Mobile benefits Relocating: In this era of downsizing, companies are scrutinizing the relocation benefits extended to transferees and new hires.


John Hoey and his wife have finally settled into their Worthington Valley home after their sixth move in eight years -- but Mr. Hoey wouldn't be surprised to relocate three or four more times before he retires.

"It's a mobile society," he says.

Mr. Hoey is all too familiar with the dread, problems, and costs related to relocating. He's seen a variety of relocation benefit programs. When he transferred to Citicorp in New York, for example, the company bought his house. But when he and his wife moved here two years ago from New York, the communications firm that was hiring him did not buy his old house -- instead offering loss-on-sale coverage.

Their New York residence took a year to sell -- 12 months of negotiating over the phone, talking to agents and lenders over the phone, haggling with repairs over the phone -- all while trying to cope with a new life.

Mr. Hoey has plenty of company in dealing with narrower corporate relocation policies.

Today's corporations, battling their own budget woes and staff reductions, are backing away from writing the big check that it takes to relocate an employee or new hire. Tiered benefits are becoming the norm, as is more outsourcing of relocation counseling services. It all comes down to more homework and negotiating for the transferee.

Now vice president of human resources with Sylvan Learning Systems in Baltimore, Mr. Hoey finds himself on the other side of the fence, examining relocation issues for his company.

"Nine times out of 10 it seemed like the company lost money [on a home buyout]," he said. "The benefit is going away."

"People get unrealistic about the value of their home," Mr. Hoey says. "You need to work with employees to be sure they're realistic about the price."

Career-related relocations exploded after World War II, fueled by changing attitudes toward moving and by returning soldiers marrying or attending college many miles from their hometowns.

During the 1950s and early 1960s, booming corporate growth caused extensive relocations, but moving costs weren't usually included in benefits packages. Over the next two decades, corporate competition for increasingly specialized candidates forced employers to add relocation costs to their benefits packages. Those costs have been increasing almost yearly.

According to the Employee Relocation Council in Washington, costs to relocate a homeowner have spiked from $7,800 in 1973 to $31,000 in 1982. The latest figure is $44,920 for 1994.

The ERC, which includes 1,200 corporate relocation representatives and 11,000 others, such as brokers, appraisers, counselors and movers -- reports that member companies relocate a yearly average of 211 employees within the United States, about a quarter being new hires.

Those costs don't mix well with today's budget-cutting, pink-slip business climate.

"When the economy in the late '80s changed, we changed," said Roger Aylward, spokesman for Hunt Valley-based PHH Corp., one of the nation's largest third-party relocation companies. "Companies are less likely to spend the $40,000 to $50,000 to relocate someone domestically. Technology can slow it down, people can telecommute. "

The National Association of Realtors' latest data indicate that the number of homebuyers moving 100 miles or more has slipped from 20 percent of all homebuyers to 17 percent -- from the last half of 1988 to the same period in 1993.

"The number of employees a corporation will transfer within a company has decreased, but companies are buying others and dealing with new hires," said Coral Read-Emerson, vice president of relocations at Coldwell Banker-Grempler Realty in Baltimore. "Westinghouse closes a plant. They send the employees to an employment contractor. A person gets a job in Texas. That company needs to be in contact with a relocation company."

Coldwell Banker-Grempler reports slightly slower relocation activity over the last five years. Relocations account for 5 to 10 percent of the agency's sales volume, Ms. Read-Emerson said.

O'Conor, Piper & Flynn Realtors' relocation division sales made up 8 percent of its $2 billion volume last year.

"The numbers are going steadily upward," says Jim Piper, president of administration, who noted that even downsizing can generate relocation business because those laid off have to move elsewhere to find work.

A related effect of corporate downsizing is the subcontracting of relocation services.

The Maryland Insurance Group in Baltimore has outsourced many relocation services to PHH, such as its home-purchase program and property management services.

"We want a concentration on the core business," said Warren Reisig, an assistant vice president.

PHH Corp., a "third-party company" that holds a 30 percent market share of the corporate relocation business, offers employers a wide range of relocation services, such as counseling for the transferee, moving management, home buyout programs and home marketing assistance. PHH then networks with real estate agencies that actually sell the old homes, and pay PHH a referral fee.

PHH and other third-party relocation firms train real estate agents to be aware of the transferee's special needs. "It's a traumatic time for them, with schools, children and other factors," said Margie Gilmore, a Hunt Valley-based PHH destination consultant.

More real estate agencies are adding relocation services to their menus and sometimes competing with third-party firms. Scores now have Internet addresses. Relocations mean additional sales that don't depend on real estate cycles. Even so, the agencies aren't getting into the entire picture, usually leaving home buyout and loss-on-sale programs to the third-party companies.

"Real estate agencies are searching for ancillary services -- in anticipation of technology's effect on the industry. They're looking to provide insurance, tax assistance, mortgages -- they find it necessary to offer more services," Ms. Brienza said.

Long & Foster Realtors opened a Relocation Counseling Center downtown in 1981 for corporate relocation business. The center offers services such as home-finding assistance, general relocation advice, apartment-finding, van line discounts, spousal employment connections, home purchase programs, home marketing assistance -- often competing directly with third-party companies.

In Baltimore, the center counseled some 600 families last year, numbers increasing steadily. Maria Norton, relocation counselor, says Long & Foster tries to ally itself with local companies who relocate five to 20 individuals per year.

"We find smaller companies that outsource the entire relocation function to us," Ms. Norton said. "Because we're local, I concentrate on growth companies. I can do more for them."

Right now, Long & Foster's average relocation sale price is about $250,000 for the Baltimore home of a middle-management transferee.

Council data indicates the typical transferee nationally is a 38-year-old, middle-management, married employee earning about $55,000 per year.

At the same time that employers are outsourcing relocation assistance, they're getting pickier about just who they'll move and what related services they'll finance. Today, about half of the companies surveyed tier their relocation policies, usually varying assistance based on skill, experience and grade/salary level. That's double 1990's figure of 25 percent.

Employers offer one or more types of a purchase program for the old home. They include in-house purchase programs, where the employer buys the home at market value; a third-party purchase program, like the in-house program except that the employer contracts with an outside firm such as PHH to purchase and resell the home; a guarantee-against-loss, where the employer doesn't buy the home but guarantees the market value; and direct reimbursement, where the transferee is paid a lump sum for selling expenses, with no attempt to protect the market value.

The third-party program is the primary form of assistance, used by 70 percent of companies the council surveyed, followed by the direct-reimbursement program.

The Maryland Insurance Group has developed a two-tier policy, the major difference being whether the company buys the old residence. The company relocates 75 to 100 new hires and current employees per year.

"Lots of companies are looking to trim costs. We all have to make profit targets. The most expensive part of relocation is if we buy your old home," Mr. Reisig says.

He says it can cost $25,000 to $40,000 to carry a home, including taxes, utilities costs and any loss on sale.

"We're not in the real estate business," he said.

Maryland Insurance Group's buyout benefits depend on the type of position. Executives and field managers who are required to be mobile receive the buyout benefit. Those who don't get it still receive counseling services, closing costs on the new home and, even for current employees, a month's salary for miscellaneous moving expenses.

More companies are leaving the old home's sale up to the transferee, like Mr. Hoey, at least for a specified time period. Then they may offer loss-on-home-sale assistance, which averages more than $10,000 per payment. Sixty days is typical, but many employers have been extending that deadline, hoping the transferees will sell their own house. Many even offer cash bonuses for those who do find buyers on their own.

"The major hurdle is buying the old house or selling the old house," Ms. Norton said.

The lump-sum approach is gaining popularity for entry-level new hires, because it encourages transferees to sell and move quickly and cuts administrative costs. Reimbursement for other relocation costs is usually itemized and documented.

Middle-management new hires usually receive more extensive help -- often a better reimbursement rate and more coverage for moving, shipping and closing costs expenses.

About 37 percent of the companies surveyed offered either in-house buyout or home buyout by a third party.

Executive-level hires receive the most extensive aid -- primarily third-party or in-house buyout programs and full coverage on related expenses.

"It's true there's belt-tightening, but they still want their employee to feel they're being fair -- that the corporation was fair to them," Mr. Piper noted. "They're walking a line."

Pub Date: 4/07/96

Average relocation costs

Here are the average costs to a company of relocating employees to a new region:

....... Employee ... Employee .. New hire .. New hire

Year .. homeowner .. renter ... homeowner .. renter

1994 ... $44,920 .. $12,366 ... $35,902 ... $8,948

1993 ..... 45,263 ... 11,960 .... 34,600 .... 8,486

1992 ..... 45,330 ... 12,457 .... 33,255 .... 8,346

1991 ..... 46,667 ... 12,290 .... 33,467 .... 8,227

1990 ..... 42,585 ... 11,234 .... 29,734 .... 7,530

1989 ..... 39,660 ... 10,649 .... 26,587 .... 6,648

1988 ..... 37,127 ... 10,880 .... 25,906 .... 6,910

1987 ..... 35,705 ... 10,115 .... 23,501 .... 6,627

1986 ..... 33,381 .... 9,164 .... 22,737 .... 6,074

1985 ..... 32,303 .... 9,124 .... 21,700 .... 5,773

SOURCE: Employee Relocation Council

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