Part 2: Cafeteria Relocation Benefits – Cost Savings
The Potential for Relocation Cost Savings
As we mentioned in the prior blog, a desire for flexibility is the most common reason for companies to embrace a cafeteria approach. However, the potential for cost containment can be another powerful motivator.
In a typical relocation program, companies might be providing “one-size-fits-all” benefits that employees neither want nor use. In a cafeteria program or a hybrid tiered/cafeteria program, benefits tend to be better aligned with actual needs, frequently with a cap on the total benefit amount. According to the Worldwide ERC® survey, Relocation Assistance: Transferred Employees, 45 percent of companies using a cafeteria approach place a ceiling on the value of the selections made. That figure has increased from 39 percent in 2004; the ceiling typically depends on the job level of the employee.
For companies more focused on cost containment, cafeteria menu items often are tied to the core home selling and home finding processes, with limited “soft service” options. An example would be a self-move package for a new hire.
Who Selects the Benefits?
A cafeteria approach does not necessarily mean that the transferee has the deciding vote. In fact, the Worldwide ERC survey, Relocation Assistance: Transferred Employees reports that in 84 percent of organizations with cafeteria plans, the business unit or division selects the specific benefits. This helps balance the employee’s wishes with the competitive environment and allows the company to tailor benefits to attract the best candidates for the position.
In many cases, the manager negotiates specific menu items with the transferee or new hire within the limits of the overall budget, though occasionally, menu items are pre-determined and tailored for everyone within the division or work group. This manager/transferee collaboration is truer to the spirit of a cafeteria approach: it involves the employee in the decision-making process, demonstrates that the company is concerned about his or her unique needs and facilitates employee buy-in for the resulting package.
A Core Benefit
To help ensure appropriate menu choices and parity among transferees, many companies offer a core benefit package that applies to all transferees. A core benefit package ensures that critical items are included in every relocation package while allowing flexibility for additional services that are important to the employee. According to Worldwide ERC’s Guide for Managing the Mobile Workforce, such a core benefit package might include:
- En route travel
- Temporary living assistance
- Transportation of household goods
- Personal counseling
- Rental or homefinding assistance
Worth the Effort
Hybrid tiered/cafeteria programs and freestanding cafeteria plans undoubtedly require more administrative attention and care than more rigidly defined programs. Particularly where managers negotiate specific provisions with employees, it is critical that they are well-versed on the program rationale, options and costs. They should be armed with modular communications pieces, such as one-page descriptions of available services, which allow them to present only the applicable benefits to the employee.
In addition, menu options must be carefully considered relative to employee needs and evaluated regularly to ensure they are still relevant. The costs of these provisions must be estimated with some care as well, to ensure that menu items are interchangeable from a budget standpoint.
These additional efforts can offer considerable reward, however: When executed properly, they can result in a cost-effective program that is as fair and flexible as possible, ultimately attracting the best candidates for the position.
Links to additional information
Since 1987, TRC has delivered creative, cost-effective relocation and international assignment services across the United States and in more than 150 other countries around the world. TRC partners with its clients to develop competitive, best-practice relocation programs, drawing from a comprehensive range of relocation services, including U.S. home selling, home finding and consulting services and complete international relocation services. TRC’s client base represents a wide variety of products and services and ranges from startup firms to Global 1000 companies.