Oil Price Slump: Does your company have Western Canadian Relocations? Here are the Top 4 Reasons you should Review Your Relocation Policy Now.

December 3, 2014:

By: Donna Lamb
Western Region Manager

Recent slump in oil prices have many people watching provincial economies like Alberta and Saskatchewan with concern. It is not known how long low oil prices will last and opinions vary. In a client note in the Huffington Post this past Friday, Doug Porter, BMO Chief Economist, said that current prices are below fundamental values and that these low prices won’t be sustained for long. Porter suggested that prices might remain at low levels for a few quarters. Whether this oil price slump is short-lived or not, All Points Relocation believes that if corporations with predominately western relocations have not recently reviewed and rewritten their relocation policies, then now is the time to do it. Working on your policies when there is possible softness ahead, combined with an inevitable rebound, gives you an excellent opportunity to analyse what your policy is doing well and where there is an opportunity for positive change.

There are five main reasons to make changes now:

  • The sale of an employee’s home: With the exception of some smaller Alberta or Saskatchewan towns, in general, relocation policies have ridden the coat-tails of relatively easy real estate markets where homes sell quickly. Companies should look at their home sale benefits right away. As at the time of writing, lower oil prices have not translated into softness in the hotter western markets, but it would not be surprising if softness did start to show up this winter in some markets or at certain price levels. It is not likely to be evenly distributed: there are always winners and losers. Regardless, the chance of Human Resources being directed to cut too radically during soft periods is strong, so being proactive is a good idea. In addition, many companies have transferees and assignees relocating between very different real estate markets with longer and shorter days on market. Now is the right time to find out if the policy can be changed to reflect a balance between fast selling markets and longer selling markets. Ideas such as delayed guarantee strategies, sale incentives and extended temporary accommodation periods based on market fundamentals, should be considered before any weakness sets in. For those companies that do not have Guaranteed Home Sale in its policy, they should have a strategy for those real estate markets where a transferee may take over 120 days to sell his/her home.
  • Cross-border, Eastern Canadian or intra-US relocations: Even though western cities and towns might dominate your current employee mobility pattern, you may also have cross-border, Eastern Canadian or intra-US relocations that are not necessarily experiencing any real estate weaknesses, and are unlikely to in the near future. It is a good idea for Human Resources to review the corporate relocation policy to see what can be done to balance all types of real estate markets.
  • Cost constraint: If you were too busy to employ cost constraint mechanisms in the last few years, or if there was no desire or need, we recommend that you consider it right now. In order to keep the most important relocation benefits in a policy, it is important to consider other benefits which can be trimmed. When relocation costs start to rise (often because of longer days on market, increased temporary accommodation periods and longer periods in inventory (if the policy has Guaranteed Home Sale benefits), cost reduction pressure on Human Resources can be very overwhelming and important benefits can get removed. Remember: oil prices will increase again and you want to have the right policy at that time. Make the smart cuts now with a scalpel rather than with a hatchet when the pressure is really on. For those relocation policies that might already be less comprehensive in coverage than others, now is the time to look at getting the most bang for your buck from the policy and this actually may mean cuts in some areas in order to shore up other benefits.
  • Miscellaneous allowances: The increase in salaries and wages in the last number of years in many of the western markets has been significant. Doug Porter’s client note also indicates that there has been and will likely continue to be an easing of the wage pressure in western provinces. However, this easing may not be at all levels. Salaries at the higher levels of the company tend to be sticky and are less likely to come down in tandem with those of lower salary bands. If your relocation policy still ties Miscellaneous Allowance to salaries (i.e. one month’s salary or a percentage of salary), now is the time to have a look at these allowances and determine if this benefit should be adjusted to something more equitable among all levels of employees.
  • Tiered Policies: Tiering is not just about cost constraint at lower salary bands of the company. It is about aligning career paths, crucial skill sets and other variables to relocation benefits and the cost of relocation. The first generation of tiered policies focussed on salary bands. Tiering has since evolved into other areas such as reflecting the importance of crucial skill sets, challenging locations, etc. Like the note above about cost constraint, it is important to remember that oil prices will return to higher levels, and your policy’s tiers should be positioned to be the winner in that environment, not just when cost reduction goals are calling the shots.

All Points is one of the first relocation management companies to acknowledge that relocation benefit changes should be thoughtfully considered by Human Resources, and should be based on employee and internal feedback. Relocation policy changes should even be made in concert with other important benefit or cultural shifts. However, we also believe that there are times for speed and this may be one such time. We sometimes forget that fast policy changes are possible, as long as they are still thoughtful and backed up with solid rationale.

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