Relocation Service

Jon Gilbertson, GMS, of SIRVA, Inc. and Susan Dawson of Genworth Financial discussed principles and techniques to apply to any RFP, contract or service relationship.

When developing an RF, there are many things that need to be considered during the process. Gilbertson and Dawson highlighted that for each program in your relocation policy you should have at least three questions related to the most critical service delivery process steps.

Specifications

The specifications in an RFP for commodities convey the style, appearance and quality of the product. The goal for specification of a service is to solicit information for you to understand how the specific service’s delivery steps will be satisfied. Be sure you are clear whether defining more specifications and expectation does not result in higher costs and higher management fees.

Evaluating

When evaluating RFPs, it is important to identify the importance of each service criteria by weighting or rating them on a scorecard. This can be done by your evaluation team scoring the comments and evidence that the supplier has provided. Gilbertson and Dawson give two ways to evaluate the RFP – the Business Process Review (BRP) or the Conference Room Pilot.

Business Process Review

The BRP is a walkthrough of the process to gain a better understanding of the clarifying comments by reviewing the process from beginning to end, clarifying gaps or questions in the process, asses any changes required and validating the potential supplier process.

Conference Room Pilot

The CRP approach is a more robust validation technique that validates real life scenarios by conducting an exercise with a team that would support your business. This can be done by role playing to assess answers and questions. This will help the team identify the gaps, review the process and make changes to the procedures.

However, the supplier assessment process doesn’t end at the RFP! Gilbertson and Dawson outlined 4 key categories to ensure the success of your service provider – Quality, performance, cost and continuous improvement. The process is continuous and clients should consistently change their policies and expectations. Equally important to keeping your expectations consistent, it is important to be aware and track the total cost when managing and assessing a supplier. Hidden fees can easily be lost and should be critical to consider in all relocation-related expenses.

To learn more about the RFP process, check out our other sessions at www.sirvauniversity.com.

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.

The U.S. housing market is continuing to slow, and most economists and housing professionals predict the housing slump will linger longer than previously forecasted.

A downturn in real estate markets creates several challenges for employers' relocating transferees, the most significant of which is the growing number of homes that end up in inventory. This rise in home inventory leads to higher overall relocation costs and increased property management duties for employers.

Total home sale costs also become less predictable in sluggish real estate markets, and unpredictable home sale costs translate into unpredictable total relocation costs.

Relocation service providers (RSPs) offer several home sale programs, each with varying levels of risk, to help corporate relocation transferees. Employers should consider the advantages and disadvantages of each program to determine the level of risk involved, and those employers who want a predictable and low-risk home sale program should consider a fixed-fee program.

Learn more about the fixed-fee program.

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 Gordon Smith as the Company’s new chief financial officer. Mr. Smith, who will work from the Company’s Westmont, Ill., headquarters, brings more than 31 years of financial leadership experience from GE Capital and Asbury Automotive Group to SIRVA. He will report to SIRVA President and Chief Executive Officer Wes Lucas.

“We take great pleasure in welcoming Gordon to the SIRVA team,” said Wes Lucas. “A highly capable and proven finance executive, with outstanding financial leadership experience, Gordon is ideal to lead SIRVA’s financial areas as we build on our strong financial position, deliver outstanding service to our clients, grow our business and continue to create the world’s premier corporate relocation and moving services company.”

See full press release

If you have a group move to manage and are seeking assistance, SIRVA Relocation is able to provide the following services:

Defining Objectives
SIRVA works closely with your Company’s management team to define the overall objectives of the move and ensure their implementation during the move process. As a part of our consultation, we will discuss the Company’s business and human resources goals and objectives, policy issues, the group move timeline, and factors to consider in the cost analysis and process development.

Relocation Cost Analysis
We provide expertise in analyzing the total cost of a group move by detailing the cost impact of policy decisions and local market conditions on both the Company and the employee.

Policy Design
SIRVA can incorporate your business objectives into an appropriate group move policy. A key component of policy design is the solicitation, review and analysis of your employees’ input via the employee survey that we will design to meet the needs of your employee population and the constraints your management has placed on the process. This information, along with policy and benefit guidelines, will result in a Group Move Policy Handbook detailing the corporate relocation program for your employees.

Employee Presentations
We have the depth of experience to assist the Company in securing the employee’s enthusiastic commitment to the move through a carefully planned and professionally presented program for the entire family. This program includes a complete overview of the new destination city and state, plus the ability for employees to ask questions and address concerns about the move. In short, we bring the experts in each resource area to the transferee.

Relocation Resource Center
SIRVA can prepare an on-site, on-going “Relocation Resource Center” for employees and their families, which provides information about the destination city’s schools, housing options, medical facilities, etc.

Information Kit
Each employee will receive a complete package of information about the destination city including, if appropriate, a video about the city. Employees will be assigned a personal relocation counselor who is available to answer questions, research any specific needs they or their family members may have, and arrange for individual home finding trips to the new city (if included in the plan).

Area Tours
SIRVA can organize area tours guaranteed to satisfy your employees’ questions about their new city.

Other services include:
• Home Marketing Assistance
• Home Purchase Assistance
• Home Finding Assistance
• Temporary Housing Assistance
• Spouse Job-Finding Assistance
• Employee Expense Tracking Administration and Tax Calculation Capabilities
• Mortgage Assistance
• Vendor Selection and Management
• Training Material and Programs

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.

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.

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 recently released a whitepaper dedicated to outlining our fixed-fee home sale program and how it can improve predictability and reduce real estate risk in a slow housing market. Below is an excerpt from this whitepaper, along with a link to the complete document.

The U.S. housing market is continuing to slow, and most economists and housing professionals predict the housing slump will linger longer than previous forecast. Total home sale costs become less predictable in sluggish real estate markets, and unpredictable home sale costs translate into unpredictable total relocation costs.

Relocation service companies offer several home sale programs, each with varying levels of risk, to help employers relocate transferees. Employers should consider the advantages of each program to determine the level of risk involved, and those employers who want a predictable and low-risk home sale program should consider a fixed-fee program.

For more information about our SIRVA’s fixed-fee program, view the complete whitepaper or contact us.

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.

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.