Benchmark Reduces Relocation Costs
TRC Benchmark Reduces Employee Relocation Costs, Preserves Employee Satisfaction
A Fortune 500 industrial company and longtime TRC client that moves several hundred employees annually.
TRC had advised the company management that its relocation policies were more generous than its competitors’ policies. The client had resisted making changes because the company culture supported liberal employee benefits. Ultimately, the company decided to look for ways to cut employee relocation costs while maintaining a high-quality customer experience and turned to TRC for assistance in benchmarking its policy.
Drawing on its global mobility expertise and data, TRC benchmarked the client’s policies against current domestic relocation best practices. Our client company was unusual in that it utilized a Guaranteed Buyout home sale program for all qualifying homeowners. In the last decade, the GBO has become one of the less common relocation benefits. Companies usually reserve it for executive/VIP transferees, if they use it at all.
The booming US economy at the time and a generally strong real estate market presented an even more compelling opportunity to limit the use of GBO/AVO benefits without unduly burdening relocating employees.
TRC audited this client’s home sale files and found the average home sale benefit per file totaled $36,631—nearly half of the average total cost per file ($79,649). Further analysis showed that our client could adjust other employee relocation benefits to be more in line with industry standards, including temporary accommodations, household goods shipping, home finding and home purchase.
TRC proposed that our client offer a Buyer Value Option (BVO) benefit instead of the GBO/AVO benefit. The BVO program significantly reduced the possibility of inventory homes, the substantial carrying costs related to inventory properties, and the possibility of a loss on sale. The BVO program included the same home marketing assistance for the transferee and preserved the sales transaction’s tax-protected status for the transferee and our client.
Our client has enjoyed significant cost savings from its revamped domestic relocation policies. By moving from a GBO/AVO program to a BVO program:
- The average home sale cost dropped from $36,631 to $23,852 per file.
- The total cost of an average homeowner file dropped from $79,649 to $56,447.
- The carrying costs of those properties that came into inventory fell from $445,528 to $157,572 within a year. These costs will continue to fall as those transferees with grandfathered GBO/AVO policies complete their moves.
Overall spend for other benchmarked relocation benefits also declined considerably, contributing to our client’s first-year cost savings of over $1m. Our client also achieved its objective of a positive customer experience, and TRC’s service scores continue to hold at 100%.