Effectively managing a company relocation policy and the program costs requires a comprehensive approach. You must first consider your company’s culture and overarching talent management objectives, as these give you a sense of the degree of cost control that might be possible. Ultimately, your plan will likely include a combination of smaller adjustments and refinements and larger policy shifts.
For some companies, it is easier to phase in more sweeping changes over several years. This approach also allows you to analyze the preliminary results and refine your plan as needed. A successful initiative will reduce excess costs, better align your relocation benefits with employee needs and expectations and support your talent and business objectives.
Below we suggest areas to review. And while not all will apply to your company, with almost any corporate relocation program, there is at least some opportunity for cost savings.
1. Try a Discard and Donate Program
You can integrate Discard and Donate services into any relocation program, benefiting your relocating employees, charitable groups and your company’s bottom line. Working proactively with relocating employees to help them discard, sell or donate items before the move can reduce your company’s moving costs from 5 to 15 percent, maximize your employees’ charitable deductions and help worthy organizations as well.
2. Approach COLA More Strategically
You need not use the most generous COLA (Cost of Living Allowance) index for all of your international relocations. Different allowances might be appropriate for different job levels, assignments of varying importance or assignments in different locations. Some companies also trim the COLA allowance once the employee is fully established in the host location.
COLAs have been on the rise for U.S. domestic relocations as well. Use these sparingly and for dramatic location differences only. Further, any domestic COLA allowance should have a sunset provision. COLA payments should not be a permanent part of a domestic relocation. COLA should be calculated using spendable tables, not based on net salary.
3. Consider Caps
Some program options, including managed cap, lump sum and core-flex, incorporate caps by design. If you use one of these programs, consider whether you can adjust any of the existing caps. You can also consider imposing a salary ceiling on international allowance calculations and cost of living adjustments. Very often, these allowances become bloated over time, as companies incorporate previous exceptions into their standard policy. You might determine that they no longer reflect current employee needs or destination conditions. Also, when utilizing a managed cap program, consider having any leftover funds revert to the company rather than allowing the employee to retain them for general use.
4. Rethink Per Diems
Evaluate your per diem calculations and make sure they reflect current conditions and host locations. Employees on short-term assignments who are living in apartments with kitchens do not require as generous a per diem as business travelers. The short-term assignees might opt to eat all their meals out, but your company does not need to subsidize this choice.
5. Look at Localization
There is no need to provide generous assignment benefits and allowances to employees in perpetuity. If you have employees who have been in the host country for 5+ years, you should seriously evaluate localizing these employees. This move will produce considerable cost savings and eliminate a great deal of administration and oversight.
6. Make Sure You are Compliant
With almost all employees working remotely right now, compliance is becoming a bigger and costlier headache for most companies. It is more important than ever to keep track of where all your employees are living and working, even within the U.S. Above and beyond continuing immigration and tax regulations, U.S. state governments are diligently tracking the number of days employees work within their state and aggressively pursuing any and all taxes due along with applicable penalties.
On a related note, short-term business travel might satisfy your company’s project needs, but it can present a minefield of compliance problems. Relocation technology is essential to track all relocation activities.
7. Explore Available Tax Breaks
Make sure that your policies take advantage of any tax provisions that reduce relocation and assignment costs for your company and employees. In the U.S., if your program is more ad hoc and centered on relocation expense reimbursement, you might be forfeiting significant tax savings. Tax breaks vary by country; professional guidance can help you to structure your program, practices and contracts in the most advantageous way while remaining compliant.
8. Embrace Technology
Today’s relocation management technologies enable detailed cost tracking and reporting. You can view data and trends for individual transferees and for your program. Sophisticated reporting capabilities can allow you to isolate costs by division, policy tier and more as well as track any patterns around exceptions. The systems allow for automation of many calculations. They also allow you to keep track of the whereabouts of your employee population, facilitating immigration and tax compliance.
The pandemic has fast-forwarded the adoption of other supporting technologies, such as e-signatures, virtual tours and virtual household goods surveys. These are likely to speed up processes and ultimately reduce costs.
The pressure to reduce global mobility services costs began before the current pandemic, but Covid-19 is certainly accelerating that process. For all 16 Suggestions on How to Reduce Relocation Costs, download our latest ebook to learn how you can preserve some of these cost savings while still achieving your talent management and business objectives