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Employee Relocation Policies and Real Estate: A Tiered Approach

Posted by Jim Retzer on Tue, Sep 02, 2014

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Tiered Relocation Packages

An emerging trend concerning employee relocation is tiered relocation packages. These packages are tailored to each level of employee and offer benefits according to those levels. Corporations have started utilizing tiered policies to provide more flexibility for hiring managers and to cut the overall costs of relocations.

Learn more about cutting costs using tiered relocation packages.

Design Your Tiers

To organize a tiered relocation policy, first you must assign each transferee into categories. The options and benefits will be different for each category. For example, consider a corporation with a tiered relocation structure and four categories, or tiers, of employees being relocated. The first tier, Tier One might include a relocation package specifically for executives. Tier Two packages may apply to middle managers and Tier Three for all other employees. The fourth Tier might apply to college recruits and new hires.

How to Categorize Your Employees

In this tiered approach, the benefits allowance and options available in each category will directly correspond with the transferee’s position or level within the company. This is how the company uses the tiered approach to cut costs while still providing for the needs of each group of transferees.

Some companies devise tier policies according to whether an employee has been with the company or are a new hire. This approach would only save on over all relocation costs if the company has a regular stream of new hires coming in. If new hires are the minority, then the company would still be paying the full amount to relocate existing employees, i.e. fewer savings.

Relocating Homeowners

Costs to move a home owning employee are considerably more since homeowner transferees require assistance for closing costs on their sold home (direct reimbursement or Buyer Value Option) as well as reimbursement of the purchases costs of a new home in their new location. The company’s goal is to keep real estate out of company inventory whenever possible, but holding onto a house in order to hold on to a key player in the company is sometimes the better choice.

Buyout vs. Lump Sum

Recent college graduate new hires logically will require minimal pay out, as compared to a relocating executive who would most likely require a much more substantial package. Lower level employees or middle management might qualify for a Buyer Value Option (BVO) program which puts the pressure to sell the home quickly onto the employee. However, in today’s real estate market a guaranteed buyout may have to be offered as a last resort to ensure the sale of the home. Many companies have started providing lump sum payments for lower tiers/new hires since their relocation needs are typically much less.

Conclusion

The bottom line in employee relocations is going to be cost. If a company is paying lump sums of equal amounts to all transferring employees, chances are it is costing the company considerable amounts of money unnecessarily. With a tiered approach, however, the company stands to save significant costs related to relocating their employees. The key to a tiered approach is sorting the employees into groups and tailoring relocation packages according to the different requirements for each tier.

Save Time & Money Using Tiered Relocation Packages

 

Topics: Tiered relocation packages, Real Estate, executive relocation package

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