Controlling Cost Biggest Relocation Challenge in 2016

Mobility experts offer tips to keep costs down

By Roy Maurer Jan 15, 2016
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International mobility managers are struggling to spend less to move workers around the world, particularly in the United States, the United Kingdom and China. Relocation industry leaders say there are a few ways to save money on what can be expensive investments for a company.

In global relocation service provider Cartus Corp.’s 2015 Trends in Global Relocation survey report, 78 percent of 148 mobility managers worldwide cited controlling relocation and assignment costs as the biggest industry challenge, followed by complying with laws and regulations (62 percent) and dealing with compensation-related issues (44 percent).

The United States ranked as the most challenging country for trying to rein in expenses, followed by the United Kingdom and China.

“Not surprisingly, controlling relocation and assignment costs has topped the list of challenges for relocation managers for the past four years,” said Matt Spinolo, executive vice president of global client services at Cartus, headquartered in Danbury, Conn.

Although cost control remains the top concern for mobility managers, these worries do appear to be easing. While 54 percent of respondents said the need to control costs is about the same as last year, only 45 percent said it is a bigger concern than last year, compared with 57 percent who said so in 2014 and 76 percent in 2010. “This trend is possibly due to cost-control measures that have already been put into place, combined with a slightly improved global economy,” Spinolo said.

Conducting a detailed line-item review of policies can eliminate duplicate allowances, adjust benefits and yield savings, said Tim O’Shea, vice president of consulting services at Aurora, Colo.-based Graebel Relocation. O’Shea said he has seen clients—nudged by hiring managers and recruiters to provide cheaper solutions—remove relocation benefits such as housing scouting trips or trailing spouse assistance or provide cheaper tiers of benefits for specified groups of employees. “We know this can meet the needs in the short term but wonder how lower-cost alternatives will impact overall employee experience and productivity. That remains to be seen,” he said.

  • Costs stemming from the following issues cause employers the most concern:
  • Exception requests from employees (cited by 62 percent of survey respondents).
  • Managers making decisions outside of policy (52 percent).
  • Inaccurate housing budgets (21 percent).
  • Policy too rich (20 percent).
  • Inconsistent policy application (19 percent).
  • Allowances too generous (18 percent).

Spinolo said large numbers of exception requests—when unanticipated circumstances lead employees to ask for financial reimbursement to cover things like a longer stay in temporary housing—are an indication that the policy is not meeting the needs of the transferring population.

“A program heavy with exceptions can often mean the mobility team doesn’t have the support of senior leaders enough to push back successfully on these requests,” O’Shea said. “Well done, benchmarked policies are only as good as the team adhering to them—and when mobility teams either lack the power to deny exceptions or use exceptions to make up for out-of-date policies, I’d argue it’s time to step back and see how aligned the mobility team’s goals are with the company’s goals.”

Policy exception pitfalls can be avoided, said George Bates, senior vice president for Graebel Relocation. “It is always best to identify all that’s needed on the front end with each relocating employee and to set clear and predictable expectations in terms of support and the financial costs.”

Reducing exception costs starts with robust tracking, O’Shea said. “Track how many, how often and who is making the exception request. From there, you can see if policies need to be revised or if you need louder advocates at the senior ranks to quell the urge to solve every wish with a costly exception.”

Experts recommended using tiered relocation policies that cover different segments of the employee population. “These are common, either by grade or job type or salary,” O’Shea said. “Tiered mobility policies can help control costs and set expectations.”

Compliance, Compensation Challenges

Difficulty complying with laws and regulations increased the most out of all the concerns mentioned, moving up 17 percentage points from 2014. The top compliance challenge, named by 63 percent of respondents, was visa wait times.

“It is a good idea [for relocation managers] to meet with human resources and business leaders on a quarterly basis to set proper expectations for visa timing and complexity,” Spinolo said.

Tax compliance, visa complexity and immigration requirements all ranked highly as problems for organizations, followed closely by tracking individuals on temporary assignments.

Tax compliance continues to be troublesome as temporary assignments—particularly those involving short-term and extended business travel—are used more frequently by many companies, Spinolo said.

Among the top compensation issues facing companies and their assignees is currency fluctuations, named by just over half of respondents (51 percent). Managers pointed to political instability causing fluctuations in currency values, complications with payroll inflexibility in some countries, and differing home-country and host-country pay approaches within regions as the most common problems.

North America (named by 49 percent of respondents) remained in first place as the region most critical to future business success. Europe (44 percent) and China (34 percent) swapped places from last year, rounding out the top three.

North America continued to see the biggest increase in relocation volume, with 48 percent ranking the region first in 2015. Europe was once again the No. 2 region (42 percent), and the Middle East (27 percent) took over the third spot from China (23 percent).

Roy Maurer is an online editor/manager for SHRM. Follow him @SHRMRoy

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