domestic relocation policy best practices · • the rise of millennials. according to richard fry...
TRANSCRIPT
At TRC, we believe relocation policies should be living documents,
updated and refined regularly to reflect current trends and evolving
best practices. As the U.S. economy and real estate market continue
to improve, the best practices that served us well during the
recession may no longer be “best” in today’s environment.
If you are not monitoring industry trends and taking measures to
strengthen the overall relocation experience for your employees,
beware, because your competitors surely are. You could find yourself
at a disadvantage in sourcing and retaining the talent your company
needs to grow. While cost control remains a critical consideration,
more companies are taking a fresh look at the competitiveness and
effectiveness of their policies overall.
Introduction
Trends Influencing Mobility
We will detail some policy specifics below, but here are several other overarching trends and best practices that relocation policies do not always address but are important considerations nonetheless:
• A more flexible definition of family, to include same-sex couples,single-parent households and multigenerational families, andthe extension of mobility benefits to meet their needs.
• The inherent ties between the talent and mobilitydepartments within organizations and the strategicpartnership between the two.
• Dramatically fewer exceptions due to greater policy flexibility.
• The rise of Millennials. According to Richard Fry of the PewResearch Center, “Millennials have surpassed Baby Boomers asthe nation’s largest living generation, according to populationestimates released by the U.S. Census Bureau.” The Millennialshave a different view of workplace norms, including the placeof technology and the ability to work remotely. Going forward,some Millennials will see some potential relocations asremote work opportunities.
A tiered policy structure is still the most common model, with
the tiers defined by job levels and homeowner/renter status.
Companies today are striving to create policies that allow
increased flexibility and decision making for the employee. The
Managed Lump Sum and Core/Flex policies have emerged from
the traditional Lump Sum approach. These programs allow the
transferee to use benefits in a way that is most important to him
or her, but typically also include caps to support the employer’s
cost containment objectives.
PolicyStructure
In assessing a company’s home disposition strategy and programs, it is in the best interest of corporate mobility managers to study their worst performing departure markets and to strategize accordingly.
During the real estate crisis, many companies distanced themselves from traditional homesale programs. Some companies transitioned from a Guaranteed Buyout (GBO) to a Buyer Value Option (BVO) program, greatly reducing potential inventory risk; others removed any type of homesale assistance from their policies altogether. Today, most companies do offer homesale assistance, with best practice being either a BVO program or Direct Reimbursement up to a capped amount.
Most companies reserve GBOs for senior level executives or use them by exception only. Similarly, homesale bonuses are no longer common. If they are offered, it is usually as part of a GBO program to potentially avoid an inventory property.
Strict marketing guidelines are standard with any type of homesale policy, including agent pre-approval, two Broker Market Analyses (BMAs), and a listing price capped at 105% of the average of the BMAs.
HomeDisposition
With a largely recovered, and in some places, booming real
estate market, the Loss on Sale benefit is no longer a best
practice. Most companies have removed Loss on Sale from
their policies entirely; some review it as an option on a
case-by-case basis.
Most relocation packages include destination home finding
assistance. The main differentiator is the number of days
and trips allowed. Best practice for renters is normally
3 days / 2 nights, while for a homeowner, the norm is
7 days / 6 nights. Occasionally, employees will allow
homeowner transferees to split the homefinding trip into
two, in the hope that the transferee will append the
homefinding days to weekends and will not have to miss
an extended amount of time in the office.
Loss on Sale
Destination Home Finding
Home purchase and mortgage benefits are normally
limited to those transferees who were homeowners
in their departure location. Reimbursement or direct
billing of reasonable and customary closing costs up
to a capped amount of either 1% or 2% of the new
mortgage amount is standard.
Mortgage Assistance is usually offered as well.
Companies or their relocation management company
typically have relationships with lenders who are
experienced in working with relocating employees.
As an added benefit, these mortgage lenders can
usually direct bill closing costs, which helps to reduce
the transferee’s out-of-pocket expenses. With
today’s historically low mortgage rates, it is no longer
necessary to cover the 1% loan origination fee.
New Home Purchase/Mortgage Assistance
TemporaryLiving
DuplicateHousing
Duplicate housing, when offered, is extended to the
transferee as a benefit to be used in lieu of temporary living.
It is normally capped at the same number of days that are
offered for the temporary living.
Furnished accommodations with a full kitchen are typical, with
30 days for renters and 60 days for homeowners being the best
practice. Whenever possible, it is best to present several options
to the transferee, to allow him or her to pick one that best
meets his or her needs (i.e. proximity to the office, a gym,
nearby amenities, etc.). Most companies no longer offer per
diems for days spent in temporary living apartments. With a full
kitchen available, the assumption is that the majority of meals
will be cooked at home.
RentalAssistance
RepaymentAgreement
selling their departure home but for any number of reasons, cannot purchase or do not
want to purchase in the new location. According to The State of the Nation’s Housing 2016,
a report from Harvard University’s Joint Center for Housing Studies (JCHS), since 2010 there
have been virtually no mortgages given to applicants with credit ratings below 620. Further,
homeownership correlates directly with income, and JCHS notes that from 2000 – 2014
there was an 18% drop in income for the 25-34 age group and a 9% drop for the 35 – 44 age
group. So it is not surprising that a significant number of transferees have a difficult time
purchasing a home.
Financial considerations aside, some current homeowners simply do not want to want to
take on new home ownership burdens once they sell their current home. It is in the
employer’s interest to be flexible to make the transition from homeowner to renter easier;
for example, offering Rental Assistance benefits in lieu of Home Finding.
Once associated primarily with new college graduates, the renter
population continues to grow rapidly. According to Runzheimer,
61% of current domestic transferees are renters and only 39%
are homeowners. Most companies provide some Rental
Assistance benefit along with Lease Cancellation penalties up to
two months’ rent.
Beyond college graduates, a growing number of transferees are
Household GoodsTransportation
Discard and Donate Programs are an emerging best practice.
Professional organizers work directly with the transferees in the
departure location to discard, sell or donate items before the
move. This is a win for all involved as the shipment size is
reduced, the donated items go to worthy organizations and the
transferee gets a tax deduction for the charitable donation.
There is a 5-15% average moving cost savings, which offsets the
cost of the service.
Best practices in the household goods industry have remained
relatively stable. Contracting with a professional, national van
line, and full packing, partial unpacking and third-party appliance
servicing are all standard. Storage has remained the same at 30
days for renters and 60 days for homeowners. Car shipments
remain the norm, but with mileage limits. For example, one car
can be shipped if the move is less than 500 miles. Two cars may
be shipped for a move greater than 500 miles.
Final Move
Relocation (Misc.) Allowance
Relocation Allowances are included in most packages and
are to be used specifically for miscellaneous expenses
that arise over the course of a move. Best practice is to
provide a flat amount dependent upon policy tier, with no
tax assistance. Companies usually provide the allowance
to the transferee outright, without any receipt
requirement. Most companies distribute the allowance as
soon as they receive the signed Repayment Agreement so
that the transferee has access to the funds as needed
during the relocation. A few companies do not release the
allowance until the transferee’s relocation is complete.
For those not covering the final move as part of a lump sum,
the best practice is to cover coach airfare or mileage at the
current IRS rate (if driving). Best practice also provides for one
night’s hotel stay in the departure location and one night’s hotel
stay in the destination location, meals (often with a daily per
diem) and one rental car for up to 10 days, if the transferee has
shipped both cars.
Tax Assistance
Repayment Agreement
A two-year repayment agreement is best practice, with the
repayment being the full amount of the relocation during
the first year and a pro-rated amount during the second
Some form of tax protection (gross-up) is best practice for any
corporation that relocates employees. Employees receive a
year-end gross-up summary to assist with their tax preparation.
TRC Global Mobility is a U.S.-based, 100% employee-owned
employee relocation company focused exclusively on US,
international and government relocation services. A nimble
talent mobility specialist, we bring creative, yet pragmatic
thinking to every client relationship. We help our clients to use
talent mobility to achieve their strategic business objectives.
By ensuring our clients have the right talent in the right place
at the right time, TRC empowers them to realize their full,
global potential.
TRC’s eclectic client base represents a wide variety of industries,
products and services, and ranges from smaller, start-up �rms to
Global 1000 companies. That gives us a broad and deep
perspective on the shape of global business today, and equips
us with the practical experience to help our clients to succeed.
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