Let them choose

Creating flexible relocation benefit packages

The ability to recruit from the broadest possible pool of experience and expertise, nationally and internationally, provides Canadian firms with an invaluable competitive advantage. At the same time, organizations must be able to move proven employees across Canada and around the world, quickly and efficiently, to improve operations.

Just as domestic and international relocations are becoming more important, they are also becoming more challenging. A major reason for this is that family dynamics have changed dramatically over the past decade — two-career families have become the norm, for instance.

Uprooting a family to move across the country or across the world can create major financial burdens and have a major impact on lifestyle. Consequently, relocating employees are looking for greater benefit and compensation incentives than ever before.

At the same time, all relocations are different and all employees, expats and recruits have different relocation needs: some have families with education needs and others don’t. Some have serious spousal career considerations and others don’t. Some own their own home and others don’t. The point is that rigid policies that fail to recognize differences can be the deal breaker from an employee perspective, just as expensive and inequitable customized programs involving massive incentives and signing bonuses can be the deal breaker from the company’s perspective.

The solution is flexible relocation benefits. By giving employees more control over the support and assistance they receive, employers effectively increase the domestic and international relocation options available.

Well-structured flexible programs, can provide a distinct competitive edge through enhanced employee satisfaction. The key is to develop programs that provide each transferee with a greater sense of personal benefit within the context of the company’s budget, business objectives, corporate culture and administrative parameters.

The move to flexibility

In essence, flexible programs provide employees with a menu of choices, within the context of the corporate policy, and within a set relocation budget.

With a well-designed flexible program, the employee can tailor the package to her needs. She is given greater control over where to spend the relocation dollar and greater privacy. Flexible packages can enhance the move for the employee while actually reducing administrative and compensatory costs for the employer.

In Canada, when an employer appoints a third party to administer its flex plans, the majority of relocation-related reimbursements made to the employee are not considered taxable thereby providing considerable tax advantages to the employee, reducing the need for employers to compensate for hefty tax bills.

Two major flexible approaches have emerged in recent years: lump sum programs and flexible spending accounts.

Pros and cons of the lump sum approach

In a sense, the lump sum approach is the ultimate in relocation flexibility. The employer essentially presents the employee with a lump sum “megacheque” to spend as she sees fit.

This maximizes privacy and choice for the employee, while minimizing program administration costs for the employer.

But there is a downside to lump sum programs if the employees are not provided with the counselling, guidance and relocation resources that will help them spend the money most effectively.

With unmanaged lump sums, the employee may make costly mistakes, run out of money or stint on relocation expenses that may be most helpful to the family.

Relocation service providers that position lump sum programs in the context of access to relocation consulting and recommended supplier networks help the employee maximize the self-directed approach. What’s more, any fees charged by the third party for lump sum administration is more than covered by tax savings mentioned above.

Advantages of flexible spending accounts

Flexible spending accounts are like a natural offshoot of the lump sum approach. With such programs, there may be a total approved budget or spending limit, but a chunk of this sum is company directed to what are seen as essential components — home sale or rental and movement of household goods, for instance. The balance can be applied by the employee to other aspects of the move as she sees fit. The employee can select from a menu of relocation products and destination services such as, spousal assistance, education assistance, cross cultural services, rental assistance, temporary accommodation, buying and selling a car, emergency airfare, home leave for expats and so on.

Flexible spending accounts thereby enable the employee to tailor the program to her own needs, within a program that provides guidance, knowledge and information to assist with the relocation. With flex programs, companies can deliver the benefits of lump sum without the downside.

Key success factors

Companies that have had the greatest success with flexible relocation programs are those that pay close attention to candidate and family identification and assessment programs. This is critically important, because with self-directed programs, the family must be more self-reliant. And including some important services, such as orientation, home finding and cultural orientation, as core components rather than as menu choices can be another key success factor — particularly with international or cross-cultural moves.

Flexible relocation programs boost employee satisfaction at no greater cost — indeed, with the opportunity for significant savings. And the bottom line is the ability to position a relocation as a positive benefit rather than a burden. Flex can mean more than flexibility for employees — it also provides employers with greater flexibility in pursuing goals that depend on successful relocations. That can boost the company’s competitive edge.

Donna Bergles is the resident international expert at Royal LePage Relocation Services and recently earned the designation Certified Relocation Professional from the American-based ERC. She can be reached at (416) 510-5619 or [email protected].

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