June 5, 2012
This series of relocation policy recommendations is for corporations with Canadian domestic relocations. All Points Relocation feels strongly that interest rates are bound to rise in the not so distant future, and real estate markets have a good likelihood of softening. So, NOW is the time to look at relocation cost reduction strategies, before other costs rise.
The last recommendation from 5 Things that Canadian Corporations should do to their policies NOW? was to reduce/remove mortgage discharge penalty coverage.
Strange but True
This week’s recommendation is to look at your policy’s temporary accommodation benefit. We forget that the main cost of temporary accommodation is a mortgage. As interest rates rise, so will the costs of temporary accommodation. Yes, we know that Canadian Temporary Accommodation costs are at their current rates largely due to supply and demand (not enough of the first and too much of the last), not because of interest rates, which are at historic lows. That will not change but we do see a time in the near future, when Canadian temporary accommodation rates will rise as a result of interest rate increases by the Bank of Canada.
If a company has 60 days of temporary accommodation in its policy; we recommend an immediate change to 30 days. This is an instant savings to the company. In buoyant real estate markets, there is less reason for the need for 60 days of temporary accommodation. The main reason for longer periods of temporary accommodations, during buoyant real estate markets, is to accommodate (pun intended) an employee that is required at the job very quickly, and the family is not ready to move.
Is it a Necessity or a Luxury?
In fact, an increase to temporary accommodation periods in Canadian domestic relocation policies is one of the top benefits to see an increase, when requested. This is because companies are empathetic to the plight of an employee who, on the one hand, has been asked to start a job quickly, and on the other hand, wants his/her children to complete the school year.
Companies can still be empathetic to this need on an ad hoc basis, but to make 60 days of temporary accommodation a carte blanche entitlement across the board (to the single 30-something as well as the family with school aged children) is encouraging free living at the company’s expense, where it is not always necessary.
Other possible avenues include providing a monetary incentive to having an employee reducing temporary accommodation periods. Perhaps offer a bonus equivalent to 1/3 of the cost of each 30 day period.
Or, offering temporary accommodation as part of a flexible policy benefit package, experience show temporary accommodation periods are reduced when they are put into a flexible policy benefit package.
The good news is that you have time to change your Canadian domestic relocation policy before interest rates rise.