Relocation expenses in spotlight with Liberal claims

Conflict often due to lack of policy clarity
By Melissa Campeau
|Canadian HR Reporter|Last Updated: 10/18/2016

This past summer, Canadians were exposed to some of the intricacies of employer-sponsored relocation expenses when it came to light Prime Minister Justin Trudeau’s chief of staff Katie Telford had racked up a bill for $80,382 in moving to Ottawa, and principal secretary Gerald Butts had spent $126,669.

Those amounts are north of what’s typical, according to Stephen Cryne, president and CEO of the Canadian Employment Relocation Council (CERC) in Toronto, as the average cost to relocate a homeowner is about $57,000. But those expenses have been on the rise, with “an increase of 6.5 per cent from the $53,500 reported in 2013,” he said.

A company-sponsored relocation expense program might cover such essentials as a moving truck, realtor fees and travel expenses, as well as childcare and eldercare assistance and spousal job support, plus packing, unpacking, rental cars, temporary housing, a home-buying trip, storage, property management and per diem expenses.

Eighty-eight per cent of organizations also provide an allowance to cover miscellaneous moving expenses, according to CERC’s 2015 Employee Relocation Policy Survey: “Some organizations place a cap on the amount based on a percentage of salary, ranging from $6,000 to $20,000 and there are variances, depending on the length of assignment and the position of the employee within the company.”

In some organizations, premium miscellaneous expenses are offered for moves to “hardship locations” and for furniture allowances, and various exceptions are provided for executives, said CERC. Per diem expenses, too, can depend on how senior the employee’s position is, although 48 per cent of those organizations surveyed said they offer a fixed amount to every employee.

Of the organizations that offered an allowance to relocating employees (one that’s outside specific, allocated moving expenses), 84 per cent said it’s paid in a lump sum and no receipts are required.

With respect to the two federal employees in the spotlight this summer, much of the scrutiny was aimed at the “personalized cash payouts and incentives” they each received. Technically, those payments were entirely above board, and right in line with what happens in private business.

“The government does have relocation policies that are competitive with industry,” said Cryne.

However, in the case of public service employees, what’s allowed can be in conflict with what’s acceptable.

“We were eligible to be reimbursed for a bunch of costs that we don’t feel comfortable about,” said Butts and Telford on Facebook. “While the rules were clear and we followed them, we both know that’s not always enough.”

Telford said she will repay $23,373 and Butts will repay $20,799 for “personalized cash payouts.” Butts also said he’ll return part of the land transfer tax for his new home in Ottawa.

Many ways to pay

Beyond a lump-sum allowance, the number of organizations giving a lump-sum amount to cover all moving expenses is on the rise, found CERC. 

Lump-sum payment structures continue to represent an established trend, with almost two-thirds of organizations reporting use of this approach.

And a growing number of companies allow employees to keep the unused portion of lump sum payments or spending accounts.

“In the last three to five years, there’s been a shift in the marketplace and an increasing number of employers are looking at more flexibility for their employees,” said Rob Stone, vice-president of client relations at relocation management firm TheMIGroup.

A more flexible package, he said, could come in the form of a core/flex package, customized to suit an individual. Or it could be a cash allotment for some or all of her budgeted expenses.

“Then the employees really have the discretion within some set of boundaries and policy parameters to expend that amount however their family requires or sees fit,” said Stone.

Changing demographics are at least part of the reason.

“A lot of the younger individuals are looking for more control over their costs,” he said. “They’re ready and willing to do a lot of the research themselves (rather than allocating budget to hire someone else to do it) and often times they’re online looking at houses and searching for information about neighbourhoods.”

Flexible relocation programs can also benefit the hiring organization, with lower overall program costs, and a simplified internal administration and budgeting process, said Stone.

Bumps in the road

When there’s conflict over expenses, it often means a policy isn’t detailed or succinct enough.

“Where companies can go wrong is in neglecting to make everything clear,” he said. “There are so many things that can come up and get in the way.”

Inaccurate cost estimates, for example, can send budgets off the rails quite quickly.

“There can be a lot of confusion around the budget, and whether or not some of the information is realistic and based on hard empirical data,” said Stone. “We often find housing costs, for example, can be an area of concern when we’re talking international relocations. Setting some realistic ranges is crucial.”

Underestimating can happen at other turns, too. A relocating family of five, for example, will require additional expenses.

“Often that’s where we see some concern raised and some pushback from families with regards to budgetary concerns,” he said. “The size of the family and home host location are key drivers for the household goods (packing, storing, transporting) cost. Having a set budget or standardized approach can create some problems for individuals when they’re outside of that standard demographic.”

However, the varied costs of living in different cities  don’t present much of a challenge.

“Most companies are pretty good at getting third-party data that’s updated quarterly or semi-annually to address the cost-of-living differentials so we don’t see as many issues around the cost of living,” said Stone. “Generally, that’s pretty well-managed.”

Staying competitive

Relocating people can be both challenging and costly, but it’s often necessary in the name of business, said Cryne. With respect to Telford and Butts, “(Finance Minister Bill) Morneau had the right perspective, that you need to get these people in place,” he said.

“We have to recognize that moving home and family is expensive, and people are very reluctant to move,” said Cryne.

Relocation is a stressful time with people trying to navigate all the issues with kids and spouses and whatnot, said Stone.

“I tend to think of relocation as a problem waiting to happen,” he said, “ but companies that take the time to create a solid policy have a huge advantage.”

Melissa Campeau is a Toronto-based freelance writer.

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