Office Relocation

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.

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.

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.

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."