Many employers aren’t using their relocation programs for full strategic benefit. Here’s a simple way to help your clients find and keep the “best and brightest” young employees they need.
Corporate relocation program managers are commonly facing a tough paradox these days. They are expected to reduce moving costs and overhead while also competing for new talent and keeping current employees satisfied.
We’re seeing widespread trends in their efforts to do all this:
- Scaled-back policies – Companies are providing less financial help for relocating employees, often through tiered policies that tie graduated move assistance to job levels. Eligibility for big-ticket expenses like real estate and household goods is often restricted to upper-level managers only.
- Equalization of new hires – The relocation assistance given a new hire employee is now often comparable to that for an equivalent transferee. In the past, employers did much more for current employees than for newly hired ones, recognizing their proven service and the lifestyle disruption of a company initiated move.
- Less direct administrative involvement – Today’s program managers can’t be so hands-on with each move as was once the case. Instead, they have automated more processes and have expanded the outsourced roles of their service partners. They are rapidly adopting web-based self-move tools for transferees that enable (require?) employees to prioritize needs, budget their relocation assistance and directly access preferred providers.
Altogether, contemporary relocation programs are more impersonal and less paternalistic, yet companies continue to struggle with the so-called “War for Talent.” They complain about the skills scarcities in growth-driver positions. They run into talent erosion as baby boomers retire and replacement millennials prove hard to attract. They face turnover problems as younger workers job-hop toward greener pastures and resume building.
Mobility programs can be part of the solution. We think it’s time for an unconventional new strategic direction in relocation policy. Employers should consider extending the perceived and real values of providing home-purchase benefits to relocating first-time homebuyers, including both transferees and new hires.
This is not prevailing practice in corporate programs. Their policies usually define move types and corresponding benefit levels based on departure-location residence status, i.e., homeowners are presumed to become destination buyers and renters to stay as renters. While we all know this is not real-world human nature, the corporate rationalization has often been that a relocation should not “enrich” an employee by providing an upgraded living situation. A renter who wants to buy a first home upon relocating would generally be expected to pay those costs out-of-pocket without employer assistance.
So, why change longstanding policy? Because offering First-Time Buyer (FTB) Benefits would be a clear competitive advantage in attracting and retaining young skilled professionals. From a recruitment standpoint, an FTB Benefits feature would:
- Enhance company image as a desirable employer;
- Attract applicants who are predisposed toward the employer’s locations;
- Provide a quasi-compensation workaround for salary limitation issues;
- Serve as a reserved negotiation tool for top candidates;
- Mitigate concerns about destination housing costs or rental availability;
- Appeal to employees seeking longer-term stability or accelerated home acquisition; and
- Enable candidates to accept moves that might be otherwise unaffordable.
We recommend that a company’s FTB Benefits offering include these components:
- Policy counseling and online resources
- Multiple mortgage lender referrals, including pre-approval services and pre-negotiated lender fees
- Mandatory destination broker registration and utilization
- Agent-provided area tour and house-hunting
- Coverage of reasonable and customary buyers’ closing costs
- Direct-billing of closing costs via national lender or RMC
- Tax assistance on taxable elements
While the costs of these components will vary by location, provider and home value, generally we would expect them to be in the range of 2-4 percent of purchase price, or $4-$8,000 on a $200,000 starter home. This is not a token investment for a company to make, but the potential benefits to an employer go far beyond the recruitment advantages of more and better candidates and hires. Employees using the FTB Benefits program are likely to be better performers and longer-tenured because of their:
- recognition of an exceptional benefit;
- personal financial stakes in their new community and in the company’s success;
- increased financial consequences if leaving the company; and
- need for elapsed homeownership tenure to accumulate value appreciation and equity.
After all, the risk to the employer in offering an FTB Benefit is really quite small. First off, not all eligible people will utilize it, so the company gets some positive aura at no cost in those cases. For those that do take advantage of the FTB Benefit, a few thousand dollars for extra service years from a better quality employee seems a prudent corporate investment. Even if an individual does not work out as expected, these added costs are recoverable: Most companies routinely require relocated employees to repay all their relocation benefits if leaving the company voluntarily within 1-2 years. That would include the FTB Benefit, as well. Some companies also would receive a revenue share from RMC-captured referral fees, further subsidizing FTB Benefit costs.
For companies with highly concentrated staff locations and/or challenging real estate market locations, an FTB Benefit could also save money by generating sales for other relocation homes. For example, FTB Benefits might include a buyer bonus for purchasing a transferee-marketed or corporate-inventory home. Corporate savings on carrying time, temporary housing and potential resale losses would offset any bonus payouts and improve overall program performance.
Of course, it’s counterintuitive in the corporate world to spend more to save more, but a First-Time Buyer Benefit program can do this for many companies. This concept would make for an interesting conversation-starter with your local employers, and it can provide opportunities for you to showcase your special services for incoming first-time buyers and other relocation customers. Sometimes being a contrarian is good business, after all.
John B. Sculley, SCRP, is vice president – managing director, RIS Consulting Group. Please email him your comments and questions.
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