EFFECTIVE RELOCATION POLICIES – "THINK HORSES FOR COURSES"

Imagine a field of top class thoroughbreds asked to complete a course designed for steeplechasers. Some will take fright and refuse the jumps. Some will try, fall and be seriously hurt. Some might make it – but be unlikely to want to do it again.

Designing an effective staff relocation policy is rather like designing a racecourse. Get it right and your thoroughbred staff will reach the winning post – get it wrong and you will have casualties. Think horses for courses. Understanding the needs of the key people you want to relocate is vitally important. Ensure your policy identifies and removes any obstacles that could prevent them reaching their destination.

The following guidelines are intended to help with determining the priorities and contents of an effective policy to achieve identified relocation aims and objectives.

Initial Considerations
To be commercially viable for an employer, and economically and sociably viable for employees, a relocation policy should be:

• Equitable: It should treat people fairly and reasonably.
• Transparent: Clear about what everyone is getting (policies with more generous or different rules for senior staff invariably hit problems).
• Competitors' policies: Some people may have worked for a competitor and have relocated with them. Compare what they currently offer. Your staff probably will if you don't!
• Not too little – not too much: This is the aim. An employer doesn't want to over compensate but the employee doesn't want to be out of pocket or grudgingly move with an ongoing, and potentially disruptive, sense of resentment.

Quality and Breadth
We invariably talk about relocation policy with the accent on the word relocation. But most policies also need to cover the directly associated issues of redundancy, recruitment and retention of staff.

• Redundancy: If there's an existing redundancy policy, and you don't want to change it, the relocation policy should refer directly to it. If you don't have one, or do want to change it, the relocation policy should set out what people will get if they are made (or opt for) redundancy.
• Recruitment: Are you going to cover the costs of someone new moving home to work for you? Most employers tend to offer minimal assistance to less qualified new entrants but offer a "full" package to highly qualified new staff.
• Retention: Sometimes referred to as "silver handcuffs" these incentives to non relocating staff who agree to stay on until the "old" location closes can be invaluable to employers. It keeps the old wheels turning until the new wheels are fully operational. Highly recommended in group moves.

Different Scenarios – Different Solutions
It is important to understand why and how the policy needs to be geared to cope with different scenarios.

There are obvious and fundamental differences between domestic and international relocation. But maybe your policy will be aimed predominantly at helping new recruits who need to relocate? Or will it also need to accommodate the needs of key staff you want to move as part of their career path development? Or assist and support staff in a large company move?

Why, and how, will your policy need to be differently accentuated? Let's have a quick look at some of the reasons.

International
The people being relocated are often high flyers possessing crucial business development skills. So the policy will need to consider:-

• "Look see" visits with their family
• Cross cultural training
• General advice and guidance on where (and where not) to live
• Specific home finding assistance
• Advice on selecting children's schools
• A location specific cost of living allowance
• Post move local help for the family unit
• Repatriation assistance if everything goes wrong

Recruiting
A policy only needing to cater for relocating new entrants (graduates etc) is generally less generous – the argument being they want to join because of the remuneration package and the prospects. However, if your new recruit is already employed (especially by a competitor) the package on offer is usually much higher (see "career path moves" below).

Career Path Movers
These people are the lifeblood of any organisation. If they don't flow through your commercial arteries you've got problems. Relocation policies for these key people are usually very supportive.

Group Moves
The commercial danger of not moving as many key people as possible to a new business location in "group" moves demands generous and supportive policies. Its also crucial to recognise that many people being asked to go will be corporate relocation virgins (with no previous experience of moving with an employer). Often they're junior or middle ranking staff too and, unlike seasoned career path movers, need more persuasion and support in agreeing to move home.

BUT WHAT SHOULD YOU INCLUDE?
Given the horses for courses analogy here's a brief menu to consider offering corporate thoroughbreds to persuade them to hit the finishing tape of the relocation course with enthusiasm.

• Eligibility: Set out clearly who qualifies for what.
  Selling the "old" home and buying the new: Lots to consider here. Including:-
• Covering the reasonable costs of agents, solicitors, surveyors and valuers fees
• Offering a guaranteed purchase scheme through a third party supplier
• Under these arrangements the employee can move quickly as a "cash" buyer
• But the employer covers the interest on the third party "loan", any shortfall below the guaranteed price and the ongoing property maintenance costs until the home is sold
• Mortgage Costs:
• Reimbursing legitimate mortgage redemption penalties
• Reimbursing mortgage indemnity policy costs on high percentage advances
• Negative Equity: Thankfully now unlikely but, if relevant;
• Finding a lender to fund the new mortgage (including the existing debt)
• House Price Disparity: Often a minefield – but a showstopper if not offered
• Covering the legitimate extra costs of buying a comparable home in a more expensive area
• Usually based on an independent "like-for-like" valuation
• The employer covers the interest on the higher mortgage for an agreed period – usually up to seven years
• Payments usually reduce in level steps over the agreed period
• Rented property : A variety of considerations here. They include:-;
• Covering the costs of vacating a rented property in the "old" location and/or the acquisition of another rented property in the new area
• Costs of renting in the new area temporarily while waiting to buy
• Renting out the old home pending a move back in the future
• House Hunting:
• Covering the costs of "X" visits to the new area, including overnight accommodation, food, travel costs etc
• Education Assistance: Over 70% of relocation "refusenicks" decide not to move because of concerns about disrupting their children's education. A few pennies spent on professional advice and support will be well spent
• Commuting pending a sale or purchase:
• These include;
• Reimbursing agreed temporary daily/weekly travel between locations pending a sale/purchase
• Removals and Storage:
• Reimbursing the reasonable costs of furniture removal and storage
• A Disturbance Allowance: Agreeing a sum to cover the miscellaneous costs involved in moving to a new home (e.g. curtains, carpets etc) – usually a percentage of salary
• "Claw Back" Clauses: What if an employee accepts a better offer from another employer and resigns shortly after moving? Should the policy contain penalties? If so, what should they cover?
• Taxation (UK to UK): For moves within the UK employers may currently reimburse their employees up to £8,000 (tax free) for the reasonable costs they incur in relocating. Over that the employee must pay tax and the employer must declare it to the Inland Revenue. So the employer must decide whether to:-
• Cap support at £8,000 (but the employee may then be out of pocket)
• Reimburse over £8,000 (but the employee pays tax)
• Reimburse over £8,000 and cover the employee's tax liability
• But this triggers "grossing up" whereby the sums an employer pays to an employee for his/her tax liability become, in themselves, taxable – which can be an expensive exercise
• Taxation (non UK to UK): For moves into or out of the UK, or moves not involving the UK at all, the appropriate non UK tax regimes will apply. Employers should therefore consult their advisers to find how much can and cannot be reimbursed to employees under the tax regimes that apply

Summary
Of necessity, this brief review only skims the surface of the many and diverse issues a relocation policy should address to provide practical and cost effective support to relocating employees.

However, there are four golden guidelines to bear in mind when deciding how best to structure a policy. These are:

• Ensure it specifically addresses the needs of the staff who need to move (remember horses for courses)
• Keep it as simple and as equitable as possible
• Bear in mind the costs and uncertainties of recruiting replacements if people don't accept the move – it might be more expensive than offering effective relocation incentives

Stuart Mitchell
Senior Partner
Business Moves Advisory Centre

Published in the Chartered Institute of Personnel Development Year Book