Issue link: http://www.e-digitaleditions.com/i/136276
Relocation assignments and localisation are robust alternatives to long-term expat relocations. "From a cost perspective, it is essential to lay out the long-range implications of the package to an employee, so they know upfront they have two years of educational assistance, this much of a cost of living allowance and this much in a housing allowance, at which point they might be localised," she advises. A survey by TheMIGroup cited several alternatives to traditional expat international assignments, insofar as their usage by companies. The study indicates that commuter strategies were used by 79 per cent of respondents, followed by rotational assignments at 21 per cent. Nevertheless, Nemer from Graebel says many of his clients with numerous international relocations are placing their people on a wide range of different types of assignments, as a means to trim costs and encourage mobility among a diverse workforce from regions across the world. Reducing Relocation Durations and Cost How can an organisation cut relocation expenses without inviting a human capital disaster? The simplest way to reduce cost is to decrease the size and scope of the nonessential benefits provided to employees. "The ideal really is to find savings that aren't borne on the backs of employees," Reznicek says. One way to do that is by carefully performing hypothetical tax calculations to ensure the company isn't overpaying and is withholding the proper amount, he adds. Another is to hold the vendors like transportation providers, destination services providers ,and tax firms to task. Says Reznicek, "You want to be sure you're getting optimal value for what you're spending, hence the need for a robust RFP process." For companies that have to cut benefits, he says it is best to determine what are the absolute core benefits the employee will need, such as housing relocation cost reimbursements. "You don't want to spend money unnecessarily," he says. Selders agrees, noting a particular scenario that ends up costing more money than it should. "Families think since the relocation costs are being borne by the employer, they can ship all their household goods, when the truth is they don't need to ship everything," he says. "Some clients now restrict the amount of goods to ship, and it does save money." Runnion from Mobility Services offers another way to potentially reduce expenses—a lump sum payment. "It can be efficient to provide the employee a specific lump sum and then let them fare for themselves, insofar as making the decisions where the money will go," he says. "One of the highest cost factors in running a domestic or international relocation programme is the exceptions from the relocation policy that come about because of special circumstances with the family. You have no control over that, and it is very hard to budget for." Selders offered the same point: "You want to avoid constantly approving exceptions by reexamining the policy to ensure it is current and up-to-date." Nemer comments that more of his clients are exploring lump sum policies for their international relocation assignments. "Such policies seem to have the most traction in Asia, and are typically employed for intra-country movement versus cross-border relocations," he says. "This option is most often provided to new hires, and for employee-initiated moves." A drawback to a lump sum arrangement is the need for multinational companies to maintain tax and immigration compliance. Another is the difficulty designing a lump sum benefit that will adequately achieve numerous, different purposes. "There is a higher risk that a poor experience can affect the candidate's view of the employer, which can potentially negate the overall talent retention goals," Nemer explains. Neil B. Krupp, vice president at HR Consulting & Global Compensation Services, says the optimum way to keep costs in check is to be specific and clear upfront about what is and is not covered. "You can state that certain benefits like the shipment of household goods, airfare and temporary housing will be provided, while others are deemed to be optional at the discretion of management, such as a home finding trip, lease cancellation and the storage of household goods," he explains. Krupp further recommends a tiered approach that distinguishes between relocation benefits provided to senior executives and those subordinate to the higher-ups. "Shared cost savings is an additional area worthy of note and one which we have assisted organisations," he adds. "Simply stated, this approach provides for the proportionate sharing of savings which are the result of an assignee to forego a policy provision to which they might otherwise be entitled, such as a furniture allowance in lieu of household goods shipment." While our experts foresee an increase in both domestic and international relocations in the coming months, the way business is being done has been changed forever. Companies will continue to move employees to ensure the right person is at the right position at the right time—but relocation providers will play the pivotal role to help organisations to do it smarter. Russ Banham can be reached at www.russbanham.com SPRING 2013 | www.hroglobal.com [33]