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Should Low Mobility Corporations Tier their Relocation Policy?

Tiering Relocation Policies

This is a question I often get asked.

Common wisdom has suggested that what works for high mobility corporations does not necessarily work for low mobility corporations.  This is a truism for sure.  This adage rears its head for a lot of mobility factors: can we get by without having relocation assistance?  Do we have the skill sets to manage immigration inhouse? Without critical mass, how can we keep up with the workload that results from split pay models for global assignments?  In fact, I agree with this argument for many factors that differentiate low mobility corporations from high mobility corporations.  Low mobility corporations simply don’t tick the same way and have to consider their relocations differently than a company that relocates over 100 employees per year.  But that argument could be made for the difference between those that relocate fewer than 10 per year and those that relocate fewer than, say 35 per year.  As your company grows, hires more people and expands domestically and internationally, scaling how you perform relocations should always be considered.

However, back to the case at hand: should companies tier their relocation policies, even if they do have between 4 and 35 relocations per year?  One should always consider where the company is heading, when making a policy choice. 

There are pros and cons to each of tiered or non-tiered approaches and determining the right type of policy is largely dependent on your company’s goals and growth plans.  One should not only consider the current number of relocations that happen, but forecasted relocations in future years, new office locations, and the demographics of the mobile population. Of course, cost considerations also play a role, but here are the general pros and cons.

A little tip to the reader:  you can get through this article and take in its main points fairly quickly, but I have also included some more arcane details/opinions on the issue of tiering relocation policies.  You will know these because they are truly IF YOU ARE INTERESTED topics, and they will be introduced with the acronym “IYI” and will be italicized.  If you are not interested in getting into the nitty gritty, then you can skip by any IYI’s and I won’t be offended and you will still have what you need to make a decision about your future policy direction.

Pros of the single tier relocation package approach:

Ease of administration.  That really is the biggest reason for maintaining a single-tier approach.  Providing the same relocation benefits to all transferees and new hires makes it easier for your HR team to explain the policy, answer questions, and maintain the policy — ultimately reducing the time spent on relocations.

IYI:  Oh yeah – and with regards to global assignments, this administration is even more of a consideration. While a single domestic relocation policy is easier than a tiered domestic relocation policy, when it comes to global assignments, the administrative argument IS SUPER-SIZED, but this can be exaggerated (Personal Opinion IYI inside an IYI alert: and this exaggeration is perpetuated by large relocation companies, who have a keen interest in keeping its own administration costs low on  small volume relocation accounts).  IYI over.

IYI: a note about equity:  If equity is important to the company, then a single tiered relocation approach meets this goal.  However, in my experience, given the cost of relocation (tens of thousands), supporting all relocating employees with the same benefit level regardless of strategic importance  happens less and less. Most companies realize that there are thousands of dollars on the table, and equity becomes less important an issue than cost containment when comparing an employee that is career-pathing to a senior executive.  IYI over.

Cons of single tier relocation packages:

The real question a low mobility corporation needs to ask is, could we have variability across our mobile population? If you do and you have a one-size-fits-all policy, you are going to be dealing with exception requests from executives and wind up with hiring managers sabotaging the benefits of lower level employees receiving expensive benefits. In short, you can very easily reduce the value of the policy and HR’s credibility, if the policy really does not fit all, and if hiring managers are making side-deals to reduce benefits.  All Points has seen too many HR departments lose control of relocation, because of their strict adherence to a one-size-fits-all approach.

And HR wants to be a proactive part of the relocation solution. For instance, while a single policy may be attractive to lower level employees, HR should not bypass an opportunity to save on costs or allocate those extra funds to a population like your executives.

Multi-Tiered Relocation Policies

Pros of this approach:

Tiered policies allow you to specify the benefits that best meet the needs of different employee groups. These groups may be based on position (particularly when it comes to global assignments – have I mentioned that before?); does this relocation have a career-pathing objective for an employee population (lower level employees?) versus a critical placement for another population (certain skill sets, executives?).  Even locations can make a difference (a crucial location that the company is opening?) or whether an employee is a new recruit or not.

IYI: on the argument that new recruits should automatically get different policies.

Be it resolved that all recruits shall get a different policy than a current employee.  This cannot be the categoric answer! Not all new recruits are built the same. If we can all remember before COVID, some of your most important talent is not even in your company yet.  They are out there for your talent acquisition partner to find.  If a Senior IT recruit is just as important as a current Senior IT employee, then they should not necessarily have different relocation policies, or else you may not get that recruit at all.  The same goes for any recruit with refined skill sets.  Separate policies for recruits were a product of different times, and they still can play a role, but companies need to consider their talent needs before they automatically consider separate recruit relocation policies. IYI over.

IYI: Another aside: should you tier policies based on homeowners versus renters?  

After all they have different needs; but nooooooooo!  Don’t do it. You can write different benefits for renters and homeowners into the same policy.  The suggestion that some relocation providers (PERSONAL IYI: big relocation companies) make to create multiple policies around homeownership is needless administrative bulk, when an intelligent employee can easily skip past benefits that don’t apply to them, read those that do apply to them, and understand when some aspects of the policy differ (Miscellaneous Allowance might be eligible to both, but at different values).  Don’t do it, or you will find yourself updating a needless excess of policies every time a new change comes out.  IYI over.

Cons of this approach:

We have already established that administration is greater.

How well established are your salary tiers?  If they are fuzzy, then tiered policies based on position, can create questions on the part of hiring managers and relocating employees. They will also be that much more difficult to create and maintain. If you can make the eligibility requirements clear, then this obstacle is removed. 

How many to create?

What makes sense for your talent mobility will likely bring you to the conclusion that 2-3 tiers is probably right for you.  It could also be more, but if you build several tiers it can become overwhelming for Human Resources and hiring managers. Determine what the most important tiers are for your company and prioritize those first. You may learn about different needs down the road, and you can address those at that time.

IYI re: Global assignments (it really has been building to this hasn’t it?) Why does Mike think the question of tiering global assignments are a trickier question than tiering domestic relocation polices?

Because two of the main pros and cons are thaaaaaat much BIGGER.  If you tier a domestic relocation policy, you could save $10,000s on a given relocation for a lower tier.  Your administration increased a little, but not a lot, especially with a relocation management company to assist.  Both costs (actual cost and administrative cost) are so much greater with a global assignment. If everyone relocating receives a home-based balance sheet approach with equalization, the actual costs would be significantly higher than if some assignees received trimmed down benefits (such as Local Plus compensation) and only senior managers receive the home-based balance sheet approach.  But the administrative cost of running different policies over a small critical mass of employees is also very high.  You have different locations that have to administer different compensation practices and tax practices.  It is a lot.  Our recommendation: If you have a varied population, then tiering still could be for you even if you don’t have the critical mass to get that expertise.  That is why you hire tax professionals, professionals to guide you on payroll and relocation professionals to guide you on the rest.  IYI over.

Conclusion:

So, are low mobility and high mobility corporations built so differently that the former has to resolve itself to a single-tier policy?  Not at all. If your population is varied and you need to proactively consider cost effectiveness of your relocation policies, then tiers are likely for you.  Just realize that it will increase administration, but there is help out there for you.

IYI – All Points can help with all of this! IYI over.

Posted on July 22, 2020 in Newsletter

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