Hot Topics in Corporate Relocation: Insights from Worldwide ERC
Posted by: Shelley Northrop, Vice President, Marketing
Worldwide ERC’s® recent forum in Washington D.C. was as dynamic as ever; great sessions, super location, and lots of time to network and catch up with old friends and colleagues. It was also a great place to learn what was on the minds of relocation managers and industry experts. Here are three of the hottest topics we heard being discussed:
The Rise of Short-Term Assignments, and the Challenges Companies Face
While more typically thought of in the context of international relocations, short-term assignments are also becoming much more common for U.S. domestic moves, and for many of the same reasons. Short-term assignments offer flexibility to accommodate family needs and employee demands, and provide cost benefits that can come from avoiding a permanent move, but they are not without challenges. Tax compliance, immigration compliance (for cross-border moves), and managing exceptions are all issues that, if not handled properly, can erode any costs savings companies set out to achieve. If your use of short-term assignments is on the rise, here are some key tips:
- Make sure you have a clear relocation policy in place. Our consulting practice has developed white papers that provide more details on what elements should be considered for both cross-border short-term assignments and U.S. domestic short term assignments.
- Understand the tax treatment of temporary assignment costs. Length of assignment, “tax home”, and tax laws need to be understood for tax compliance.
- Be consistent. If your policy and program are not clearly defined, you may face exception requests, which can quickly erode the cost savings you set out to achieve.
Compliance Issues and Their Impact on Relocation
Compliance issues pose some of the highest risks, and represent an area of great exposure, for organizations worldwide, and was top of mind for many of the WERC panelists. Companies are well aware of the issue, as illustrated in Cartus’ recent Global Mobility Policy & Practices survey, where 79% of respondents said that the focus on compliance was continuing to increase at their companies. There are a variety of reasons for this, including expanding assignment locations, many with complex regulations; a rise in temporary assignments that can pose risks in terms of tracking and reporting; and more data available to help tax and regulatory authorities identify potential violations.
The Duty of Care section in our 2016 survey provides a number of best practices that companies are considering to address compliance, as well as to keep their employees safe and informed. For instance, 72% of survey respondents are looking at earlier involvement of tax and immigration providers.
Regulations are also changing quickly, especially in another area of compliance—data security and protection—which is receiving high attention recently due to the issues surrounding the demise of Safe Harbor, and the introduction of the new Privacy Shield regulations. Cartus was among the first companies to sign up for the new regulations and was recently quoted in a Bloomberg BNA article on why early signup is beneficial.
Flexibility of Relocation Programs
One conference panelist reflected that, if he didn’t demonstrate more flexible policies and approaches, he would quickly be replaced by someone who could. It is clear that employees, and not just millennials, are looking for flexibility in their relocation benefits and more companies are seeking the potential cost savings that a good flexible policy can offer. But without a solid policy structure, companies can end up simply granting exceptions—an approach generally acknowledged to drive costs up, not down. So, which policy approaches are the best, and how do you develop them?
Core-flex policies, and related approaches such as tiering, are being pursued by a growing number of companies. But a core-flex policy can be difficult to structure, challenging to administer, and requires an understanding of a number of key elements (see our Consulting white paper on Flexible Policy Approaches for more info). Company and assignment priorities, location, and employee characteristics—for instance, the desire to target “high potentials” and “new hires” differently (one panelist called this “differentiated investment”) can all factor into the ultimate decision as to which elements to make “core” and which to leave “flexible.” When done right, though, the approach can definitely help companies meet two needs: target benefits to the right individual to help both the employee and relocation succeed, and save dollars by not forcing everyone into a potentially unnecessarily expensive “one size fits all” scenario.
Another common scenario that demands flexibility is the split-family situation, where up-front discussion of the issues and potential solutions can help keep costs down and productivity up. (See our Mobility Insight for more information on the factors that cause split family situations and how to support them).
For more insights from your industry peers on their approaches to today’s relocation challenges, request a copy of our 2016 Global Mobility Policy & Practices report or take a look at the Survey Highlights. Also, if you didn’t get a chance to attend our Worldwide ERC® webinar on September 21, I urge you to listen to a playback of the webinar where we shared information on key trends and the specific issues our clients are facing.