RISMEDIA, July 9, 2009-It would be difficult to find any segment of U.S. business unaffected by the economy to some greater or lesser degree. There is a veritable spider web of interconnectedness when it comes to one segment of the workforce being affected by what happens in another. Hotel maids and bellhops are experiencing reduced income as a result of the slowdown in booked conferences/conventions and recreational guests. No question, we are all in this together, and no one knows that more than Jan Hatfield-Goldman, VP, Research and Education for Worldwide Employee Relocation Council (ERC) (firstname.lastname@example.org). Hatfield-Goldman has been researching the trends and patterns of corporate relocation for many years. She observed some interesting business-practice shifts as a result of the present real estate market, technology, reduced revenues and general corporate downsizing.
Marylyn B. Schwartz (MBS): How has the economic downturn affected the way corporations are deciding whether or not to relocate an employee?
Jan Hatfield-Goldman (JHC): When the economy tightens, decision making changes. Corporations look for ways to orchestrate moves that are more efficient, to create programs that are leaner relative to benefits available to those being transferred, and to be sure that there are compelling reasons relocation is warranted. Moves must be imperative rather than discretionary.
MBS: What would make for a more efficient relocation?
JHC: In many policies transferees are protected by a loss on sale (LOS) provision. If the home they are leaving was purchased for more than is able to be realized in a sale, the transferee is protected from absorbing that loss. Covering the loss on sale is the number one most expensive cost to the client. For those who are protected by such a provision, the average cost to the client is $20,000. In 2004, 33% of all companies had a LOS policy; 46% have one today. The percentage rose as a result of the value of homes declining and therefore the risk of loss rising quickly. Some clients are controlling those rising costs by capping the allowable amount of the loss and by not including capital improvements made by the employee as a part of that loss on sale. Transferees might be paid 100% of loss up to a maximum amount of ‘X’.
MBS: Are you seeing any difficulties in getting employees to accept transfers when offered or for companies to get their first-choice candidates in a hire situation?
JHC: With the job market in turmoil and unemployment high, most people are just happy to have a job or to find one. If the employee is required to move to keep that job, so be it. However, with dual family incomes playing such a crucial role in making ends meet, giving up one salary is not always an option. That applies even in a new hire situation. In robust employment times it was fairly easy to help the trailing partner find employment. That is no longer true. The quality of the job market at the destination will play a role in whether the employee/first-choice candidate is able to make the move.
MBS: How are the challenges in the real estate market further affecting relocations?
JHC: Many transferees are ‘upside down’ in their mortgages. They owe more than the house is worth. The amount may be so significant that any loss on sale protection would do little to bridge the gap. Those folks are often just unable to move. It would be unusual for the client to just ‘make it happen’ as might have been the case at the height of the market.
MBS: Do you have any data to support some of the changing trends?
JHC: The 2009 Relocation Assistance Transferred Employees Survey pointed out the differences in cost of living allowances (COLAs). That is, the comparison of the typical expenses (housing and living) from one area of the country to another. In 2004, 46% of companies offered COLAs to transferees. Today the number is 39%. In addition, the costs in the destination area will often have to average 7.1% higher than in the departure area for the policy to even apply. Another trend we are seeing is how companies are using mortgage subsidies to help transferees make the move. Often called interest rate buy-downs, the company may help by lowering the rate for 1-3 years by decreasing degrees over that timeframe.
MBS: What are the transferees being asked to do to help make the move happen?
JHC: There are incentives offered to the transferee to get the home sold. One thing is for certain, the company does not want the house to go into inventory. Selling the home quickly is crucial to keeping costs down. Therefore, if the transferee hires a skilled, experienced real estate professional, gets the home in the best possible shape, markets it at the correct value and it sells, there will be remuneration for the efforts. These are sale incentives and may be as much as 3% of the sales price. A challenge that surfaced as a direct result of current market difficulties in getting homes sold is the need for temporary housing at the destination. In the past it was typical that the home would sell and close and the family would join the transferee in a relatively short period of time. That is frequently no longer the case. As the timeframe for selling and closing lengthens, the transferee requires housing at the destination. Putting people up in hotels that do not specialize in long-term rentals is not cost effective. Clients are asking agents to assist in finding housing that accommodates protracted stays.
MBS: What are the trends for the projected number of transfers in the near future?
JHC: The ‘General Benchmarking Survey’ asked respondents what they anticipated when estimating the number of current-employee transfers for next year. Seventy percent said they would move fewer than were moved in 2009 and 70% fewer for new hires as well. If a company can achieve its objectives without moving an employee, then it will. Costs are being carefully monitored throughout the relocation process.
MBS: In all of my years working closely with ERC, they have always proven to be the best and most current source of knowledge, trends, assistance and guidance for companies who transfer employees. In these challenging times, it would be hard to imagine navigating through the relocation process without them. Thank you, Jan!
Marylyn B. Schwartz, CSP, is an expert in real estate and corporate sales training/management and team development. She is president of Teamweavers and a trainer for Leader’s Choice.
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