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Tough times push relocation specialists to trim costs and tweak policies that keep employees on the move.
Until three years ago, Marjorie Diehl, manager of compensation and relocation for Aramark Uniform and Career Apparel, rarely spent time on housing-market issues related to relocation. Today, when she discusses relocation, she sounds like an experienced real estate agent.
She knows house prices in other cities. She expounds on the importance of great marketing in the first 60 days after a house goes on the market. She stays in tune with the psychology of sellers and has detailed tax knowledge of various options for employees and her organization. The company—with 17,000 U.S. employees, 300 based in Burbank, Calif.—is part of the Philadelphia-based Aramark food service and apparel company employing 250,000 worldwide.
"I used to be able to say, off the top of my head: It will cost X dollars to move that family," Diehl says. "Now, there are too many factors to do a quick estimate."
Diehl isn’t alone in her role as a real-estate expert. Many employers’ in-house relocation specialists are being asked to cut dollars from relocation budgets, and the first expenses to come under scrutiny are often home sales.
Such expenses can include mortgage buyout plans, home marketing assistance, temporary housing and reimbursing employees if they sustain a loss when selling their houses to make moves. Also, many employers will, if necessary, purchase a relocating employee’s house for later resale so that the employee can buy a house in the new location. In a faltering housing market, that practice can be costly for employers if houses remain unsold.
Housing inventory costs and employees’ requests for relocation policy exceptions are increasing for North American employers, according to a 2008 survey of 200 employers by Weichert Relocation Resources, headquartered in Morris Plains, N.J. These may include:
Many respondents said they are adjusting policies to reduce costs connected with home sales. According to the survey report Mobility and the Current Real Estate Market, of the 64 percent of companies that have a guaranteed offer program, 78 percent offer only a buyer value option (BVO) where the value of the home is established by a bona fide offer from an outside buyer. The survey determined that most companies now reserve guaranteed buyouts for senior employees, while middle managers and new hires receive the less-expensiveBVOs.
"When real-estate markets were favorable, few companies had to cover loss on sale," the survey report says. Now, after nearly two years of price declines, the survey found 68 percent of respondents provide loss-on-sale assistance, but with a range of caps, thresholds and eligibility criteria.
Moving the House
Employers must focus on selling relocating employees’ houses during their first 60 days on the market, because after that houses become harder to sell, says Jennifer Connell, CRP, GMS,manager of consulting services for Weichert Relocation Resources. To sell a house quickly, employers can provide buyer and broker incentives when the employee is trying to get the house sold, or they mayrequire use of particular brokers or implement list-price guidelines, she says.
Jill Burke, CRP, GMS, director of policy consulting for Chicago-based Sirva Relocation, suggests that employers require employees to list their houses within 105 percent or less of the average of the approved broker analysis, and capping or placing restrictions on other benefits such as loss on sale, meals, airfare and shipment of autos.
Employees may be required to list the homes aggressively, present all offers to relocation counselors, use company-approved real-estate brokers and lower the list prices regularly if the houses aren’t selling.
These efforts "should minimize the need for the home to go into inventory or the loss on sale," Connell says.
Although certain industries—among them engineering, medical manufacturing and other niche medical fields—are still showing growth in numbers of relocations, the trend is down, says Ryan McConnell, senior director of sales development and account interaction for Atlas Van Lines, based in Evansville, Ind. Initially, the cause was the housing market, he says, but since last year, layoffs and staff reductions contribute to the decline.
Expense Reimbursements for Transferees and New Hires
Here’s how employers paid the costs of transferees’ and new-hires’ relocations, as reported by Atlas World Group’s 41st Annual Corporate Relocation Survey of 347 companies, conducted in 2008.
Type of Payment
Full reimbursement of relocation expenses
Partial reimbursement based on salary, position, tenure, policy tier
No reimbursement of relocation expenses
Source: Atlas World Group.
In Atlas’ 2008 Corporate Relocation Survey, 63 percent of 347 respondents said they are offering full reimbursement of relocation expenses for transferees, and 54 percent said they offer such reimbursement for new hires. Across companies of all sizes, researchers found a significant increase from a year earlier in companies offering lump-sum payments for moves—44 percent for transferees, up from 32 percent, and 49 percent for new hires, up from 31 percent. Lump sums can motivate a relocating employee to pare costs because the employee can keep money not spent on the relocation.
McConnell says employers are cutting overall relocation costs in other ways. Companies are using short-term assignments of three, six or nine months rather than long-term relocations. They are trimming existing relocation policies—paying to move one car but not two, for example—and allowing fewer exceptions to policies.
Burke, who notes that "the No. 1 request I get is ‘Where can we cut costs?’ " says many companies are shifting away from reimbursements for expenses and offering lump-sum allowances instead.
Diehl is thinking of a lump-sum policy, and she may restrict or eliminate per-diem meal costs for employees in temporary quarters. At the same time, she has seen an increase in requests for temporary housing extensions. She’s more likely to approve those requests if the transferring employees clearly are working hard to sell the houses they left behind and find permanent residences in new locations.
Diehl advises negotiating for reduced prices with moving companies and third-party relocation services. She recently started shopping for a new relocation company and found "all the companies were willing to negotiate."
Although the overall volume of relocation has dropped because of companies going out of business or holding back on relocation, Weichert Relocation’s Connell says companies still need people in the right locations. So even as relocation experts within companies are asked to cut costs, they still need to make crucial moves happen.
Thomas Zastudil, director of talent management and global assignments at Lubrizol, a Wickliffe, Ohio, producer of lubricants and fuel additives, is working to trim relocation costs. Lubrizol offers a lump sum for house hunting, temporary living and transportation expenses, and employees generally manage within the allotments.
Yet Lubrizol would never eliminate its relocation program, notes Zastudil, who manages relocations within the 7,000-employee workforce worldwide. "Retention is a key issue," he says. "You always have to continue to recruit your key employees. When a manager feels that we need to relocate someone for a good business reason and a skill set, we definitely go ahead."
Tom Darrow, founder and principal of Atlanta-based recruiting firm Talent Connections, says that if employers "need some key skills or they need to hire some top talent, obviously they’ve got to invest and bring in someone from outside. I think it’s a bad strategy for a company to say, ‘We’re not going to look for talent outside a certain geography.’ "
Darrow, a member of the Society for Human Resource Management’s Staffing Management Special Expertise Panel, says many of his clients are being smart about how, when and where they relocate. For example, moving an employee from New York City to a location with lower housing prices, such as Atlanta, can be a less-complicated transfer. Darrow adds that with the pool of applicants growing, companies don’t need to relocate for entry-level positions. Because of the recession, some companies get top performers whom they might not have landed in a better economy.
"Relocation is not a casual expense," Darrow says. "You are investing in your future. You are investing in talent."
Burke and other experts warn against cutting relocation expenses drastically. Depressed housing values alone could undermine relocation. "The current housing market condition is the No. 1 reason that folks do not accept a relo," she says.
Indeed, HR managers are careful about shifting costs or trimming reimbursements because of the difficulties that employees face when relocating. They are loath to see good talent depart because of the difficulties and expenses of selling a house and making a move.
Zastudil says cutting back on temporary housing, for example, can stress employees. "To manage the initial transition, the employee might have 45 to 60 days," he says, adding that a cohesive relocation policy applied consistently remains crucial for keeping employees from becoming resentful.
A Silver Lining for Some
Although relocation numbers nationwide are down, not all companies are cutting back on the number of moves. Jay Allen, director of indirect procurement for Asurion, a cell phone insurance company based in Nashville, Tenn., says his employer "is one of the few businesses growing in this recession. We are actually adding to our head count." Although Asurion hasn’t reduced relocations, Allen and his team have revamped policy to make it easier, more efficient and less expensive for employees. An HR-led team chose Mobility Services International to handle Asurion’s relocations and signed a sole-source agreement with Atlas Van Lines, saving the company 50 percent in trucking costs compared with the costs of the previous mover.
SHRM article: Homebound in Relocations (HR Magazine)
Survey: 2008 Corporate Relocation Survey (Atlas)
Study: Mobility and the Current Real Estate Market 2008 (Weichert)
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