Employers keen to reduce policies while maintaining employee support
More employers are cutting back on relocation costs this year than last, according to the 2010 Global Relocation Trends Survey by Brookfield Global Relocation Services.
Seventy-two per cent of employers are slashing relocation costs in response to economic conditions, up almost 10 per cent from 2009, found the survey of 120 senior HR professionals.
“When under pressure to reduce costs in the global mobility sector, companies focused on reducing the policy offerings and benefits that they provide to their mobile workforce,” says Scott Sullivan, executive vice-president of global sales and marketing at Brookfield in Chicago.
“They are going to look at their policies to see if they can minimize what they are actually providing to support the assignee and their families.”
During the boom time between 2005 and 2008, people didn’t pay as close attention to the costs, says Stephen Cryne, president and CEO of the Toronto-based Canadian Employee Relocation Council.
“With the recession, the costs and policies that companies have in place for moving people came under greater scrutiny during that period of time.”
The problem of cost-containment also grew exponentially as a result of a generational shift between generations X and Y and the previous baby boomer generation, says Donna Bergles, national director for global mobility services at Crown Relocations Canada in Toronto. And many relocation benefits provided to the boomers are irrelevant to generation Y.
“There are things you can offer them that they don’t need. For example, settling-in services are a service that a lot of corporations have in their policies, such as getting phone and cable and a driver’s licence in the new location,” says Bergles. “Generation Ys do that online on their own, they don’t need that help. They want their money spent in other ways.”
One way is to help their partners or spouses with employment, because there are so many dual-income families, says Bergles (see “Expatriate spouses eager for career networking help” on page 27).
This slimming down of policies is resulting in an increase in policy exception requests, says Terri Oliver, director of consulting services at the MI Group in Mississauga, Ont.
“Employees are asking for benefits which are over and above what is written in the policy.”
Exception costs can significantly increase program costs, says Sullivan.
“Employers need to be able to say ‘No’ to assignees asking for extra services, saying to assignees, ‘You can pay for that on your own or don’t take the assignment.’ But some companies don’t have the luxury because they don’t have any options of candidates,” he says. “So it is a lot more about being strategic with relocation as opposed to being reactive. And that will save money as well.”
One of the most effective strategies when it comes to relocation cost-containment involves better scrutiny of policy offerings that meet the needs of employees, says Bergles.
“The key starting point is a good, up-to-date policy that addresses their internal corporate culture and their mission and vision for their business model,” she says. “You’ll be surprised how many Fortune 500 companies don’t have that.
“You can spend smart and ensure that your dollar goes a much further way with all kinds of services.”
For example, a big cost item for corporations is home-sale assistance, says Bergles. There’s the risk a house might not sell and an employee has to take a loss on the sale. There is also the movement of household goods and temporary accommodations, and employers can do these much better if they hire professional relocation management companies.
However, the core problem lies in a failure of HR to implement strategic talent management initiatives, says Sullivan.
“When you think about the cost that is invested in an international assignment, the money that walks out the door — you need to replace that investment. There are really large amounts of investment lost from this talent not being career pathed properly throughout and after their assignment,” he says. “So when you talk about the cost of lowering the household goods move or trying to get a cheaper apartment, those things are important and can add up but the huge cost is the investment of the assignment not being retained with the individual and the company.”
Expatriate attrition accounts for 38 per cent of assignees who leave a company within the first year of repatriation, according to the Global Relocation Trends Study — and the total assignment cost can exceed $1 million for each relocating employee.
Poor talent management costs employers the most money through the loss of intellectual capital, says Cryne.
“If you consider the cost of an international relocation, if that employee doesn’t stay with the company when they return, all that intellectual capital has left the organization so, basically, what you’ve done is train that employee to go work for your competition,” he says.
Companies should not go bare bones when designing a relocation policy and benefits, though this can be a challenge as some employers continue to choose short-term financial savings over long-term gains, says Cryne.
“There are some people in operations that just say, ‘Well, we’re going to reduce your budget by 20 per cent and you go figure it out.’”
Whatever the approach, employers should constantly review relocation policies and understand why they are considering relocating employees.
“Frankly, a great way to reduce costs is to not send anybody at all,” says Sullivan. “Unless the objective of sending somebody is really clear, then they can turn to, ‘How can I fulfil the need that I have and can I possibly look at hiring locally or doing it using short-term assignments?’ And that will save money as well.”
Yaseen Hemeda is an HR product writer at Consult Carswell. He can be reached at [email protected] or (416) 298-5141 ext. 5012.
