Assignment: Relocation

After keeping employees home for a few years, medium-sized and larger companies are getting wanderlust again.

The slowly recovering economy and increasingly global nature of many businesses has them planning to move more workers this year, a study from relocation specialist Brookfield Global Relocation Services shows.

The survey of more than 100 multinational firms found 61 percent planned to transfer more employees to posts outside their home countries this year, the highest figure since 2006.

Companies still are closely watching budgets, says Jeff McMillen, relocation products manager for employee-mobility firm Runzheimer International in Waterford, Wisconsin. That doesn’t negate the need to relocate key staff, particularly overseas. According to the Brookfield study, participating companies derive an average of 58 percent of their revenue from foreign markets. “There’s a lot of pent-up demand showing up,” McMillen says.

But companies can easily overspend on unsophisticated relocation programs, says Scott Sullivan, a Brookfield executive vice president. Worse, if relocations aren’t well-handled, they result in the ultimate waste, a manager who quits mid-assignment or leaves shortly after returning, as 8 percent of transferees did in the Brookfield study. When that happens, it leaves a company with essentially no return on its relocation investment.

How can companies avoid wasteful spending, yet keep workers happy whether they’re moving across the country or the world? Here is a step-by-step guide:

Expat Assignments: Put the Business Purpose First
When designing a relocation package, a company’s biggest consideration should be the business reason for moving an employee, says Lauren Herring, president and CEO of Impact Group, a St. Louis HR consulting firm. “You have to think strategically about what you’re trying to accomplish,” Herring says.

For instance, if the goal is giving a junior-level executive a professional-development opportunity, a lower-cost, six-month stint abroad might suffice. But a manager who’s opening a new office and training a local replacement might need two to three years, requiring a more elaborate – and usually more costly – relocation package, Brookfield’s Sullivan says.

Companies are steering toward shorter assignments because they don’t require relocating an employee’s entire family, Sullivan says. Sometimes even relocating someone to Europe from the United States can be reconfigured as an “extreme commuting” assignment, with the family staying put and the breadwinner flying back and forth on a regular basis. “It might even become a virtual reassignment for part of the time needed, where they manage a foreign office over the Internet,” Sullivan says.

For Overseas Jobs, Select Candidates Carefully
Companies can waste time and money if they’re not careful when selecting candidates for expat positions, McMillen says. Many employees get excited by the prestige of an overseas assignment and accept without thinking about all the ramifications, McMillen says. Meanwhile, “the company is spending money for that relocation before they really figure out if this person can even sell their home, or if their spouse could move,” he says.

Todd Robinson, chief executive at InMotionHosting, a Los Angeles web-hosting company, hopes to avoid such pitfalls as the 200-person business prepares to launch its first satellite office in the United Kingdom later this year, followed by offices in Brazil and China in 2012.

To start, Robinson only considered moving employees who’d expressed an interest in an overseas position. In a few cases, candidates are natives of the countries to which they will relocate, which could help smooth the transition.

Robinson plans to rent housing for the three-person teams that are doing one-year stints in each of the new locations. That way he can avoid any difficulties employees might have trying to sell their houses in a depressed U.S. real estate market. “People here are nervous about purchasing homes, as well as selling,” he says.

Domestic Moves: Avoid the Real Estate Sinkhole
Right now, real estate presents a major stumbling block for relocating employees inside the United States. More than one fifth of U.S. homeowners are underwater on their mortgages, owing more than their home’s current value. That puts pressure on companies to subsidize what can become steep sale costs or even purchase and remarket slow-moving homes to speed up the relocation process. Housing costs are the top concern in relocations now, says Brookfield’s Sullivan, where in the past family issues such as schools and finding jobs for an employee’s spouse were paramount. In part because of the difficulties many homeowners would have selling, “Some companies are simply moving more managers who are renters,” he says.

Companies that relocate employees who own homes might help rent out houses that are being vacated and find new rentals in areas workers are moving to. If that’s the case, Sullivan suggests setting limits on how long a company helps pay maintenance expenses.

Experts also suggest capping the compensation offered for the loss an employee may take on their home sale. Otherwise, in present market conditions, a manager who’s half of a high-earning, two-career professional couple could have a $1 million home that’s $200,000 underwater, “and your company is on the hook for it all,” McMillen says.

To give a home the best shot at a quick sale, insist sellers get two estimates of what the house would currently sell for from experienced brokers, McMillen says. Then, require that the employee list their home at no more than 105 percent of the average figure.

Relocation services outsourcers can help both an employer and employee save money, especially when a home sale is involved. If a company gives an employee a lump sum to cover a home sale, it’s taxable, so an employee could ask for more to cover the taxes McMillen says. But if companies channel expense payments through a third party such as an outsourcer in compliance with IRS law, they’re not taxable.

Family Support: Vital, Yet Often Overlooked
When it comes to relocation budgets, funds for family support are often the first thing to go. According to Brookfield’s 2011 relocation study, only 74 percent of companies provided such support last year, an all-time low.

That’s shortsighted, says Impact Group’s Herring, since family stress is the main reason relocations fail. Companies such as Impact provide ongoing support, from helping spouses find work visas to locating appropriate social clubs and after-school activities for children and spouses. “Often, as soon as the relocating family finds a place to live and the furniture arrives all the support goes away,” she says.

But such support is particularly key now because good jobs for relocating employees’ spouses remain difficult to find. The Brookfield study found that 60 percent of relocating spouses had jobs at home, but just 12 percent found work during their husband’s or wife’s overseas assignment.

Benchmark and Create Flexible Policies
Before offering a relocation package, research current trends. A 2011 employee benefits study from the Society for Human Resource Management trade group found that only one in 10 companies gave employees a cost-of-living bonus for moving to a more expensive market. While many foreign postings used to come with ongoing “hardship” pay, that’s seldom done now, just one example of how standard practices for international relocations have changed, Brookfield’s Sullivan says.

Sullivan advocates creating flexible policies that reflect workers’ needs. That’s what InMotion plans to do. For domestic relocations, the company pays a flat bonus of $1,250 to $20,000 depending on the employee’s salary level, CEO Robinson says. He plans a similar scheme for employees taking expat jobs.

Those employees would then be free to spend their relocation budgets as they pleased. They could, for example, live more frugally abroad and fly home more often, or vice versa. However, “It needs to be a predictable expense. I’m not getting into marketing their house.” Robinson says.

Some companies are cutting costs by giving employees more choice over where they live. Nashville-based executive recruiter Dan Ryan, a SHRM staffing expert, says one of his clients looking to fill a position recently expanded the acceptable area in which a recruit could live. The territory changed from a single small southern Georgia town to anywhere in the region served by the company’s branch office. The change opened up the position to many more candidates, some of whom already live in the area. “The biggest way to save,” Ryan says, “is to decide you don’t need people to relocate.”