), and homeowner or renter status (49 percent), or a combination of these. "Another way is whether someone is a current employee or a new hire, but the number of companies using new-hire-only policies is on the decline," Dillner said.
Policies for New Hires vs. Current Staff
About four in 10 employers use some type of new-hire-only relocation policy, most often for entry-level positions, Dillner said. However, "this trend was inverted a few years ago. As companies have expanded their suite of mobility policies, they are bringing in new hires at levels in line with current employees rather than reserving special policies for them."
The main reason many organizations have different policies for newly hired employees versus existing staff is that a current employee has generally proven her value to the organization, while a new hire has not had that opportunity, Gerlich said.
Notable differences between relocation packages for current employees compared to those for new hires are typically found in home sale programs and in cash allowances. "Many organizations may offer a more-traditional home sale offering such as a guaranteed buyout offer to current employees, but will use a buyer value option program [in which the employer enters the process after the employee markets the home and receives a purchase offer] or reimbursement program for a new hire," Gerlich said. "Additionally, a current employee may be offered a higher level of assistance for loss on sale of a home. We also see some differences in support for new home purchase costs, which may not be offered to a new hire."
Additional findings from the Aires survey include:
- 13 percent of organizations place a cap on the overall cost of a relocation.
- One-third of organizations provide a relocation lump-sum allowance in lieu of reimbursed expenses for home-finding, travel and temporary living. "HR must have realistic expectations of what employees should be spending to relocate before providing [a lump sum] to cover those expenses," Dillner said. "Employees may think they have to spend all of the money [that they are allotted]."
- 94 percent of companies provide some form of financial assistance to relocating employees purchasing a home in the new destination, most often reimbursement of normal and customary closing costs.
- 92 percent provide a cash allowance to offset incidentals and out-of-pocket expenses. *Miscellaneous cash allowances are more often reported to be a flat, static amount (48 percent), rather than a portion of the employee's base salary (40 percent).
- Mobility professionals said that a few of their biggest challenges are employee reluctance to relocate to high-cost areas, employee requests for exceptions and keeping relocation costs within budget constraints.
Looking Ahead
Experts predict that rising U.S. real estate prices will make it easier for employees to sell their homes but more challenging for individuals being relocated to high-cost areas.
"The real estate market will certainly have a lot to say when it comes to where relocation policies go in 2017," Gerlich said. "We are seeing organizations remove things like discount points and mortgage subsidies from their policies as interest rates remain low. As they begin to rise, it is possible that we will see some companies begin to reintroduce these benefits back into their policies as a way to mitigate increases in cost of living."
Gerlich added that alternatives to permanent relocations like short- and long-term assignments and rotational and commuting programs, which were used heavily by employers during the Great Recession to help overcome employees' resistance to relocate, will still be part of the domestic mobility landscape but may not be used as widely going forward.
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