International Relocation Companies

Some companies have very sophisticated well-thought-through global mobility programs that have been tried and tested for many years. Others are stepping into the global arena for the first time. Either way it doesn’t hurt to check the health of your global mobility program and consider what I would believe to be the 10 best practices to ensure your global relocation program is a successful one.

10 Best Practices to Ensure a Successful Global Relocation

1. Policy
   1. Make sure you have a formal global policy in place that has been reviewed by your global relocation provider for competitiveness and efficiency and bench-marked against industry standards.Candidate Selection 
2. Candidate Selection
   1. Utilize pre-decision surveys or interviews to ensure that your candidate is flexible, adaptable and ready to take on the challenge of an international assignment.
3. Benchmark
   1. Keep up-to-date as situations change, trends develop, and new products come to market.
4. Cost Estimates
   1. In today’s economic environment it’s prudent to have a cost estimate completed before sending someone on an assignment so you have an idea how much it is going to cost.
5. Cost Analysis
   1. Know what you’re spending and what policy changes or exceptions are costing or saving money. There are many examples of companies focusing on elements that are inexpensive and denying them, while allowing exceptions for other elements that are very expensive.
6. Track Exceptions
   1. Be sure to always track any policy exception that was made or declined and the cost of that exception. This will help you be consistent in how you treat other exception requests in the future.
7. Use Proven Providers
   1. Proven providers can give you good advice on all elements of a global relocation and can make the process easier for you.
8. Don’t Cut Corners to Reduce Costs
   1. There is usually a good reason to do something well.
9. Create a Repatriation and Reintegration Plan Well Before the Assignment Ends!
   1. If you don’t, you may risk losing a valuable employee. Statistics show that up to 70 percent of repatriated assignees leave their employer within two years, usually to join a competitor.

For more information on the above global mobility program components and services, please contact SIRVA Relocation for a consultation.

 

Before you announce that a corporate group move (or relocation) is taking place, it is important to be prepared. A part of that will be identifying the resources you will need. Consider all the internal departments that need to be involved or will be impacted by the move. Evaluate if you need to bring in outside resources to assist you in managing the move.

Too often people underestimate the complexity of a group move and the critical need to have the time to properly prepare for the move prior to it being announced. For those employees who are moving, as well as those employees who are not going to move, you or someone on the team need to have the answers to a number of critical questions such as:

Questions that need to be answered for employees who are moving:

• What organizational units and types of jobs will be involved?
• How many jobs will be moved? From where? To where?
• Has selection criteria been established? Will the criteria be publicized?
• How will transferees be selected and invited? What will be the administrative process for job offer and acceptance?
• Will transferees’ departure-area jobs be re-filled? If so, how?
• How many job openings in the new facility will be filled locally?
• Will there be new-hires to be relocated?
• Will group move relocation benefits expire at a certain point in time?

Questions that need to be answered for employees who are not moving:

• Why wasn’t I asked to move?
• Will I be offered a new job?
• Do I need to apply for it?
• When will my current job end?
• Will there be a stay or retention bonus?
• Is there a severance package?
• If a job opens up at the new location, can I apply for it?
• Can I apply for a job at another location?

In today’s precarious economy, many employers are considering giving relocation loans to employees. Several of these employers may not have provided relocation loans to employees before, but are now looking for ways to increase the opportunity to make such loans available.  .

A relocation loan that is done correctly can be offered to the employee interest-free and without exposure to creating imputed interest to the employee which would be treated by the Internal Revenue Service as compensation income.

The following information concerning below market rate loans is an excerpt from an article published by the Worldwide Employee Relocation Council® (ERC) in its Tax and Legal MasterSource:

A. Types of relocation loans

1. Mortgage loans

A mortgage loan is extended by the employer to the employee with the understanding that the employee will use the proceeds of the loan to purchase a new principal residence. Such loan may be a demand or term loan, and is conditioned on the future performance of substantial services for the employer. The loan may have a market interest rate, a below market interest rate, or no interest at all.

2. Equity bridge loans

A loan may be offered to an employee in order to enable the employee to receive the equity out of an old unsold residence to make the down payment on a new residence. The terms of the loan may require that the proceeds be repaid within a short time after the sale of the former residence. The loan may have a market interest rate, or a below market interest rate, or no interest at all.

B. Imputation of interest on a loan transaction

1. Explanation of imputed interest

When a loan is made at a below market interest rate, or with no interest at all, the Internal Revenue Code may impute interest to the loan even though the lender and borrower never did. If imputed interest rules apply to an employee relocation loan, the amount by which a market rate of interest exceeds the loan’s actual rate of interest is considered income to the employee borrower. (The market rate used is the "applicable federal rate," which is computed by the IRS under a formula in the Internal Revenue Code and periodically adjusted.) This income is considered to be derived from the employer-lender, because the employer-lender is considered to have paid interest on the loan to itself on behalf of the employee-borrower.

2. An example of imputed interest

An example of imputed interest may be helpful in understanding this complex area. Assume that the employer has made an interest-free bridge loan to the employee. The market rate of interest on the loan would be $100 per month if interest were charged by the employer-lender. No interest is paid by the employee-borrower or received by the employer-lender. However, the tax law considers the employee-borrower to have owed $100 of interest, and since the employee’s obligation to pay this $100 was satisfied by the employer-lender, the transaction is treated as though the employer-lender paid $100 per month to the employee-borrower, who then repaid it to the employer-lender. This characterization of the transaction gives rise to $100 per month of compensation income to the employee-borrower.

3. Reporting requirements for imputed interest

The employee-borrower must report imputed income on his/her tax return, even though the employee never received it, but then may be entitled to a corresponding deduction for the interest theoretically paid on the employee’s behalf by the employer-lender.

4. Negative tax consequences of imputed interest

If interest is imputed to loans it has negative tax consequences for the employer-lender and may have for the employee-borrower. The employer-lender must pay payroll taxes (FICA, RRTA, and FUTA) on the amounts imputed as interest income to the employee-borrower. (The employer-lender, however, does not have to withhold federal income taxes on the imputed interest income.) The employee-borrower may or may not be eligible for a deduction of the imputed interest. The interest on a mortgage or bridge loan may be deductible as "qualified residence interest" under the general rules applicable to homeowners. However, there may be situations in which interest income is imputed to the employee, but the employee is unable to take a corresponding interest deduction. For example, there is a $100,000 limit on the amount of home equity debt upon which interest is deductible.

C. Avoidance of imputed interest

1. De minimis exception

If the total principal amount of the employer’s mortgage loan, bridge loan, or both outstanding to the employee does not exceed $10,000 during the year, the loans are ex-empted from the imputed interest rules due to their small size. No interest will be imputed in this situation.

2. Exemption for employee relocation loans under regulation 1.7872-5T

Under a temporary regulation, imputed interest will not apply to compensation-related mortgage or bridge loans if the following requirements are met:

      a. Exemption for mortgage loans

          The loan agreement must require the following provisions:

i. The proceeds of the loan must be used only to purchase the new residence.

ii. Such loans must be secured by a mortgage on the new principal residence acquired in connection with the relocation of the employee to a new principal place of work.

iii. The loan must be a demand or term loan.

iv. The benefits of the interest arrangements must not be transferable.

v. The below market interest rate (or the lack of interest) must be conditioned on the future performance of substantial services by the employee.

vi. The employee must certify to the employer that the employee reasonably expects to itemize deductions for each year the loan is outstanding.

     b. Exemption for bridge loans

The terms of the bridge loan must meet all the requirements for the mortgage loan as stated above except for the security requirement. Note, however, that any interest actually charged on a bridge loan will not be deductible by the transferee unless the loan is secured by either the old or new residence. In addition, the bridge loan agreement must provide that the loan is payable in full within 15 days after the sale of the employee’s immediately former principal residence. The aggregate of the principal amount of all outstanding bridge loans must not be greater than the employer’s reasonable estimate of the equity in the former residence. The former residence must not be converted to business or investment use.

     c. An unresolved issue

One issue that remains unresolved under the temporary regulation is whether the exemption applies in situations where imputed interest would not be deductible under the general rules applicable to home mortgage loan interest deductions. This problem is particularly acute for bridge loans, which are often unsecured by either the old or new residence, and, even if secured by the old residence may be considered home equity loans, and therefore limited to $100,000 of principal on which interest would be deductible. Although the IRS has not spoken to this issue, it is arguable that the 1986 Tax Reform Act, which imposed the current limitations on deductibility of interest, would be held to modify the exemption contained in the temporary regulation. However, in the absence of any IRS statement of position, it should be assumed that the regulation may still be relied upon. The IRS continues to follow the regulation, and has shown no interest in revisiting it.

In case you haven’t noticed there have been some significant exchange rate movements in the past few months due to the global financial crisis that is churning. International HR professionals are well aware of this and so are expatriates whose compensation packages appear to be impacted by such movements.

For example, the U.S. dollar has declined significantly since late 2006; it then rebounded abruptly in the Fall of 2008. Five currencies have experienced noticeable changes in the last two months, the Australian Dollar (AUD), the Brazilian Real (BRL), the Canadian Dollar (CAD), the British Pound (GBP) and the South-Korean Won (KRW).

So what should companies do about this? First, they should use specialist third party organizations such as ORC and Air Inc. to provide advice on cost-of-living data and other related information to help provide accurate solutions. These companies use complex formulas to track cost-of-living and related exchange rates to minimize the negative financial impact that currency fluctuations can have on expatriates living under one currency but being remunerated in another currency. 

Such currency volatility is not unprecedented, and urgent action is not normally required as long as allowances and payments are reviewed frequently; for example moving to a quarterly review may be worth considering. Only where inflation is running out of control should exchange rates be considered more frequently (e.g. Zimbabwe), but in these extreme cases, a local currency should be avoided if possible.

Below are some solutions that should be considered:

• Quarterly reviews of allowances and payments made in an affected currency
• Consider a split pay approach that would deliver a combined goods and services amount normally spent at home, plus a goods and services differential in the host currency
• Communicate with expatriates, to show how their purchasing power is being protected

For assistance in reviewing your company’s global mobility policies and process related to expatriate compensation, please contact SIRVA.

Lynn Bragg, Worldwide ERC® CEO, has agreed to speak at this year's SIRVA University, which will be held on April 1 - 4, 2009 at The Ritz-Carlton in Palm Beach, Florida.

Lynn will be presenting a 2009 relocation industry outlook address, which is sure to be an informative session for the relocation professionals who attend this year's event.

Lynn's Full Bio
Video of Lynn Speaking at ERC's Global Workforce Symposium

More information about this anticipated event to follow.

On December 5, 2008, SIRVA announced the appointment of David Byers as the Company’s new chief commercial officer. Byers brings more than two decades of operations, marketing, sales and brand management experience from H&R Block and Foote, Cone&Belding Inc. to SIRVA.

“David’s deep knowledge base in financial products and services, and his experience in developing and managing brands will help drive our relocation services business,” said SIRVA President and Chief Executive Wes Lucas. “Similarly, his background working with distribution networks will bring tremendous value to our moving business.”

Byers was with H&R Block for eight years and progressed quickly through the ranks, from senior vice president and global chief marketing officer to senior vice president of U.S. operations, and most recently, chief operating officer of retail tax services. In these roles, he was responsible for H&R Block’s U.S. operations, sales and business development functions, which comprised more than 13,000 retail locations and 100,000 employees. Prior to H&R Block, Byers’ career included working for global advertising agency Foote, Cone & Belding Inc., Del Monte Corporation, and most recently, he served as chief executive officer of The Mutual Fund Store.

See Press Release
 

According to the Trippel Survey&Research LLC Seventh Annual Relocation Managers Survey: Relocation Management Company Industry©, SIRVA Relocation ranked second in overall performance and satisfaction among the industry’s top six largest relocation companies. The company achieved the highest scores among the six largest relocation providers in eight of the 24 areas surveyed, and it also placed as one of the top three providers in 22 out of 24 areas surveyed among the largest relocation providers. SIRVA Relocation LLC is a subsidiary of SIRVA Inc., a leading global relocation services provider.

“These results are a direct reflection of our steadfast commitment to providing our customers with unparalleled service and value every day,” said SIRVA Inc. CEO Wes Lucas. “Our goal is to be the most trusted and sought-after relocation services provider in the industry based on the work we do and solutions we offer. I am elated to see that customers are recognizing the value we bring to the table.”

Trippel Survey&Research conducted this survey—which launched September 12 and concluded October 1—with the goal of obtaining evaluations from corporate relocation managers regarding levels of satisfaction with firms in the relocation industry. More than 300 survey evaluations—representing 298 different relocation management companies—were received. The six largest relocation management companies in the survey accounted for nearly 75 percent of all evaluations returned.

Categories in which SIRVA Relocation achieved the top score included: Responsiveness and flexibility to your needs; Service recovery; Year-end tax reporting; Management reporting; Identifying trends and responding to them; Suggesting policy recommendations; Suggesting ways to reduce your costs; and Taking actions that control or lower direct real estate costs.

On November 6, 2008, SIRVA announced the appointment of Sean Fernandez as the company’s new senior vice president, operational excellence, people and infrastructure. Fernandez brings 19 years of leadership, operations and consulting experience to SIRVA. He will report to SIRVA President and Chief Executive Officer Wes Lucas, and work from SIRVA’s office in Fort Wayne, Ind.

Fernandez is a proven global executive with an excellent track record in improving business performance and growing companies. Specifically, he has driven improvements in operations, quality and customer satisfaction. In his new role, Fernandez is responsible for overseeing SIRVA’s global operational excellence initiative, building strong teams and a high-performance organization and enhancing information technology capability. This position includes the development and implementation of key process improvements designed to drive customer satisfaction, cost efficiencies and improved quality.

“We are delighted to welcome Sean to the SIRVA team,” said Wes Lucas. “He is an outstanding leader and brings valuable operational capabilities, process improvement skills, product management and a proven ability to grow companies. I am confident that he will play an integral role in helping our company to serve our global customer base.”

See full press release

While globalization has opened many opportunities for business, it has created some significant challenges. One leading challenge for global managers is learning to understand and appreciate cultural values, practices, and various nuances in different parts of the world. Experts in international business agree that to succeed in global business, managers should be open to others’ ideas and opinions and have the flexibility to respond positively and effectively to practices and values that are oftentimes drastically different from what they are accustomed to. Cultural training has been shown to improve an individual’s relationships with host nationals and allows expatriates to adjust more rapidly to a new culture and an international relocation.

There are a variety of training techniques that prepare people for foreign work assignments. They range from documentary programs that merely expose people to a new culture through materials about the country’s sociopolitical history, geography, economics, language and cultural institutions, to intense interpersonal-experience training, in which individuals participate in role-playing exercises, simulated social settings and similar experiences in order to “feel” the differences in new culture. Successful cross-cultural programs can include the following:

Local business etiquette. Even the most veteran and prolific employee can have difficulty without an understanding of business etiquette in other cultures. For example, the U.S. tendency to “get down to business” is regarded as rude in Japan, where business transactions often have a greater personal relationship component. An employee who appears impatient with Japanese traditions designed to establish friendship and trust will have little success in business negotiations.

Cultural biases. International relocation assignees should always examine the way their own culture affects their perceptions of right and wrong, good and bad manners, values, dress, and other customs. Cultural training can improve understanding of the cultural forces that affect their own behaviors and help assignees learn how to adapt to new cultural demands and the international relocation.

Customized training. Additional training can include special modules to help the employee and his or her family with their own individual concerns. For example, if the assignee’s children will be attending local schools, modules and resources on education etiquette would be appropriate.

To learn more, please visit our resource library

Before you announce that a corporate group move (or relocation) is taking place, it is important to be prepared. A part of that will be identifying the resources you will need. Consider all the internal departments that need to be involved or will be impacted by the move. Evaluate if you need to bring in outside resources to assist you in managing the move. It may not always be obvious who should be on the team.

It may be that there is a “working team” and a “guidance review team.” Having a “team within a team” is an efficient way of keeping people focused and available, rather than in meetings.

Once your team or teams are selected, it is time to build your plan. The following steps can help you get started.

Create a timeline.
If possible, have your Company’s leadership team provide you with a “hard date” as to when they want the move to be completed. Test the logic behind the date. Is it feasible? Will the building be ready to occupy? Will the timing of the move disrupt business during peak months? Can everyone be moved by that date? Remember, once you agree on a date (whether you had input or not) you will be measured according to whether or not you hit the date. If it is not possible to establish a specific date, you will need to recognize that you are working against a moving target that will add complexity to the timing of the move as well as stress and anxiety for the employees moving. In addition, a group move without a hard date complicates the entire process, as there is always an implication of having “more time.” Determine your schedule for accomplishing each element of the project. You will also want to establish a timetable for acceptance once employees are invited.

Gather data about the people who will be impacted by the move.
This will include both those who are moving as well as those who are not. For those who are moving, you need to gather a great deal of data, including:

• Current position
• Tenure with the Company
• New position
• Current salary
• New salary
• Current manager
• New manager
• Family information
• Homeowner or renter information
• Current address
• Expected move date

Review your current corporate relocation policy to evaluate whether it will support the objectives of the move. (Read more).

In the article Global Mobile Talent—Retention on the Move, published in the August issue of MOBILITY, Silvia Molnar addresses not only the importance of nurturing globally experienced talent in an increasingly global economy but the issue of retaining this talent. Molnar, a client partner at MSI Mobility, begins the article stating that “talent has been declared scarce and, once acquired, increasingly difficult to keep engaged and retained.”

Molnar explains the dilemma: expatriate experience is a critical step in the development of a leader; however sending an individual abroad requires a significant long term investment and increases the risk of loss.

She then introduces six fundamentals of retention that can be used as a guide for increasing your return on talent investment. Molnar stresses investing time for clarification and planning in the beginning of the expatriation process will enable you to build relationships with your future leaders and will return greater dividends in the end. Read more..

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.

This March SIRVA University, SIRVA Relocation’s annual conference exploring corporate relocation industry trends and professional development, played host to 150 of the nation’s top relocation industry executives. The event, which was held at the Westin Kierland Resort in Scottsdale, Ariz., provided an exclusive forum for industry insiders to discuss vital, ongoing and emerging industry issues with experts
and colleagues.

Attendees included representatives from human resources, domestic and global relocation, procurement and supply chain departments from more than 75
different companies.

”Our industry is facing a lot of challenges, and SIRVA University provides an opportunity for human resource and relocation professionals/specialists to gather and discuss best practices and practical solutions,” noted Mike McMahon, president, SIRVA Relocation.

This year, conference roundtables and educational sessions covered topics ranging from tips for promoting relocation programs within an organization, home loss-on-sale assistance to relocation trends in China. Additional sessions addressed relocation fundamentals, such as policy trends and best practices, and provided a comprehensive history of the industry—on both a domestic and global scale.

“The educational roundtables in particular were an opportune time for attendees to interact directly with SIRVA executives and fellow relocation professionals,”
said McMahon. “And the keynote speakers were incredibly well received by all.”

SIRVA University Presentations Available Online

Those who were unable to attend this year’s event can download SIRVA University presentations and event images at www.sirvauniversity.com/agenda.asp. Individuals can also download audio recordings of the various sessions to hear them as they were presented, including question-and-answer sessions. Individuals seeking more information on SIRVA University 2008 can e-mail sirvau@sirva.com. If you'd like more information about SIRVA or corporate relocation consulting visit: www.sirva.com.

This March SIRVA University, SIRVA Relocation’s annual conference exploring corporate relocation industry trends and professional development, played host to 150 of the nation’s top relocation industry executives. The event, which was held at the Westin Kierland Resort in Scottsdale, Ariz., provided an exclusive forum for industry insiders to discuss vital, ongoing and emerging relocation industry issues with experts and colleagues.

Attendees included representatives from human resources, domestic relocation, global mobility, and procurement and supply chain departments from more than 75 different companies.

This year, conference roundtables and educational sessions covered topics ranging from promoting corporate relocation programs, home loss-on-sale assistance, developing employee relocation packages for global mobility and relocation trends in China. Additional sessions addressed relocation fundamentals, such as policy trends and best practices, and provided a comprehensive history of the industry—on both a domestic and global scale.

SIRVA University Presentations Available Online

Those who were unable to attend this year’s event can download SIRVA University presentations and event images at www.sirvauniversity.com/agenda.asp. Individuals can also download audio recordings of the various sessions to hear them as they were presented, including question-and-answer sessions. Individuals seeking more information on SIRVA University 2008 can e-mail sirvau@sirva.com.