These four mobility strategies will lower costs and retain talent to boot.
By Debbie Bolla
On average, organizations spend more than $15 million annually to transfer employees, according to Worldwide ERC. That’s a substantial line item in the overall budget, but nearly half of global organizations are willing to make it because they view relocation costs as an important investment in their talent: 49 percent of businesses name the need for quality workers as a driver for relocation, according to the Atlas Van’s Corporate Relocation Survey.
“Relocation is playing a more critical role in the recruiting and talent acquisition process than ever before,” says Bryan Schutjer, executive vice president and co-founder of Global Mobility Solutions.
Organizations looking to retain key talent or transfer knowledge and skills are leveraging relocation options. Data shows that relocation is steadily increasing. According to Atlas Van’s Corporate Relocation Survey, more than one third of firms saw volumes increase, and nearly one third reported budgets increase as well in 2012 (see Figure 1).
The housing bubble burst and wary homeowners have reshaped how relocation strategies are executed today. Technology has also helped evolve the market. What hasn’t changed: Organizations continue to look to outside expertise for assistance. Worldwide ERC reports 61 percent of organizations fully outsource the mobility function.
How can organizations leverage corporate relocation to retain top talent while remaining cost-effective? Some of the industry’s top experts shed some light.
Pre-decision counseling has increased in popularity after the recent economic crisis, says Randy Wilson, CEO of NEI Global Relocation. It empowers candidates to be armed with all the information they need to make a smart decision. Pre-decision counseling provides potential transferees with transparency when it comes to their move by detailing: authorized benefits, potential costs they will incur, and the employment market for partners/spouses. Wilson says organizations should also offer a blueprint of the destination, mapping available housing, pricing, school rankings, and community appeal.
“With this information, a candidate can make a well- informed decision about accepting or declin[ing] an offer to relocate,” says Wilson. “A positive experience helps to turn a candidate into a long-term employee.”
Tom Colucci, vice president of U.S. services for MSI, recalls an instance of a technology firm leveraging pre-decision offerings for a key employee. The organization collaborated with MSI to deliver a market value on their current home, travel authorizations, rental housing possibilities, and school service assistance.
“We were then asked to get full updates from the destination agents [or home marketing agents] and report back to the client. This let them know how things were going and enabled them to offer additional support, as needed, to entice [the] candidate to take the job,” explains Colucci.
The Power of Data
Analytics are no longer nice to have, they are a must-have. Data is driving decision making around relocation policies. Today’s technology allows organizations to have real-time access o important data points showing volume, costs, and employee satisfaction. Summary dashboards offer an online side-by-side comparison of the most important factors that attribute to a successful relocation.
“Clients are looking for analytics around the success rate of transfers and assignments,” says Debbie Maupin, president of Graebel Relocation Services Worldwide. “They want to be able to quantify their ROI [return on investment] related to the assignment or relocation.”
Maupin says this can be achieved by comparing year-over-year cost and exception data. This analysis can drive policy changes and it can show a “correlation between policy benefits, cost, and satisfaction of the employee with the company’s global mobility program.”
Stephanie Spencer, director of business application development for MSI, says organizations look to data analytics to tackle:
- budget forecasting
- feasibility of a domestic/global relocation for various home/host locations combinations
- defining the policy matrix for group moves
- compliancy requirements specific to services (visa/ immigration), and
- program assessment (short-term vs. long-term assignments).
Having insight into these analytics can also contribute to future policy shaping, allowing clients to see what is working and what isn’t. Global Mobility Solutions’ Schutjer says, “Client(s) can leverage data to conduct smart ongoing program management. These analytics can be used for benchmarking efforts or budgetary decisions. Often the data helps to drive relocation policy improvements and quantify the cost of specific program benefits to align with corporate culture and competitive hiring pressures.”
Weighing The Options
Guaranteed buyout options (GBOs) and buyer value options (BVOs) are common approaches when a home sale is involved with a corporate relocation. In today’s market, slow home sales are the thorn to corporate relocation’s side. Many areas are still saturated with homes on the market, selling for less than what was originally paid. This has been a challenge for relocation in the last few years, and organizations continue to weigh the advantages and disadvantages of offering GBOs and BVOs.
In simple terms, with a GBO, the home is sold for a pre- determined amount of money and taken into inventory if it doesn’t sell with in a specific time frame. With a BVO, a guaranteed offer isn’t included; rather the transferee is assisted with marketing and selling of their house for fair market value.
Which one is preferred? The jury is still out, but due to the risk and the potential of the higher costs that come along with GBO programs, BVO programs tend to appeal to both parties.
Paul Sorrentino, vice president of corporate partnerships for NuCompass Mobility, says global organizations are looking for cost-effective ways to help their top candidates transfer without the financial burden of dual home ownership. That being said, Sorrentino says in today’s climate, employees need to participate more in the home selling process, and have a more realistic understanding of home values.
“The BVO program facilitates that understanding for the employee while not committing the client to purchase the home until a buyer is found, reducing potential costs for the client while still effectively disposing of the home for the employee,” he says.
Both carry tax implications, but in general, GBO is most tax safe and compliant. Since this is the case, Karen Rose, senior director of global relocation services for Paragon Relocation Resources points out that “Worldwide ERC’s Tax Counsel recommends client organizations provide a GBO at the end of the BVO process in order to operate in the most favorable way to protect the tax exempt status of the third-party relocation home sale program.”
Some food for thought: Another approach, says Rose, is to offer a guaranteed price based on a percentage of the appraised value of the home.
“The same process for determining the value is followed except at the time of calculation, an employee is offered, for example, 95 percent of the appraisal value, resulting in the GBO amount,” she explains. “This approach may allow for an employee to have more incentive earlier in the process and facilitate a change in the strategies for selling a home prior to having to accept a GBO.”
Lump sum programs are pretty literal: Organizations offer transferees a lump sum cash payment rather than reimbursing expenses (see Figure 2). Mitch Ulrich, senior vice president of mobility strategies for NEI Global Relocation, says lump sum programs have been around for decades, but have seen a recent resurgence because of tighter budgets and reduced staff. At the root, they are simple and effective. In fact, Atlas survey finds 68 percent of large organizations offer this type of allowance. It may be driven by the fact that fewer firms cover the entire cost of relocation, dropping to 42 percent from 51 percent from 2012. Other benefits are clear as well.
“Lump sum benefits include greater cost control, reduced administrative burdens, and employee flexibility while providing greater program consistency and fewer exceptions,” Ulrich says.
Lump sums have their perks for transferees too, depending on the scope and complexity of the relocation. NuCompasses’ Sorrentino shares findings from the 2013 WERC Lump-Sum Policy Survey. Lump sum only policies were most often used for the following employee groups:
- New hires and recent college grads: 88 percent
- Renters: 39 percent
- Employees who request lump sum only: 36 percent
- Gen Y (born between 1981 and 1997): 80 percent
- Employees below manager level: 21 percent
- At manager discretion: 12 percent
- Executives covered by SOX: 6 percent
A hybrid approach is a capped program, which includes a specified lump sum, but also assistance on the more stressful side effects of moving, like household goods transportation.
“This approach gives the transferee a maximum amount of funds to be spent while maintaining the benefit of the support services,” says Schutjer. “[It] offers the added advantage of direct billing the employer for those costs that are tax deductible thereby preventing the risk of an employee missing the deduction at tax time.”
Having a proactive approach to relocation offers organizations the best of both worlds: happy, productive employees and a cost-effective solution to attracting and retaining said employees. Relocation has a big impact on the ever-important candidate experience. “A positive experience can create a stronger bond between the employee and employer,” says Sorrentino.