Agenda Relocation: Rules for (Hitting) the Road

To keep employee transfers equitable, draw up—and abide by—a company relocation policy.

​Mary Ann Zipf, director of global relocation for MasterCard International in St. Louis, says a company doesn’t have to make many employee transfers to realize it needs a relocation policy.

How many moves does it take?

Two, she says. “Because those two people are going to find each other!” And when they do, she explains, they’ll compare notes about their moves. If they’ve been treated in accord with a relocation policy, they’ll likely conclude they’ve been treated consistently and fairly.

“Like any other benefit that you provide,” says relocation specialist Terry Davis, “you want to have consistency to keep the rumor mill from literally taking control. You want a published policy so when somebody accepts a move or transfer, they know exactly what they’re going to get and can make informed decisions.”

Davis, associate director of the Center for Mobility Services at Ernst & Young LLP in Cleveland, says a written policy “prevents favoritism issues from creeping in.”

The use of relocation policies—for new hires as well as transferees—appears to be gaining favor, as are certain types of policy provisions. Of the firms responding to last year’s Atlas Van Lines’ 34th Annual Corporate Relocation Survey, 87 percent have relocation policies—up from 71 percent a year earlier. The percentage of small companies with formal relocation policies also rose—to 73 percent from 54 percent—according to Atlas Van Lines, based in Evansville, Ind.

Some of the policy provisions that are gaining attention, according to various sources, include lump-sum payments to employees for their moving costs, help for spouses and children, and payback agreements—penalties, in effect, designed to discourage employees from backing out of a relocation within a year or two after a move.

One Size Does Not Fit All

Relocation policies generally come in three levels of coverage, with companies deciding which types of polices to adopt for their circumstances. A company could have policies for all three types of transferees, for example, or policies covering just one or two types of transferees. The levels of coverage:

• The new-hire policy, for young recruits, typically those just out of college who have limited experience.

• The experienced-employee policy, for those who have been in the workforce for some years and are likely to be more settled.

• The executive-level policy, for very-high-end employees, who also are likely to be firmly established and have family and community ties.

Transferred employees’ needs vary, but typically fall in line with their experience level, says Davis. For example, the policy applicable to a 22-year-old college recruit from out-of-state might include household-goods shipment, final travel and some allowance for miscellaneous costs of “settling in,” such as registering a car and getting a new driver’s license. “Typically, it’s one month’s salary,” Davis says.

The policy for the experienced employee has to address more complexities. “In theory,” says Davis—admitting he’s making a vast generalization—“these people are normally settled in a house or apartment, they could be married, they could have kids. That’s the logic. They’re going to have more household goods, and they’re going to be more settled.”

Consequently, in addition to a household-goods allowance and final travel costs, this employee could require a house- or apartment-hunting trip, temporary living expenses and a higher allocation for miscellaneous relocation costs. Moving an experienced employee is more likely to involve matters such as employment for a spouse and proximity to schools.

Policies for the third tier of employees, Davis says, vary significantly from company to company, but there are some norms established by the Employee Relocation Council (ERC), a Washington, D.C.-based organization of relocation-industry professionals. Upper-level employees’ relocation benefits generally include a temporary living allowance for 30 to 60 days; a sundry allowance, generally equal to a month’s salary; assistance with selling the transferee’s current home or breaking an apartment lease, then finding and closing on a new home or apartment; reimbursement for up to two or three house-hunting trips; and relocation assistance for the spouse, such as help with a job search.

Consider Culture, Expect Exceptions

In developing or revising a relocation policy, it can be helpful to look at policies created by other organizations. “Why reinvent the wheel?” says relocation adviser Jeff Arouh, a partner in the national law firm of Holland & Knight LLC in New York. “What you want to do is understand the many variations and variables that exist. You can start with a model, recognizing that your company’s culture will certainly require you to assess the model in terms of where it fits within your framework. Then you make changes so the program you have reflects the goals that are most important to you.”

Davis says the ERC is a rich source of information. Its web site offers members an information database, policy examples and an online forum for asking questions and sharing information on relocation issues.

When developing a relocation policy, it makes sense to get others involved, Arouh advises. “There are so many variables within these programs that it’s important to have finance people, HR people and legal people working together so they can achieve a program that reflects the compromises that will always be necessary.”

About four of every five employees being transferred request exceptions to the standard policies, according to “Survey & Analysis of Employee Relocation Policies & Costs, 8th Edition,” compiled last year and issued by Runzheimer International, a travel and relocation consulting firm based in Rochester, Wis.

“In theory, if there’s a precise policy, there should not be a negotiation,” says Davis. But he admits that there may be room to maneuver. Companies generally will vary their policies slightly rather than run the risk of losing a valuable transferee. He poses an example: All that stands in the way of an employee’s transfer is a home sale, but the employee is not eligible for financial help from the company to sell a home or buy a new one. That’s a rule that could be set aside if the company doesn’t want to lose the employee.

MasterCard’s Zipf says, “We grant very few exceptions to our policy because we have benchmarked against best practices in the industry to make sure we’re competitive.” Nonetheless, she adds, “as much as we would like to think relocation is straightforward, it’s not going to cover all situations, and we have built some flexibility into our policy.”

Cash Up Front, Payback Time

One way to head off requests for policy exceptions is to offer lump-sum payments for moving expenses, enabling transferees to spend the money as they see fit. Says Zipf: “We give a lump sum on home-finding and temporary housing so people can, for instance, bring a child on a house-finding trip or extend temporary housing. They have the funds to move around and cover the benefits that are important to them. That’s why there are few exceptions that are granted.”

According to Runzheimer’s survey, 43 percent of respondents provide lump sum allowances to some or all transferees. Seventy-six percent of those making lump sum payments saw a reduction in requests for exceptions.

Moreover, respondents say, providing lump sums has eased the burden of auditing moving expense reports and receipts. Transferees appreciate having immediate access to funds, which eases cash flow concerns, eliminates the need to do expense reports and gives the transferee discretion in allocating funds—without haggling with managers. Since lump-sum payments are considered taxable income, companies often “gross up” the amount paid to cushion the impact for the employee.

Another feature in many relocation policies is a payback agreement. After paying for a move, “companies want to make sure that a person will stay in the position for at least a year or two,” says Nat Workman, senior editor of relocation publications for Runzheimer. Of the companies that responded to the Runzheimer survey, 64 percent have payback agreements that are enforceable for one year after relocation; 18 percent of companies have a two-year payback period.

Family Matters

Citing results of Atlas Van Lines’ latest relocation survey, Laura Herring, founder of The Impact Group, a relocation firm in St. Louis, says 42 percent of companies now offer spouse and family assistance, up from 10 percent 10 years ago. She says the increase reflects recognition of the importance of the family in a successful transition.

“Statistics indicate that 81 percent of all relocation refusals are due to family and spousal issues,” Herring says.

“Almost every family has one item that is going to cause the transfer to be difficult,” says Davis. “If you can figure that out, you can resolve it.”

To that end, some companies—including Ernst & Young—give potential transferees a chance to bring up family matters. “In our counseling session with transferring employees,” says Davis, “we say, ‘If there were one item that [would] make this transfer difficult, what would it be?’ You may have been meeting with the transferee for an hour and it will never come up, but when you ask that question specifically, they’ll say, ‘Well, I have elderly parents,’ or ‘My child [has Attention Deficit Disorder] and has special needs.’

Arouh says that in today’s environment “there is clearly a premium on helping the spouse and the family—whether they’re working or not—get acclimated to the new location. That’s a very important ‘soft part’ of making the move successful. Family ties are extremely meaningful.”

In fact, family issues appear to underlie the small increase in transfer refusals. In the Atlas Van Lines survey, half of the responding companies had at least one employee turn down an opportunity to relocate—up from 39 percent in the previous year’s study.

“It’s not to the point where a mass mutiny is taking place in terms of employees not wanting to move, but there is a growing concern, especially among rank-and-file employees,” Workman says. “Their spouse works, and they have kids in school, and they’re often not as willing to take that move for their career when there’s a significant downside either socially or economically, or both.”

Managing Expectations

The goal of relocation policies, says Arouh, “is to manage expectations—expectations on the part of the employee in terms of what the employee is going to get, expectations on the part of the company in terms of what the costs are likely to be. As long as the expectations are reasonable and appropriately communicated, there is much less likelihood of dissatisfaction either in doing the move or after the move takes place.”

Arouh, who has worked with and counseled both providers and users of relocation services, says that when a company undertakes transfers without a relocation policy, “there are too many opportunities for people to try to take advantage of the program.” But with a policy in place, he says, the company can “truly control who is getting what out of the program and ... make an informed judgment and assessment of what should be available for anybody [who] accepts a transfer package.”

Lin Grensing-Pophal, SPHR, is a Wisconsin-based business journalist with HR consulting experience in employee communication, training and management issues. She is the author of Human Resource Essentials: Your Guide to Starting and Running the HR Function (SHRM, 2002).