Employee Relocation

International Relocation: Cross Cultural Awareness

Friday, August 15, 2008 by SIRVA Relopinion

Here are a few things to remember when instituting a cross-cultural awareness program into your corporate relocation program. For a full account of information regarding this service visit our resource library.

Don't forget the family
Just as spouses should be involved in the assignment selection process, they should be involved in training for global assignments. Some experts estimate that nearly 80 percent of all failed global (international) assignments can be linked to the spouse's inability to adjust to the new environment. Each member of the family faces special issues in the expatriate environment that should be addressed.

Other cultural resources
Organizations should consider utilizing their returning expatriates for help with cultural awareness initiatives. Employees who have already completed similar assignments can act as subject matter experts (SMEs) to help new expatriates learn business customs and how to navigate foreign business circles. SMEs can also prove invaluable in helping new expatriates learn the hierarchy in companies with which they will be dealing. It's important to note, however, that companies should not rely solely on employees to provide guidance to new expatriates. Relying exclusively on veteran expatriates can be problematic if the guidance reinforces cultural stereotypes or results in the new expatriate adopting the predecessor's bad habits. While other international assignees have a role to play in helping newcomers adjust, they should not replace professional consultants/trainers.

Alternative views
Although cross-cultural awareness is important, some might argue that its importance is just a hyped up myth. In actuality, on average only 30 percent of American managers sent on international assignment lasting from one to five years receive any cross-cultural training. It can be argued that managing is simply "managing," so where it is done is irrelevant. Another point of view is that any type of short-term cultural training would be ineffective because people can't learn to work and live in a foreign culture after only a few days (or even a few weeks) of training. Others argue that an understanding of a country's culture is something people assimilate over many years based on personal experiences in that specific culture. Others will say that corporate culture takes precedence over country culture. For example, a local employee working for a "bullish" American firm in Thailand might show traits of aggressiveness and conflict, which are not traits normally associated with the Thai culture. These traits, however, may be common in the corporate company culture of the employee's organization, causing the Thai employee to act outside his or her normal cultural dimensions.

Nevertheless, in order to be successful, an expatriate must be comfortable with his or her staff, colleagues, clients and business atmosphere--regardless of location. Cultural specialists also agree that to be successful in dealing with people from other cultures, expatriates need knowledge about the cultural differences (and the similarities) among work locations. The global employee of today's business world can only benefit from gaining cultural awareness, either through direct training or personal experience, which would lead to greater professional effectiveness and company performance. Read more

If you would like more information about cross-cultural education and how it can be added to your international relocation package/program, please contact our corporate relocation consulting team.

Corporate Relocation Consulting: Group Moves

Thursday, August 14, 2008 by SIRVA Relopinion

What is a group move?
The definition of a group move is when 10 or more employees are being transferred from the same area and to the same area, at the same time, for the same business reason. Group moves are critical to the performance of the company and are of high strategic value in meeting the objectives of the business plan. If the group move is being driven by either a merger or an acquisition, the pressures only become greater as the already charged environment that a group move can create is compounded with the added factors of merging two different cultures. This reality, combined with the inherent risks that a merger or acquisition almost always adds, results in higher stakes and more pressure on corporate relocation program managers to make sure that the right group move process be in place.

Why do group moves fail?
In a series of internal reviews with subject matter experts who have had extensive experience in assisting our clients in planning and managing a wide range of corporate group moves, a number of reasons repeatedly rose to the top as to why a group move may fail:

Announcing the move without adequate preparation or involvement
Not having clearly defined objectives
Lack of time and/or poor planning
Losing control of the relocating transferees
Not understanding the unique needs and dynamics of the group
Not bringing outside resources in early enough
Political pressure to use non-qualified suppliers
Lack of senior management endorsement and involvement

How do you avoid the pitfalls? This topic will be covered in our next post. For more information about this subject or to view the complete white paper, visit our resource library.

Relocation Policy Tips: How to Effectively Plan for a Group Move

Wednesday, August 13, 2008 by SIRVA Relopinion

Imagine that you are just leaving a meeting where you were told that your employer has decided to relocate a group of people from one location to another. The CEO told you that you are expected to manage the move. He/she stresses to you that the success of this group move is critical to the future of the company and everyone is counting on you to, "make it happen." Any number of business scenarios could lead to this decision.

Even though this may be your first experience in managing a group move, you may have heard stories about the stress group moves can bring to an organization and the people who are working on the relocation. You may recall hearing how a group move does not always turn out as planned, and that a lot can change between the time the plan is initiated and the last employee is in place at the new location.

Whatever you do, you need to be prepared for the responsibility of:

Business disruption
Talent loss
Low employee morale
Cost overruns
Having your plan for the move challenged by others

You may not be able to eliminate all of the issues, but if you can bring an effective plan to the project and assemble the right team to execute the plan, the odds that the move will be a success and that you will survive the group move will be greatly improved. The intent of our "How to Effectively Plan for a Group Move" white paper is to provide you with a proven approach to effective group move management.

View white paper

If you would like more information about corporate relocation services including group move management consulting, contact us.

Relocating employees face challenges in today’s market, including down payment requirements

Monday, August 11, 2008 by Paul Klemme

Let’s set the scene, Mr. Smith a transferee with XYZ Corporation finally sells his house after 180 days on the market. His net proceeds from the sale of his home, after paying off the mortgage, is $2,000—in essence, break-even.

With the credit crunch tightening product guidelines, the down payment requirements have made a significant impact on qualifying for a loan. The no and zero down payment products have been eliminated; consumers that previously qualified for 5% down now qualify for 10% down.

Mr. Smith has a small amount of savings he could use for a down payment, not nearly the 10% down he was approved for at the beginning of his relocation.

As credit tightening continued, products like second mortgages and Home Equity Lines of Credit have been significantly reduced and in many cases eliminated from purchase transactions. These products would typically assist the buyer by providing combination loans (e.g. 80/10/10) piggybacked with a first lien loan as a way to decrease payments, avoid mortgage insurance and provide a lower Loan to Value on the first loan.

Private Mortgage Insurance is still a viable way to provide a less than 20% down payment loan, but mortgage insurance guidelines have also changed and now require higher credit scores and higher premiums. With the combination of falling home sale values decreasing the amount of money available for a down payment, higher down payment requirements, time constraints and more costly mortgage insurance—many transferees are left confused, frustrated and experiencing less satisfaction during the relocation.

Mr. Smith’s situation has a happy ending. He qualified for a 3% down payment with a FHA loan. The monthly payment and down payment requirements fit his budget and he was able to close on his new home on time.

His co-worker Mr. Jones completed a short sale on his home sale and faces other challenges we will discuss next time.

If you would like more information about FHA loans, you can call one of our loan counselors at 800.531.3837.

Corporate Relocation Program Tips: The Importance of Cross-Cultural Training

Tuesday, August 5, 2008 by SIRVA Relopinion

The five cultural dimensions (individualism vs. collectivism, power distance, uncertainty avoidance, masculinity vs. femininity, and time orientation) provides valuable insights into the cultural practices of different countries. This is the type of information that global relocation managers need in order to better understand cultural similarities and differences while on an international assignment. The ability to effectively communicate with people from all over the world is also key to a global manager's success. An expatriate will have to interact with all types of people in the assignment location, i.e. employees, customers, shareholders, regulators and vendors. Effective cross-cultural communication requires finding integrated solutions and compromises that allow decisions to be implemented by members of diverse cultures.

Cross-cultural training will provide relocating employees with a starting point for the preparation of working overseas or long distances, addressing cross-cultural communication and cross-cultural conflict resolution. For example, by knowing whether a society is individualistic or collective, an global manager would benefit by knowing what to do in cases of decision making, offering incentives or even scheduling meetings.

Knowing the cultural dimensions of the society he or she is working in, the expatriate will have a point of reference when investigating what to expect with respect to all management practices.

Depending on assignee needs, there are a variety of cross-cultural training programs available. Prices typically start at $1,500 to $3,500 for one to two day programs, and increase as the duration and complexity of the services increase. These costs are miniscule, however, when compared to the overall cost of a global relocation assignment, and could save your organization from absorbing the financial burden of a failed assignment due to the assignee's inability to adjust to his or her new location. Read more.

Managing Corporate Relocation Expenses

Monday, July 28, 2008 by SIRVA Relopinion

Accurate and timely accounting of relocation expenses has a far-reaching impact on the overall performance and success of a corporate relocation program, to both the company and the individual transferee. With relocation costs per employee homeowner topping $70,000 in recent years (according to averages reported by Worldwide ERC), effective management of expenses can easily exceed several million dollars annually for a company. Because all relocation services funnel through the expense management function, to be appropriately recorded and paid, this function is a significant responsibility for those managing the relocation program. As a result, corporate relocation managers and/or payroll managers should consider several key issues when evaluating the effectiveness of the expense management process in their companies...read more.

SIRVA Relocation Consulting: Mortgage Subsidy Programs

Wednesday, July 23, 2008 by SIRVA Relopinion

A solution for attracting employees and experienced new hires to higher housing-cost areas

Companies have increasingly been faced with trying to solve the situation in which employees from low cost of living areas are relocated into higher-cost areas. This issue has become more difficult to handle since, from the mid-to-late 1990s, the demand for qualified employees has increasingly exceed the supply of these individuals. Previously, employees were willing to live with higher costs in exchange for their new position opportunities. Over time, however, employee expectations have shifted. Now, more than ever, employees believe that if their company relocates them into a higher-cost area, then the company should provide them with some financial relief.

This issue has been exacerbated by the increasing disparity in housing costs by geographic region. Runzheimer housing data measures the average cost of a typical transferee home (e.g. 2,400 square feet on an average size lot with four bedrooms and two and a half baths). Most recent data shows that the same home in similar neighborhoods cost $270,800 in Houston, $426,500 in Chicago and more than $906,000 in the San Francisco Bay Area.

This noise surrounding housing cost differentials has simply become too loud for companies to ignore.

What actions have companies taken?

Adjust Compensation (view details)
Cost of Living Allowances (view details)
Lump Sum Payments (view details)
Mortgage Subsidies (view details)

For more information around why mortgage subsidy programs are a popular choice, visit our resource library.

Introduction to Home Sale Tax Issues

Monday, July 21, 2008 by hank roth

Employers who reimburse brokers’ commissions and closing costs on the sale of their employees’ homes, as part of a relocation, create taxable income for those employees. Since the Tax Reform Act of 1993, no deductions for such relocation expenses are available to employees, and, therefore, all such payments create fully taxable income. As an example, the average sales commission and closing costs on a $300,000 home are approximately $24,000 or about 8% of the home’s value. Reimbursing these fees creates a tax liability for the transferee of approximately $8,400 in state, local and federal taxes. For transferees in high-income brackets, this tax liability can run as high as $11,400 (slightly under 50% of the estimated closing costs).

Many employers, attempting to relieve the tax liability for their employees, reimburse their employees for these taxes. In the relocation industry, this is commonly referred to as “gross up.” On a $8,400 tax liability, however, the initial reimbursement creates $3,300 in additional taxes for the transferee. Most companies also gross up this amount. If $8,400 is fully grossed up, so that the employee has no net-tax liability, total tax reimbursements come to an average of $16,080 (about 67% of the broker’s commissions and closing costs reimbursed) and can reach over $21,230 (about 88.5% of the reimbursement) for employees in the highest tax bracket.

To eliminate the creation of taxable income these reimbursements create, certain employers have used home purchase programs – also called “buyouts” – designed to utilize the tax effect of the 1972 IRS Revenue Ruling 72-339. In November of 2005, the IRS finally issued an updated and very detailed new Revenue Ruling (Rev Rul 2005-74) which reaffirmed that home sale programs if constructed in alignment with the examples in the Revenue Ruling would still obtain the tax benefits of Rev. Ruling 72-339. Unfortunately, according to the Employee Relocation Counsel (ERC), historically the cost of buyout programs average almost 17% of the acquisition price of the home. As a result, many corporations have never employed home purchase programs, while others have abandoned buyouts and are looking for other options…read more.

To read the rest of the conversation, visit our resource library.

Relocation Policy Tip: Short Distance Group Moves

Wednesday, July 16, 2008 by SIRVA Relopinion

Group moves occur for a variety of reasons and in most cases can be treated (relative to the IRS rules) exactly as other non-group moves. A group move, however, may not meet the IRS 50-mile test. In that case, consideration should be given to providing a short distance group move policy. The IRS 50-mile test generally requires that in order for certain costs associated with a relocation to be excludable from income, the distance between an employee's old residence and the new work location must be 50 miles greater than the distance between the employee's old residence and the old work location.

It is not uncommon for companies to change office locations, or have multiple facilities in the same geographic area, where the distance between an employee's old and new work location may or may not meet the IRS 50-mile test. For example, in larger cities, where a move may be from one side of a metropolitan area to the other, it is likely that the IRS test will not be met. These "short distance" office relocations, however, can significantly impact the commuting patterns of employees. It is highly unlikely that employees impacted by an office move, where their commute could be increase by up to 49 miles, will simply accept an "IRS explanation" as to why they are not entitled to relocation benefits. Employees will often make their feelings known and ask management to consider providing some or all of the relocation benefits provided in a standard regular or "long distance" employee transfer.

The relative distance that a short distance group move involves, necessitates a closer look at the specific features provided in a company's relocation policy to see if benefits should be offered for a short distance group move. Properly structured, short distance group move programs reduce absenteeism, attrition and administrative time, and are often far less costly than a normal relocation program.

For more information about short distance relocation packages, visit our relocation resource library and view our white paper.

When should I buy?

Thursday, July 10, 2008 by Paul Klemme

The question we left off with is when should I buy?

The answer, Now! I know that is the simple, easy answer, but it’s true. We have talked about rates continuing to be historically low and how there are plenty of products available in the mortgage market. So what is holding you back? Market timing? Are you trying to time the bottom of the market? If so, stop. Like guessing stocks, the bottom of the real estate market will be reported months after it happens.

There have been major price adjustments that have taken place in most markets. Are we at the bottom, maybe? For many, this is close enough to the bottom and the opportunity to buy smart is now. There are great deals out there. Foreclosures and forced sales have provided wonderful price discounts and incentives in all home value ranges. Incentives include, seller paid closing costs, reduced rate programs, airline miles, paid principal and interest payments, high definition television sets, builder upgrades and even automobiles.

The fact is housing has become more affordable and bargain prices and incentives have given many consumers an opportunity to be smart about buying. I think the time is now. What do you think?

Relocating employees face challenges other buyers don’t. We will explore those issues next.

Relocation Tips: Defining Roles and Responsibilities

Wednesday, July 9, 2008 by SIRVA Relopinion

Relocating is often a stressful and confusing event in anyone’s life and career, especially if the transferee is going through his/her first relocation. Lack of role clarity (who does what) and inadequate information throughout the process will not only amplify a transferee’s stress, but will also directly impact the outcome of the corporate relocation. There are a number of measures that can be taken to make the relocation process easier. One key action is to include a section in the relocation policy that defines specific roles and responsibilities of all transferee resources.

When defining roles and responsibilities during the relocation process, there are a number of key points to remember. We are going to outline a few of them here, but encourage you to view the complete article in our Resource Library.

Internal and external resources
Include internal and external resources when defining roles. In many cases, the transferee is starting a new position with the organization and may not immediately understand where to go for support. Identifying internal resources early in the relocation process will enable the transferee to assimilate into the new organization quicker, he/she will feel more comfortable, and will also feel more in control of the relocation.

Setting transferee expectations
Clearly lay out the company’s expectations for the transferee during the relocation. This will help prevent the employee from straying outside the policy and limit the need for exceptions. Decreasing exceptions goes a long way toward alleviating the dissatisfaction that can result if a transferee finds out they were treated differently than others at their same salary or grade level. More and more companies have placed wording in their policies that clearly outlines that exceptions are not expected, and if requested, will be escalated to a senior-level executive for approval. It should be noted in policy that the transferee is a visible representation of your company and needs to act and behave in accordance with your company’s code of conduct.

View more points to keep in mind when defining roles and responsibilities for corporate relocations.

International Relocation: Examining Expatriate Localization Compensation Issues

Tuesday, July 8, 2008 by SIRVA Relopinion

When localizing an expatriate, there are several compensation items that need to be considered. Here is a checklist to use a guideline:

1. Base salary. Should the employee be "re-priced" to the local market pay structure? Should a premium be offered for international experience? Many organizations move the employee to local salary levels. If there is an extreme difference in salary levels (either lower or higher), however, a phased-in approach is often carried out. On the other hand, oftentimes organizations justify paying an expatriate on a higher pay structure because of his/her international experience and business relationships with the home office.

2. Retirement benefits. Because retirement plans, social security and pensions do not cross national boundaries, this is often the most difficult item to transition. Often employees have expectations to remain on their home country retirement program, but unfortunately there is no typical solution to bridge the gap between country plans. Some basic alternatives include retaining the employee in a tax-qualified home country plan, simply transferring to the local plan or using an umbrella-funded plan.

3. Income taxes. Normally, the expatriate will simply transfer to the local tax system. This is not a problem for most of the world. American workers, however, are put in a difficult situation because they are taxed on a worldwide basis. Many organizations will continue the "tax equalization" process on an as-needed basis to prevent double taxation on American expatriates. Employees of other nationalities do not require such assistance.

4. Housing. It is recommended that organizations remain flexible regarding host country housing because many factors come into play when deciding how to handle housing for the expatriate. In many locations throughout the world, expatriate housing is vastly different than local standards and expectations. In some cases, it may be unreasonable to expect an expatriate to move into a local neighborhood or local style housing, e.g. Mumbai, Beijing, Jakarta, etc. Therefore, if the expatriate is moved to the local salary structure, a housing allowance may be needed to subsidize continued living in expatriate style housing. Other issues that arise with housing tax issues, family matters, property ownership laws, home search assistance and moving costs.

5. G&S differential/assignment incentives. In locations where assignees receive a G&S differential, the common practice is to immediately stop the allowance. Other options include a phase-out or lump-sum buyout, although it is rare for companies to continue to pay a G&S allowance beyond the effective localization date. Other assignment incentives such as mobility premiums, hardship allowances, etc. are also normally stopped upon conversion to local status.

6. Education for dependent children. After housing, this item is the most commonly subsidized cost after an expatriate is localized, especially if the local schools are inadequate based on international standards or if the host country language is an issue. To alleviate the problem, organizations should consider continuing education coverage, or pay a percentage of the education costs for one to two years.

7. Health care. Health care standards and costs vary greatly in different parts of the world and is a priority issue for most employees and their families. Normally, localizing employees will simply transfer into the local health care system, but concerns will arise if the health coverage in the new location is of a lower standard than in the home location. This will be a costly change for an employee coming into the United States, where typically the health care is more expensive. Because of their time spent in the host country, a localized employee will most likely be aware of the issues, and therefore be in a position to make appropriate decisions.

Finally, localization may subject the employee and the company to various employment laws and regulations that apply to employees hired by local companies. It is important to speak with a local employment counsel to understand the legal effects and ramifications of localization, including subjecting the company to stringent employment laws in some European countries.
Localizing expatriates can be a complicated process and is not as simple as transferring expatriates to a local compensation package. By having a strategic plan in place, companies can anticipate potential localization issues and make the process as efficient as possible.

Relocation Policy Checklist: Setting the Right Tone

Wednesday, July 2, 2008 by SIRVA Relopinion

The decision to relocate an employee or new hire is the result of a great deal of effort and evaluation by a company and then by the prospective transferee. Agreeing to relocate at the request of an organization is not always an easy decision for an individual and his/her family to make. When describing your company’s corporate relocation policy it is important to remember that no matter what the circumstances are, agreeing to relocate will begin a stressful and sometimes life-changing process for most transferees. When crafting the relocation policy it is advisable to look beyond just describing the level of benefits that will be provided. You should also consider if the policy will assist and support the transferee when it is examined at the start of the relocation.

When writing a relocation policy there is a checklist of things to keep in mind when setting the right tone:

Optimistic Empathy
Start your company’s relocation policy with a supportive and positive welcome or introduction. Recognize what your company is asking transferees to do and acknowledge what they may face during the relocation process. Let the transferee know that your company understands the experiences of other transferees that have preceded them. Point out that understanding and following the relocation policy will minimize the disruption to the lives of the employee and their families. Close the introduction with words of appreciation and thanks for accepting the relocation.

Rational Processes and Requirements
When describing a process or requirement in your company’s policy, include the reasons behind the wording. Letting the transferee know the “why” can often increase voluntary policy compliance and reduce the level of enforcement needed. While relocation is a complex process and there are a number of hard rules that need to be followed, the tone of the policy as being one of mutual benefit is critical. The key is to avoid setting a negative and controlling tone that may offend the reader and create a pessimistic view of the relocation process and even perhaps of your organization.

Clarity and Firmness
A policy needs to be both clear in what it says and firm in how it says it. A policy should not give the impression that the components are subject to personal interpretation and/or can be negotiated. Some policies even state up front that the company is ”…please to provided you with a quality relocation program and exceptions are not anticipated.” While the tone needs to be supportive, the policy must still clearly state what benefits will or will not be provided. If the company style/format guidelines permit, write the corporate relocation policy in the second person voice. Using the pronouns “you” and “your” adds a personal tone to the policy. It also assists the employee in understanding what processes and procedures he or she must follow.

SIRVA Advantage Caters to Companies Relocating 30 or Fewer Transferees Annually

Friday, June 27, 2008 by SIRVA Relopinion

There is no such thing as a small relocation, but some companies don't require the large-scale support needed by those relocating hundreds or even thousands of employees annually. For these companies, SIRVA Advantage might be the answer. SIRVA Advantage is a program developed specifically for companies that relocate fewer than 30 employees per year. Currently, 120 companies participate in the program.

Through the program, companies have access to a dedicated service delivery team with specialized experience in small-volume relocations. Users don't have to be experts in relocation because all the details are handled for them. SIRVA can get a relocation program up and running quickly, and because they manage every aspect of the program, companies don't have to worry about the details. Transferees receive the full benefits of having a corporate relocation provider manage their transfer without the large corporate relocation budget.

"Companies that relocate a small number of employees have different needs than those of their large-volume counterparts," said Tim Callahan, senior vice president of sales and marketing SIRVA, Inc. "These companies may not be as familiar with the process or the complexities involved in different domestic or international relocation scenarios because they simply don't relocate employees as often."

Using SIRVA Advantage, companies can choose their services á la carte, which offers them the flexibility to develop a cost-effective custom program to fit their needs. SIRVA Advantage provides companies with guidance and assistance on a range of relocation issues, including:

Domestic and international support
Fixed-fee or traditional home sale programs
Home marketing services
Home finding and new home purchase services
Home rental and temporary housing services
Mortgage services
Move management
Tax and legal services
Vendor contracts
Online relocation tracking and reporting

One-on-one attention and interactive tools
The Advantage process starts with a consultation between our client and SIRVA Advantage's Business Development Manager, Jane Yanosko, to coordinate services tailored for each transferee - with this program a corporate relocation policy is not needed, SIRVA's abbreviated contract serves as the purchase order for all services authorized by the client. Once services are determined and the transfer process is initiated, the client and the transferee receive dedicated support from relocation counselors and associates focused on serving clients with fewer than 30 relocations annually.

In addition, transferees have access to MoveOurHome.com, a Web portal designed to help them take an active part in their move. MoveOurHome.com has up-to-the-minute relocation information configured on a per-client basis. On the site, transferees can view company-specific policy information and transferee-specific relocation program information.

"Transferees can submit, view and check the status of expense reports, communicate with their relocation counselor, and specify home and area preferences," continues Callahan. "They also have access to an online move organizer and essential destination information such as weather, crime statistics, school reports, population figures and other community information."* SIRVA Advantage was developed based on input from current customers and internal service teams, and is designed to provide a company will a small or no relocation program a high level of service on a more flexible, on-demand basis.

To learn more about SIRVA Advantage, contact Jane Yanosko, SIRVA Advantage business development manager, at 800.531.3840 or jane.yanosko@sirva.com.

Do Buyer Value Option (BVO/BVX) Home Sale Programs Still Work in Tough Real Estate Markets?

Thursday, June 26, 2008 by David Barlow

Companies continue to report that their employees are increasing reluctant to relocate. While the usual factors of family and spousal employment are even more magnified in tough real estate markets, one additional factor may be the home sale program the company offers. When the transferee is provided with a “pure” BVO/BVX home sale program, there is no guaranteed home buyout offer. These BVO/BVX programs have generally worked well in good real estate times; but when so many sellers are chasing even fewer qualified buyers (as is now the case) these relocation programs become less successful. Even when transferees do all the right things—prepare the property for sale and list it at or near the most probable sale price—they still struggle to find buyers. This creates more pressure for corporations to extend temporary living benefits.

In some cases, it may make sense for companies to consider converting BVO/BVX home sale programs to AVO/AVX programs with required mandatory marketing times (e.g. 90 or 120 days). Here the best of a BVO/BVX program is maintained with ample time to find an outside buyer but also with the added assurance that if a buyer cannot be found then a guaranteed buy-out offer can be generated. This can be thought of as an “emergency parachute,” which can be used to complete the sale of the home and thus the corporate relocation. Also keep in mind, AVO/AVX corporate relocation programs ensure compliance with the recent revenue ruling (2005-74) which approves the use of AVO/AVX programs while not specifically approving BVO/BVX programs.

Have you considered this or have you already switched to an AVO/AVX relocation program? Are your employees more willing to relocate?

Part Two: SIRVA Research Uncovers Mobility Trends in China

Monday, June 23, 2008 by SIRVA Relopinion

The complex and rapidly changing socioeconomic and political climate in China, together with a massive shortage of skilled workers, makes human capital and global workforce development particularly challenging. As a follow-up to SIRVA's China Urban Index, released in 2006, SIRVA Relocation recently completed a study to address the lack of readily available relocation data and trending on mobility policy and practices in China. The results are documented in "The SIRVA China Mobility Report."

Thirty-seven leading global companies contributed to this unique SIRVA research initiative, the results of which have formed a valuable benchmark framework for human resources professionals to observe current key mobility policy and practices in China. This benchmark report on key findings and trends represents SIRVA Relocation's analysis of the most up-to-date data spanning seven industry sectors in both Tier 1 and Non-Tier 1 regions in China.

Substantial differences in infrastructure and accessibility exist between Tier 1 and Non-Tier 1 regions, which companies must evaluate when creating policies to introduce employees to these varied conditions.

Below is a check-list of key findings for this study.

Key Findings
Current Assignments: While all participating companies reported traditional international short- and long-term assignments, there is an emerging trend of new assignment types. Twenty-eight percent of companies have domestic short- and long-term and permanent one-way assignments and 33 percent of companies report permanent one-way moves into Tier 1 and Non-Tier 1 locations.

Emerging Trends and Associated Challenges: As companies in China look to expand their business with locally or regionally hired resources, rather than high-cost, international long-term assignments, it is anticipated that future permanent one-way assignments will increase more than any other assignment type. Companies have found permanent one-way assignments to be the most challenging, contradictory and controversial, making it difficult to establish a framework for policies and practices.

As a result, assignment terms and conditions are handled on a case-by-case basis due to lack of benchmarking data and experience among human resources professionals and global mobility managers. Consequently, inequalities are widening in remuneration packages as talent becomes more valuable, so new models will have to be developed to mirror evolution in emerging assignment types.

Domestic relocations are new to China. Like regionally hired permanent one-way moves, they are predicted to increase. These moves, which originate and conclude in China, are used predominantly in Non-Tier 1 cities where there is significant growth.

Cross-cultural Awareness: Most companies provide cross-cultural awareness programs to transferees: however, few companies currently enforce mandatory sessions. SIRVA expects more companies will emphasize cross-cultural training to ease the transition into Chinese culture and create an understanding of language and customs.

Assignment Administration Outsourcing: 70 percent of companies surveyed outsource assignee administration and between 86 and 92 percent outsource various assignee support services. However, companies outsource contract preparation and international compensation. SIRVA is witnessing an increased trend in companies consulting with external providers for mobility policy development due to a lack of available resources and global mobility expertise in-house.

Assignment Representation across Industries: The following graph provides a snapshot of industries and assignment types in Tier 1 and Non-Tier 1 locations. Click here to view the graph.

Of the surveyed companies, IT/telecom and petrochemical industries show the highest representations of assignee population in Tier 1, followed by manufacturing and pharmaceutical. IT/telecom and petro-chemical industries also show the highest representations in Non-Tier 1 regions, followed by manufacturing and automotive.

The study also indicates the majority of assignments in Tier 1 and Non-Tier 1 regions are long-term and short-term assignments, followed by permanent one-way moves.

For more information you can visit http://chinaindex.sirva.com/study.asp

SIRVA Research Uncovers Mobility Trends in China

Tuesday, June 17, 2008 by SIRVA Relopinion

To Forecast or Not to Forecast: That is the Question!

Friday, June 6, 2008 by hank roth

In the past, employers offering corporate relocation services had to assure that a home buyout price paid to the employee was a fair market value, no more and no less. The use of broker market analyses to help establish an appropriate listing price and independent appraisals to establish the buyout price was an attempt to assure that the home buyout price represented a fair market price.

Due to the rapidly declining real estate market, a questionable trend has reared its ugly head—employers who are desperate to find a way to increase a transferee’s home buyout offer, without triggering a “direct offer” scenario, are now asking for relocation appraisals without forecasting. A directed offer requires the IRS to treat the buyout amount paid to the employee, in excess of the home’s fair market value, as income to the employee.

Standard corporate relocation practice calls for appraisals that attempt to determine a home’s anticipated sale price taking into account current marketing conditions (known as a forecasting adjustment). Forecasting in a declining market results in lower appraised values than those without forecasting adjustments—ignoring a forecasting adjustment will likely result in the appraised value being inflated.

The result is that the employer pays an amount to the employee that is higher than fair market value while having appraisals that appear to support the value by not using the forecasting adjustment process.

As was pointed out by Pete Scott, Worldwide ERC Tax Counsel, in the tax and legal update session at the San Antonio Worldwide ERC Conference, risks of ignoring the forecasting component include a rejection by the IRS of the appraisal as good evidence of fair market value; the appearance of a directed offer; a departure from standard policy that could result in a purchase price substantially higher than the sales price and income that is taxable as wages and subject to withholding/payroll taxes. There was substantial agreement among the members of the ERC Public Policy Committee in San Antonio as well as among appraisers attending the meeting that the practice should be discouraged.

This strange reversal of practice is driven by the need for employers to do whatever is possible to encourage employees to accept their corporate relocations, while not creating additional income to the employee. Employers, however, should not abandon standard practices or depart from their own former policies regarding appraiser instructions by ignoring forecasting.

What Transferees Need to Know About the Changing Mortgage Market

Tuesday, June 3, 2008 by SIRVA Relopinion

Mortgage expectations in the United States have changed as a result of the current lending market, and transferees will face a different lending process from what existed only a few months ago. While it is still easier to get a home loan today than it was eight years ago, transferees should be aware of several changes so they can avoid mortgage surprises.

"Transferees should be encouraged to be pre-approved and speak to a mortgage counselor once they accept a relocation, even if they are not yet ready to purchase a home," says Rick Hoover, director of client services at SIRVA Relocation. "A credit check can be completed up front, which allows transferees to be proactive in addressing any issues. They should also be prepared to provide relevant financial documentation, as programs that allow no, low or limited documentation have disappeared or been drastically curtailed in most areas."

In addition, transferees should also expect to buy within their salary range, since the use of projected bonuses or incentive pay is no longer acceptable. They should also expect to make a down payment, as zero down loans are not as accessible. Making a down payment-even a small one-also lowers the opportunity for negative equity situations in the future.

Another significant change is the availability of certain types of loans. Jumbo loans are now more restrictive than smaller conforming loans, and as a result, executives who may have been approved for jumbo loans last year may no longer qualify. Also, combination loans-such as 80/10/10 or 80/20 loans-which many transferees have used to avoid mortgage insurance or as a bridge loan, are more restrictive than ever. Pricing and underwriting guidelines have made these options less favorable, causing mortgage insurance to once again be more prevalent than in the recent past.

"Mortgage lending changes regularly, and it is important that transferees have access to a knowledgeable resource to answer any questions," continues Hoover. "SIRVA has mortgage counselors available to work with transferees within a company's relocation policy parameters. They can walk transferees through various lending options and help determine the right loan for them based on several factors, including risk levels, cost, credit qualification and housing needs."
Hoover emphasizes that if companies conduct their own counseling with employees, they should stress that transferees talk to a lender at the beginning of the process, even if they don't intend to purchase a home right away. This will help transferees better understand what will be required once they are ready to move forward.

Regardless if transferees work with a SIRVA Mortgage counselor or another mortgage professional, they should have the proper financial documentation available before beginning the lending process. "Underwriting guidelines can change daily," explains Hoover. "The more educated transferees are about the process, the better prepared they'll be."

For more information about the latest mortgage trends visit Paul Klemme's Blog, "The Mortgage Insider" or visit our resource library to view our recent Webinar, "Today's Mortgage Industry and its Impact on Relocation."

Six Best Practices for Reducing Real Estate Risk in Your Corporate Relocation Program

Friday, May 30, 2008 by SIRVA Relopinion

Tie benefits to desired behavior: Companies have every right to require transferees to follow established home sale processes. The process to be followed should be clearly stated in the company's corporate relocation policy along with the benefits to the transferee. Reasonable expectations include complying with the company code of conduct and following the corporate relocation service providers' recommendations which are based on the company's policy. Penalties for not complying with the terms of the policy, as well as any home sale incentives that are to be offered, should also be clearly outlined.

Require full property disclosure and educate transferees on ineligible properties: Accurate assessments of property history, condition and initial ownership risk when a home is sold limits future risk potential and protects both the company and transferees. Transferees should understand that purchasing ineligible properties may cancel future home sale benefits.

Require active transferee marketing participation: Home marketing needs to be well planned, supported and implemented properly by all parties involved. Because the real estate market is changing rapidly, marketing strategies must be adjusted quickly, and prices need to be reduced in shorter intervals. Failure to adequately react can extend marketing time, increase corporate relocation program costs, push homes into inventory, decrease the pool of potential buyers, and reduce the final price transferees receive on the home sale.

Evaluate all offers: Every appraisal should be thoroughly reviewed before giving it to the transferee in order to ensure they properly recognize the current market conditions. Do not hesitate to negotiate down to 95 percent of the appraised value. This also minimizes the emotional reaction to perceived "low" offers and the potential loss of an offer that would have been acceptable to the company.

Require mandatory home-finding assistance: Home-finding assistance reduces home loss-on-sale risk for those transferees (such as new hires) who are future relocation candidates and ensures employees don't purchase ineligible properties. It also helps mitigate the challenges of current market conditions, such as selecting a qualified agent, planning home-finding trips, evaluating financing options and reviewing contracts.

Develop home sales programs that fit your company's risk profile: Home sale programs vary in risk based on several factors. These include program type, number of controls in place, current market conditions, locations where homes are sold or purchased, past company practices and company culture. It is critical that companies are aware of the risks involved and create a home sale program that meets the company's overall service, cost and risk objectives.

For assistance incorporating these real estate best practices into your corporate relocation program or to learn more about how to mitigate real estate risks via a home sale program, visit David Barlow's blog.