Over the past decade corporate relocation policies have become increasingly sophisticated, balancing the needs of the company with those of the relocating employee. As the global economy struggled, companies formulated relocation policies that empowered them to realize their talent management objectives while managing costs and minimizing the stress and inconvenience for relocating employees.
Today we look at the recently released 2014 Worldwide ERC® (Employee Relocation Council) survey, which reported that U.S. companies experienced a 10 percent increase in domestic employee transfer volume in 2013 over 2012, and employee reluctance to relocate dropped a significant 16 percent from the previous year’s survey.
The WWERC survey points to an improving economy and a healthier real estate market as an impetus for a rebounding relocation market. Survey highlights include:
- The average cost to relocate a current employee homeowner in 2013 was $90,219, a one percentage point drop in the cost reported in 2012.
- The average cost to relocate a new hire homeowner remained essentially unchanged, at $71,952 in 2013 from $71,786 in 2012.
- Renter costs were virtually unchanged from the previous year, with current employee costs increasing one percent, from $24,714 in 2012 to $24,995 in 2013.
- The average cost to relocate a renting new hire decreased two percent, from $22,493 in 2012 to $22,048 in 2013.
Ups and downs
Increases were seen in five policy components:
- Home-finding trips saw the most substantial increase at 20 percent, which ERC says is a positive indicator that a return to home purchasing by relocating employees is underway.
- Shipping household goods increased four percent.
- Purchase closing costs and temporary living at the new location each rose two percent.
- Home sale assistance increased one percent.
- Decreases were seen in seven policy components:
- Federal tax liability dropped 14 percent.
- Loss-on-sale assistance fell 11 percent.
- Spouse employment assistance decreased seven percent.
- Travel and lodging at the time of the move fell five percent.
- Bonuses/incentives given for employee-generated home sales dropped four percent.
- Miscellaneous expense allowance and duplicate housing assistance both declined three percent.
For the first time, WWERC asked respondents about lump-sum payments, and 72 percent report offering a lump-sum-only policy or a partial lump-sum policy to some or all of their employees. The breakdown:
- 37 percent offer a partial lump-sum payment that is intended to cover specific components of their relocation policy.
- 25 percent offer a lump-sum-only policy to some of their relocating employees.
- 10 percent offer a lump-sum-only policy to all transferees.
- Six percent of respondents do not offer any lump-sum provisions but plan to do so within three to five years, while 22 percent do not offer lump-sum provisions and have no plans to do so.
Nearly half of the companies with lump-sum policies began offering them more than nine years ago, and another 25 percent of the companies surveyed instituted these policies five to nine years ago. And the recipients of lump-sum payments—78 percent—were new hires with no experience or recent college graduates, followed by renters, who composed 38 percent of the people receiving lump-sum payments.
Relucatance to Relocate
As noted, WWERC found that reluctance to relocate is decreasing markedly. Forty-nine percent of organizations reported experiencing problems with employee reluctance. This figure is down from 78 percent in 2012 and 61 percent in 2013, a 29 percent decrease over two years. Thirty-seven percent of respondents reported minor reluctance, while 12 percent cited moderate employee reluctance to relocate. No companies reported major problems with reluctance.
Reluctance was most commonly due to “the transferee’s home in the old location is in a negative equity situation” and “slowed real estate appreciation/depressed housing market at the old location.” These are still the leading reasons for reluctance, but the percent of employees citing these objectives is dropping significantly.
WWERC notes that the effects of the 2007 housing crash, while still real and prevalent, are beginning to fade from the lives of the U.S. mobile workforce and are having a diminishing effect on their employers as well. In stark contrast to reasons reported from 2007 to 2013, housing-related reluctance prior to 2007 ranked near the bottom of reasons given, when family reluctance to the move was the most prevalent reason given.