Recently, many companies have reduced, frozen or eliminated their relocation programs in an effort to save costs. However, to remain competitive, companies still need to place the best talent at the appropriate locations, and often that talent isn't available without a global transfer. In these instances, the proper management and oversight of relocation costs becomes imperative.
How Can You Control Your Relocation Costs?
First, it's essential to actively manage expense packages. Though some companies prefer to set a standard relocation package across the board, when you're working with key talent, it's usually much more effective to be flexible. By compromising on certain points, you can keep your top talent happy and eliminate the risk of losing them in the relocation process.
With that flexibility scenario in mind, it's important to remember that no two global relocations are identical. Therefore, as a rule of thumb, whenever you're presented with a one-size-fits-all solution, you may wish to weigh it against some custom-fit solutions that take the bigger picture into consideration and can save on expenses in the long run. In addition, the measures listed below have proven to be effective in managing and reducing global relocation costs.
- Regulate cost-of-living allowances. There's often a significant difference between the costs of living in originating and host countries. Set allowances that are applicable to their respective locations, and recalculate cost-of-living subsidies regularly to reflect financial fluctuations in the host country's economy.
- Reevaluate host country housing allowance. It's reasonable for transferees to expect housing allowances in their host countries, but oftentimes the allowances represent high standards of living based on out-of-date data. To control these expenses, employ more conservative housing standards to determine host-housing allowances. Another approach is to set allowances that match home values in the localities transferees will be living and working. Also, review and adjust allowances each quarter to account for local real estate value and currency fluctuations.
- Avoid total lease payment. Unless absolutely necessary in light of the competitive environment, avoid providing zero-cost housing to transferees. Determine reasonable housing contributions that employees are responsible for. For some temporary positions, such as highly mobile postings managing the global rollouts of products and services, zero-cost housing may be the only way to keep employees productive. But in most corporate relocations, when transferees are accompanied by their families as well as household goods, a fair employee contribution to housing is usually expected.
- Employ a host-based salary system. By paying transferees salaries that are comparable to those of professionals in similar positions in the host countries, US-headquartered companies can save a lot of money without disadvantaging transferees. This way, transferees can maintain their standard of living in their new environments.
- Lower house-hunting trip reimbursements. It’s reasonable to reimburse transferees’ house-hunting trips to the host location, but international airfare, transportation at the location, as well as lodging and food can be expensive. Limit these costs by capping monetary reimbursement or reducing reimbursement levels for these trips. In many circumstances, when there’s flexibility based upon the transferees' needs, there will be opportunities to shorten or negate some costs associated with house-hunting trips.
- Reassess the costs of language training, cultural training services, home-finding and familiarization trips. Though these services are often crucial to a transferee’s successful relocation, there may be more cost-effective ways of providing them. Do some research and compare providers to see where and how you can cut these costs. Oftentimes, these providers offer different packages and levels of service. To assist you in making both responsible and cost-effective decisions, however, bear in mind service quality benchmarks that take into account client satisfaction. Rule of thumb: The best deal on paper isn’t always the best deal in practice.
- Utilize junior-level employees. According to a Worldwide ERC white paper, almost a quarter of companies predict the number of overseas developmental or trainee assignments to grow. That presents the opportunity to increase the ratio of trainee transferees vs. senior transferees when possible. Many trainees are willing to accept reduced relocation packages in exchange for gaining global experience and career growth opportunities.
- Cut hardship compensation and bonuses. Financial reimbursement on real estate losses, bonuses on fast home sales and additional compensation pertaining to host-country quality of life issues can all add up. Analyze these elements of your relocation package to see if you can cut or eliminate costs. Don’t forget the option of capping bonuses as a whole; so once a cumulative amount has been reached on bonuses, no further costs to the company accrue.
- Review your relocation program for other places to make adjustments and cut costs. There are likely to be numerous other aspects in your relocation package where you can make minor adjustments without negatively affecting transferees. For each possible adjustment, analyze how it will impact the relocation process and make your decision in accordance with its impact on the transferee’s happiness and productivity.