Relocation Policies Guide

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2 Relocation Policies Guide Setting and Revising Relocation Policies... 2 Business Relocation Policy: Understanding Tiers and Status... 2 Relocation Policies: What s Best for Your Company?... 3 Lump Sum Relocation Policies... 3 All Inclusive Lump Sum Payment:... 3 Managed Lump Sum:... 4 Direct Reimbursement Relocation Policies... 4 Managed Relocation Policies... 4 Tiers for Real Estate Sales in Your Employee Relocation Policy... 5 Executive Level Home Sale Assistance... 5 Buyer Value Option (BVO) Program... 5 Home Sale Bonus Incentives... 5 Tiered Business Relocation Policy: Will it Save You Money?... 5

3 Relocation Policies Guide Setting and Revising Relocation Policies Plenty of executives simply don't realize how critical having up-to-date policies is for the success of the organization. Best practices and tactics are always improving, therefore it s critical to make certain your relocation policies are keeping pace. Not only will updating your relocation policies save the company money directly, it will help you retain valuable employees. Just as you would consider using the latest taxsaving tools at tax return time, the same should be said for having the most current and relevant company relocation policies. Corporate relocation policies should be reviewed regularly to integrate with your corporate culture and industry best practices. Also, be certain to find out what's most important to your employees. You'll probably discover that home sale, spousal support, and finding a good neighborhood and a new home at a fair price rank near the top of the list for many employees. Relocation policies are broken into a few main categories based on how much involvement the employer has, and how much of the burden of managing relocation is placed on the employee. Any type of program may use tiers to determine either how much money the relocating employee will receive (in the case of lump-sum reimbursement policies) or what expenses are covered in a direct reimbursement or managed package. Business Relocation Policy: Understanding Tiers and Status If you are restructuring or introducing a corporate relocation policy for the first time, one of the questions you may consider is how to differentiate employees in a tiered policy.

4 First, it's important to understand the difference between tiers and an employee's status. An employee's status refers not to their status within the company, but their moving status. In other words, it addresses the services an employee may need when he or she moves. For instance, is the employee: A homeowner or renter? Single or married? A new hire or current employee? Additionally, an employee's status may address individualized needs. Does the employee have: Kids in school? Elderly parents that may require care or special services? Pets that require transfer and licensing? An employee's tier is related to their standing within the company. Employee tiers may be determined based on salary, title (job level), seniority or a combination of all three. Be consistent in determining employee tiers and to set your business relocation policy and stick with it to avoid resentment from employees if exceptions are made for certain relocating individuals and, similarly, to avoid lawsuits if one employee believes another is receiving special treatment to encourage the move. Relocation Policies: What s Best for Your Company? There are several types of relocation policies that could work for your company. Let's look at the pros and cons of lump sum, direct reimbursement and managed relocation policies. Lump Sum Relocation Policies In a lump sum policy, employees are given a pre-determined amount to manage their relocation. There are several different lump sum programs available for your company. All Inclusive Lump Sum Payment: In this policy, the employer issues a single check to cover the employee's moving expenses. The burden is on the employee to manage their own relocation including selling and finding real estate, moving household goods, helping a spouse find a job, and even organizing their own house hunting trips. The employer has no say as to how the lump sum package is spent. The benefit for employers is that this type of domestic relocation policy is easy to administer. A drawback is that the entire payment is considered income to the employee and may be grossed up so the employee does not incur a tax liability.

5 Managed Lump Sum: With this policy, the employer allocates a lump sum amount to the employee but requires the professional assistance of a full-service relocation company. Managed lump sums may be an appropriate hybrid that provides flexibility, cost control and professional guidance, resources, and quality control. When creating an efficient and cost-effective lump sum program, it s helpful to remember that all relocation expenses paid on behalf of the employee are considered taxable income with the exception the household goods move, 30 days of storage, and final move costs. Direct Reimbursement Relocation Policies In a direct reimbursement relocation policy, employees are reimbursed for each item that is part of their move. In many cases, the employer or a relocation firm acting on behalf of the employer will offer assistance with lining up service providers, including real estate agents and household goods movers. The employee will pay expenses out of pocket, but will submit receipts and be reimbursed. Expenses may be grossed up so the employee does not incur a tax liability from his domestic or international relocation package. This type of policy can work well, especially if the employer has a hand in lining up service providers. Employees don't feel a burden to stretch their dollars, and can be assured good service to sell their house quickly and move with less stress. Managed Relocation Policies In this type of relocation policy, the employer or a corporate relocation firm handles every aspect of the move for the employee. The employer can work with the relocation firm to assure relocation service providers offer the best service available, resulting in a happy employee who can get back to work faster, with less stress. Managed and direct reimbursement relocation policies provide full service, flexible, professional guidance to a relocating employee or new hire. Both policies may help you save money and ultimately keep your key talent happier.

6 Tiers for Real Estate Sales in Your Employee Relocation Policy In addition to tiers for relocation policies, there are also tiers for real estate sales. Here are a few ways you can structure a tiered employee relocation package to address real estate concerns and encourage quick home sales. Executive Level Home Sale Assistance An executive level employee relocation package might include buyout of a home after the home has been on the market for a specific length of time. In today's market, this isn't a preferred choice for many companies. The goal is to keep real estate out of company inventory whenever possible. But when the choice is holding onto a house or losing a key player in your company, a buyout option if the home doesn't sell could be the best choice. Buyer Value Option (BVO) Program Lower level employees or middle management might receive a BVO option, placing the burden on the employee to sell the home quickly, although a guaranteed buyout may be offered to ensure a sale in today's tough real estate market. Home Sale Bonus Incentives A preferred option to a BVO program involves home sale bonus incentives. This can become part of any tiered relocation package for employees of any level. You simply need to change the amount of the bonus employees receive when they sell their home within a specified time period, using approved real estate service providers. Tiered Business Relocation Policy: Will it Save You Money? Are you thinking of establishing a tiered business relocation policy in order to better meet the needs of your relocating employees? Many companies who have switched to a tiered lump-sum program have reduced administrative costs, managed their business relocation budget better, and even improved their recruiting and retention efforts when it comes to top talent. However, even a tiered business relocation policy may have hidden costs that need to be considered. Establish the answers to these questions as you set your new relocation policy: Will you offer exceptions in a business relocation package? Under what circumstances? How many tiers will cover your different levels of employees? What factors will you take into consideration when determining the tiers? (i.e., homeowner or renter? Will the employee be relocating with a spouse, kids, or elderly parents?) Do you know what other companies in your industry are offering in their executive relocation packages?

7 Tiered relocation packages provide good flexibility for an employee's needs without having to renegotiate the business relocation package every time you are relocating an employee. A lump-sum program means less administrative hassles, paperwork, and management for your HR staff. In addition, financial issues like tax gross-up are simplified when you're issuing a lump-sum package. However, your tiered packages should provide enough flexibility to keep employees happy, which will aid your recruiting and retention efforts. They should also be competitive with the business relocation policies of other companies in your industry. Finally, you may want to create tiers that address today's primary relocation concerns, especially the challenges involved in selling real estate in today's market. What needs to be updated with your relocation policy depends on a variety of criteria. Maybe your policy is effective and well executed, needing only a few minor changes to optimize. It's also possible that your relocation policy is in desperate need of a complete overhaul to better reflect your company's business objectives. Or, maybe you don t even have relocation policies at your organization. Whatever you use now to administer a corporate relocation, taking a close look can only improve the results of your next future relocation.