Even before the current economic crisis, a majority of companies required transferees to sign repayment agreements, under which the employee agrees to repay relocation benefits if they leave the company within some specified period after being transferred.

Such agreements commonly include a requirement to repay costs that were incurred by the employer to acquire and dispose of the employee’s home in the departure location under a home purchase program. Such costs are usually the largest part of the expenses incurred to move the employee. 
If a home purchase program is properly organized and implemented, IRS agrees that costs incurred are not taxable to the employee. See Rev. Rul. 2005-74. However, employers sometimes express concern that inclusion of those costs in a repayment agreement is somehow inconsistent with the original exclusion of the costs from income.

That concern is not well-founded. 

A repayment agreement simply imposes a condition on the employer’s willingness to undertake the expense of moving the employee. It does not operate to characterize any of the expenses as employee benefits, either taxable or not taxable. The company incurred many costs to move the employee, some taxable and some not (for example, moving household goods). Under the repayment agreement the employee simply acknowledges that the employer expects a return on its investment in moving the employee. The benefit to the employer of incurring the costs will not be realized if the employee accepts relocation but then leaves employment within a short period of time.

Requiring the employee to repay such costs does not in any way suggest or imply that the costs were incurred to benefit the employee. Indeed, as discussed in the previous paragraph, it tends to suggest just the opposite. 

Moreover, when the employee does repay the home sale costs, the employee in effect has simply paid his or her own costs of home sale. There is no benefit to the employee at all, taxable or nontaxable. 

Consequently, including home sale costs in a repayment agreement should not be taken as suggesting that such costs were a taxable employee benefit in the first instance. 

However, as with all other costs included in a repayment agreement, the agreement should clearly specify the categories of cost that are subject to the agreement. Doing so will help the company to enforce the agreement, if that becomes necessary.

Reprinted from the Worldwide ERC Tax and Legal Mastersource with permission. Article prepared by Peter K. Scott, ERC Tax Counsel.

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.

 

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.

 

We all know that real estate is local. However-in our current real estate situation-we are seeing more markets continue to see a slip in home sales with only a few who are reporting an increase. The National Association of Realtors (NAR) reports areas such as Colorado Springs, Colo., Sacramento, Calif. and Spartanburg, S.C. are experiencing double-digit pending sales gains compared to a year ago with a significant percentage of these sales attributed to investors who are buying foreclosed properties. So while some markets have seen tremendous growth in home sales compared to last year, others have seen contract signings slashed by as much as 50 percent.

The current real estate market for the typical residential home is still very much a buyer's market. Attractive interest rates, large inventories of homes for sale and lower-than-average sale prices make it a great time to buy. Sellers aren't so fortunate. In fact, some areas have seen home values drop so low that typically willing transferees are hesitant to take a corporate relocation because of loss-on-sale concerns or owing more on their properties than the current market value sales price.

According to a recent survey conducted by the Worldwide ERC®, the number one reason employees are reluctant to relocate is a direct effect of the troubled real estate market. The survey indicated that more than 95 percent of respondents reported "slowed real estate appreciation at the old location," as the reason their employees are averse to moving. This is a stark contrast from last year when only 16 percent cited the real estate market as the reason for their reluctance. Instead, high housing costs, high cost-of-living and family resistance to move, were top concerns.

"Today, it's an unfortunate fact that those true soldiers that have faithfully relocated every two to three years are cooling to the idea because of the economy and the fear that they will take a considerable home loss-on-sale," says David Barlow, SIRVA's senior consultant. 

Barlow advises companies that have not done so to consider implementing a loss-on-sale policy to remain competitive and to help their transferees with the reality of falling home values and sale prices. He also advises companies that already have a loss-on-sale policy to re-evaluate the loss-on-sale limit or cap to ensure it is sufficient in today's difficult real estate market.

It's no secret that the current real estate market has had a significant impact on the relocation industry. Companies have had to reevaluate and update their corporate relocation policies to overcome the challenges of the current market.

Barlow doesn't wager a guess on when the market will turn, but he expects companies will be working through the challenges of the current real estate market for some time to come.
 

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

We all know that real estate is local. However—in our current real estate situation—we are seeing more markets continue to see a slip in home sales with only a few who are reporting an increase. The National Association of Realtors (NAR) reports areas such as Colorado Springs, Colo., Sacramento, Calif. and Spartanburg, S.C. are experiencing double-digit pending sales gains compared to a year ago with a significant percentage of these sales attributed to investors who are buying foreclosed properties. So while some markets have seen tremendous growth in home sales compared to last year, others have seen contract signings slashed by as much as 50 percent.

The current real estate market for the typical residential home is still very much a buyer’s market. Attractive interest rates, large inventories of homes for sale and lower-than-average sale prices make it a great time to buy. Sellers aren’t so fortunate. In fact, some areas have seen home values drop so low that typically willing transferees are hesitant to relocate because of loss-on-sale concerns or owing more on their properties than the current market value sales price.

According to a recent survey conducted by the Worldwide ERC®, the number one reason employees are reluctant to relocate is a direct effect of the troubled real estate market. The survey indicated that more than 95 percent of respondents reported "slowed real estate appreciation at the old location," as the reason their employees are averse to moving. This is a stark contrast from last year when only 16 percent cited the real estate market as the reason for their reluctance. Instead, high housing costs, high cost-of-living and family resistance to move, were top concerns.

"Today, it’s an unfortunate fact that those true soldiers that have faithfully relocated every two to three years are cooling to the idea because of the economy and the fear that they will take a considerable home loss-on-sale," says David Barlow, SIRVA’s senior consultant. 

Barlow advises companies that have not done so to consider implementing a loss-on-sale policy to remain competitive and to help their transferees with the reality of falling home values and sale prices. He also advises companies that already have a loss-on-sale policy to re-evaluate the loss-on-sale limit or cap to ensure it is sufficient in today’s difficult real estate market.

"In the past, $25,000 was a typical loss-on-sale cap, but today that figure is increasing and could approach $75,000," he explains.

Negative Equity a Grim Reality
While many companies are struggling with situations where transferees are not willing to relocate because of a significant loss-on-sale, others are dealing with a less common but potentially even more difficult scenario— is trying to relocate employees who have negative equity in their home.

Barlow explains that SIRVA is seeing this problem grow from what used to be a very low percentage of relocation candidates, which is a definite sign of the times.

Negative equity comes into play when a home’s value is less than the amount of all outstanding debts against the home. This can happen if an individual takes out a line of credit, second mortgage or other loan on his or her home, which must be paid before the home can close. It can also happen if the home’s value has decreased below the value of the original mortgage. This can occur with low or no money down loan products that were prevalent in the last 5-10 years.
 
"If a transferee purchased a home for $350,000 two years ago, and in today’s real estate market that home is only worth and sells for $325,000, then the owner is looking at a $25,000 loss on sale," explains Barlow. "This situation would generally be covered in whole or in part by a loss-on-sale policy. However, if the same individual also took out a $50,000 home equity loan (in addition to a $300,00 first mortgage), then he or she is now on the hook for whatever portion the company does not cover in the loss-on-sale benefit.  If the first mortgage and the line of credit is greater than the net proceeds of the sale of the home plus the loss-on-sale benefit then the homeowner is in a negative equity situation or is considered to be ‘upside down’.

"If the homeowner can’t repay this total debt at the home closing, the home can’t be sold. This is a significant issue in corporate relocation because all obligations have to be cleared when closing the sale of the home, and if the individual can’t clear the obligation and sell the home, the relocation can’t proceed."

SIRVA’s Solution
SIRVA works closely with companies to minimize the risks of relocating individuals with negative equity. SIRVA counselors are trained to ask the right questions and uncover negative equity situations in the discovery phase, before the relocation is initiated.

"If we determine a relocation candidate will be in a negative equity situation then we can alert our clients who will then have to make some tough decisions," explains Barlow. "The best course of action may be to select another candidate."

Barlow says the last course of action a company should take is to settle the negative equity obligation for the employee in the form of a lump-sum payment.

"Our counsel has always been against paying the negative equity to the employee. Imagine the potential equity issues if an employee were to find out the company settled a colleague’s unique financial obligation. This could create more problems than it solves," he says. "Consider the similar transferee who did not take out an equity line who would—in effect—be penalized for his/her conservative financial management." 

Instead, Barlow advises companies that absolutely have to relocate a high-value employee with negative equity to consider a loan—rather than just cutting a check—for the outstanding debt.

"Companies can give transferees the opportunity to pay the loan back or use it as a retention device, forgiving portions of the loan over time," adds Barlow. "Companies could also consider a temporary domestic assignment or home-retention allowance. Either would allow the company to relocate an individual with negative equity by not selling the home and thus not having to deal with the debt obligations during the relocation process.

Barlow emphasizes how important it is to identify negative equity transferees before relocations are initiated.

"This is one of the ways SIRVA’s consulting services can help companies execute their relocation programs while minimizing the risks of the current real estate market," he continues. "Our obligation is to work with clients to identify every possible course of action in order to make a relocation happen."* It’s no secret that the current real estate market has had a significant impact on the relocation industry. Companies have had to re-evaluate and update their corporate relocation policies to overcome the challenges of the current market.

Barlow doesn’t wager a guess on when the market will turn, but he expects companies will be working through the challenges of the current real estate market for some time to come.

The ability to effectively communicate with people from all over the world is 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 expatriates with a starting point for the preparation of working overseas, addressing cross-cultural communication, and cross-cultural conflict resolution. For example, by knowing whether a society is individualistic or collective, an expatriate 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 assignees 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 an expatriate assignment, and could save your organization from absorbing the financial burden of a failed assignment due to an assignee’s inability to adjust to his or her new location.

For more information, visit our resource library

On October 27-31, 2008, ERC will host its annual Global Workforce Symposium in our nation’s capital, Washington, D.C. The conference offers global mobility leaders the chance to network with peers and exchange global mobility best practices.

This is a special conference because H. Cris Collie, Worldwide ERC’s CEO of 36 years, will be retiring and will be passing the torch to Lynn M. Bragg. There will be an event on Saturday, November 1, 2008, to commemorate all of Cris’ contributions to the relocation industry.

SIRVA will be exhibiting at the conference and will be offering attendees the chance to “cast their ballots early” for a chance to win one night’s stay in a Presidential Suite. Even if attendees don’t make it to SIRVA’s booth, they will be sure to attend our “Monumental Evening” event, which will be held on Thursday, October 30. This special event will be hosted at The Daughters of The American Revolution (DAR), a national historic landmark and will mark a first time meet-and-greet with SIRVA’s new CEO, Wes Lucas. The event will hold many surprises for its guest and is sure to be an evening to remember.

For more information about ERC and the Global Workforce Symposium, visit this website: http://erc.org/news_events/gws08.shtml

As trends of short-term assignments have increased, a new category of worker has emerged, “stealth expatriates” (expats). This term is used to describe employees who work in another country outside of the country’s official international assignment program— often without the knowledge of Human Resources. These stealth expats originate from a number of different sources: employees or short-term assignees who have extended their planned overseas visit due to business reasons: foreign nationals who have been hired locally but on a semi-expatriate package; cross-border commuters whose job responsibilities have been extended; employees who are sent on assignment by business leaders who do not understand company procedures.

Flying under the radar, stealth expats inadvertently increase the risk of noncompliance for themselves and for their employer in the areas of tax, immigration and employment laws. Consulting companies in particular are caught in the dilemma of balancing contract deadlines to avoid penalties with lengthy work permit application requirements in the host country. It has become the job of Human Resources to educate the stakeholders on the options available to transfer assignees into the host country as quickly and efficiently as possible. This is often accomplished by taking advantage of special immigration legislation aimed at allowing people with special skills to work in host countries. Human Resources also are responsible for the corporate governance requirements of their companies to build processes that bring stealth expats into their companies’ processes and mitigate risk.

Companies that consult on global relocation are now developing sophisticated tools and processes to help organizations identify and track stealth expats and bring them back into company processes while not disrupting the stealth expats’ valuable contribution to their organizations’ international businesses.

For more information, visit our resource library

International Relocation: The Importance of Cross-Cultural Awareness

Companies operating in the global market are quickly discovering business success depends heavily on expatriate managers’ knowledge and familiarity with the cultures in which they do business. Culture clashes have a momentous influence on an expatriate’s assignment, and understanding the host country’s culture is a significant piece of the puzzle. Since expatriate failure is costly for companies, it is to a company’s benefit to provide cross-cultural training to employees working on overseas assignments.

Although generic programs exist, cross-cultural training is most effective when it’s tailored to the specific needs of the expatriate and the host country. Because learning about a new culture requires an understanding of one's own cultural biases and behavioral traits, companies that use customized, cross-cultural training typically receive better results.

Successful cross-cultural programs can include the following:

Host Country Information
Basic information about the assignee’s host country, including its history, common religions, political structure and recent events, so employees can understand citizens’ values and beliefs.

Behavior Adaptation
Although people have a hard time changing their cultural understanding, they can learn to alter their behavior to adapt to a new culture. In this phase of cross-cultural training, expatriates examine the way they currently handle a situation and what is required in the new culture.

Communication techniques
A manager going to live in a foreign country for the first time might not realize how communication styles differ around the world. For example, U.S. employees tend to use “low context” communication, which is direct and task-oriented. Many other cultures have “high context” communication, in which messages are more indirect, like in the Middle East.

For a full account of information regarding this service visit our resource library.

Trends in Global Relocation Assignments:

In a fast changing global economy, where the pace of globalization is accelerating exponentially, world-class planning for a globally mobile workforce is the key to success. Increasingly, companies and nations realize that they must produce and attract the right workforce from all over the world and retain it. This places new pressures on human resource professionals to develop international competencies and become strategic partners in the management of global business.

One major trend is that firms everywhere are relying less on high-cost traditional expatriate assignments and more on short-term assignments, extended business trips and cross-border commuters. The popularity of off-shoring to “low income” countries and cross-border joint ventures has also meant more short- and medium-term relocation assignments.

Want to Learn More?

 
What is considered to be one of the most complex and fastest growing economies in the world?

The answer: China. The complexity and velocity of socioeconomic change in China, together with a massive shortage of skilled workforce makes human capital and global workforce development particularly challenging.

As the thought leader in corporate relocation consulting, SIRVA has developed the China Mobility Report, the first ever relocation policy and practices benchmarking study to span across various industries and assignment types found throughout tier one and non-tier one cities in China. The report can be used as a detailed reference tool whereby readers can interpret mobility policy and practices in China, including relocation cost comparison, relocation challenges, and assignment management practices.

The report intends to assist businesses with the development of their China mobility strategies by exploring emerging policy trends, challenging traditional thinking versus flexible and fit-for-purpose policy, and seeking alternative approaches in policy and practices. Learn more or register for your copy

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.

The Worldwide ERC Foundation for Workforce Mobility and Thunderbird School of Management recently released findings from a study, which identifies the attributes that determine the "success potential" of an assignee during his/her international assignment. With a growing number of companies sending their employees on short-term assignments, this study may be highly valuable to those who are involved in the candidate selection process.

The study determined that much of the success rate is based on the assignee's ability to possess a "global mindset" -- which is defined as "individual attributes that enable an expat to successfully influence those who are different from him/her." The research points to three components that make up the global mindset, which includes, intellectual capital, psychological capital and social capital...read more.