With a rise in employee relocations in 2013 and no sign of the increase slowing over the next year, relocation service providers are ready to face the challenges of overly thrifty companies, a new generation of transferees and an overall change in approach.
The economy’s recovery has pushed more companies to go global, which is leading to more employees relocating to international destinations. In general, relocation service providers have seen about half of midsize and large companies transferring more employees than in 2012. According to a Mercer survey, 53 percent of the 800 companies surveyed saw an increase in long-term expatriates, and 57 percent predicted an increase in 2014.
A similar survey conducted by Atlas Van Lines showed a smaller uptick: 41 percent of 353 responding companies of various sizes saw relocation volumes increase. On average, the report said, companies relocated 10 to 19 employees in 2013.
Long, Long Way From Home
The growing trend of working in overseas markets has especially influenced smaller companies, said Sean Raney, vice president of international assignment compensation services at relocation service provider Cartus Corp. Companies follow the finances, especially to emerging markets in Europe and Asia-Pacific.
The Atlas survey showed that 32 percent of transferees relocating from the U.S. move to countries in the Asia-Pacific region, which remains the most frequent destination. “I joke with our team that Shanghai and Singapore are constantly neck-and-neck,” said Ed Hannibal, global leader for Mercer’s mobility practice. Western Europe (24 percent) and the United Kingdom (22 percent) round out the top three most frequent destinations.
Domestically, the Midwest and South were the most popular regions in the Atlas survey, with Houston and Detroit being two cities Mercer’s clients researched the most. Hannibal isn’t surprised at the investment in smaller cities, but steering away from bigger metropolitan areas like New York has provided a new challenge to service providers and companies.
Lauren Herring, CEO of relocation services provider Impact Group, said she has clients whose transferees are reluctant to move to smaller towns. Although there’s nothing new about employees showing disinterest in moving to less-glamorous locations, collaborating with the recruiters and providing data that can disprove false assumptions about destinations — for example, that there are only little farms in a small Kansas community — has helped relocation service providers increase transfer acceptance rates.
According to Atlas, 13 percent of employees were reluctant to relocate, a rate far below its peak of 29 percent in 2009, however. The survey also showed that for the first time in five years housing and mortgage concerns are no longer the primary reason employees decline a transfer. Family issues and relationships are once again the top reasons for turning down a relocation offer.
Although companies are moving more employees, relocation services providers are seeing a decrease in how much money organizations will spend on a move.
In the past, companies would grin and bear it when paying to move transferees, said Bill Humphrey, president of Xonex Relocation. For the past few years, organizations have been capping the amount of money they want relocation providers to spend —and that trend is growing.
Of course, this means tightening the belt when it comes to extra services, such as unpacking boxes at the destination or moving special items (boats, second vehicles, exercise equipment, etc.). One of the biggest shifts Humphrey has seen in the past year is a reduction in assistance organizations traditionally offered to a relocating family, which is corroborated by the Atlas survey. Only 42 percent of firms offered to cover an entire relocation cost, down from 51 percent in 2012.
Mercer’s Hannibal said that some companies should consider their relocation spending as part of their talent management strategy. If someone is going to grow in the market, organizations need to retain that person on more than a home country compensation package. That said, moving employees from a low-wage location to a country with higher earnings — the U.S. or Switzerland, for example — could make it hard to repatriate them to their original home country because the workers have grown accustomed to higher salaries and don’t want to take a pay cut when they return home.
A ‘Bump’ for the Road
Companies have also bumped up how often they award lump sums to transferring employees rather than cover the costs as they come. Humphrey said many times the dollar amount doesn’t change depending on if an employee has a family or is moving alone. Although the lump sum eases accounting woes for organizations, it also ignores the needs of the transferee. The Atlas survey showed companies are more likely to pay lump sums to entry-level employees, which include many newly graduated millennial hires, than executive-level employees.
Transferring people in lower-level positions incorporates more millennials into the relocation process. Because of Generation Y’s inherent technological savvy, this means a shift in how companies like Xonex communicate with them. “Millennials need answers right here, right now, and it’s a good challenge for any company because that’s the workforce of the future,” Humphrey said. “It’s very rare for them to return a call, but they’ll return an email within three minutes.”
Accommodating for fast-paced demands means employing mobile apps that transferees can use to guide and track the moving process, from expense report filing to inventorying possessions that have been packed and unpacked. Xonex has its own, but others have turned to pre-established social media tools. Herring said Impact Group has launched its own app as well as integrated social media site Pinterest into how it reaches its clients.
Communication with transferees and their firms plays into the shifting mindset that comes with the relocation services industry boom. “Mobility isn’t necessarily seen as a transactional process anymore,” Herring said. “Companies are recognizing a need for a more holistic approach.”
This includes gauging a candidate’s preparedness and helping prepare a transfer employee while evaluating the value of a global assignment. Herring said there’s also a focus on providing the right resources for successful career management to international transfers on assignment so they can repatriate smoothly at the end of their assignment, which mutually benefits companies by combating turnover.
Mark Bennett, executive vice president of relocation service provider TheMIGroup, said with smaller firms participating in a practice that only a decade ago was dominated by multinational organizations means a need for more education. Larger corporations had relocation experts focused solely on transfers, but these smaller firms have put the responsibility on employees who also juggle other human resources duties. This requires building policies and practices at a grass-roots level, Bennett said.
But developing programs from the ground up requires an understanding of the landscape, and even companies that have a history of working on transfers are under pressure to relearn the industry.
Mercer’s Hannibal said learning new developments in compliance and governance issues should be at the forefront of any company’s voyage into the relocation process. “Even though the world economy is getting better, it’s easier to tax noncitizens,” he said. “It’s important companies make sure they have full visibility, with no stealth employees moving across the borders off the radar. I spend so much time personally telling clients to forget everything they knew about short-term assignments.”
That education isn’t in vain, however, as the future points to continually increasing relocation rates.
“The Western domination of relocation is changing, and it’s changing pretty rapidly,” Bennett said. “It’s going to continue to change just as companies continue looking for more cost-effective ways to move their people and just as workforces become more global.”