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Relocating Costs
Rise
By Liese Hutchison
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The
average expense of moving an employee, who owns his or her home,
within the United States, costs $50,000. Moving an employee to
London or Tokyo? That relocation starts at $100,000 and can reach
$500,000. The cheapest employee to move—the new hire who is renting—costs
about $11,000.
How can a company save money when it wants to advance a key employee
to a new location? The biggest expense is selling an employee’s
house and buying a new one. Marian Anderson, director of corporate
services at Gundaker, notes that companies typically used to hire
two appraisers to determine the price of an employee’s current
home, then offer the employee that price. The problem, Anderson
says, is that with this guarantee price, employees didn’t have
an incentive to maintain, spruce up or sell the house quickly,
leaving the company the owner of a home.
|
1998
Average Component Costs
Current Employees
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| Shipping
households goods |
$7,546 |
Preferential
rate mortgage
(permanent buy down) |
$6,943 |
| Federal
tax liability |
$6,475 |
| Purchase
closing costs |
$6,324 |
| Miscellaneous
expense allowance |
$4,438 |
Bonuses/Incentives
given for
employee-generated home sales |
$4,023 |
| Temporary
living at new location |
$3,340 |
| Duplicate
housing expenses |
$2,429 |
| Home
finding trips |
$1,656 |
| Spouse
employment assistance |
$1,367 |
Travel
and lodging expenses
at the time of the moves |
$1,147 |
Source:
Employee Relocation Council |
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“Now corporations offer incentives to sell the house—typically
a two percent bonus of the sale price if the house is sold within
60 days,” she states. “There’s also the buyer value option or
BVO.” Basically that option states that an employee receives the
amount a buyer is willing to buy the house for, not what it is
appraised for. “This saves the company money because it doesn’t
have to pay for two appraisal fees.”
Another issue regarding a relocating employee’s home, says Jennie
Schutze, director of relocation at Coldwell Banker, is that when
an employee moves to a new location the company should be involved.
“A company needs to be a part of the home-hunting process,” she
says. Her advice: Don’t buy something that’s difficult to sell,
because the company might end up owning the house in a few years
when the employee is asked to relocate again.
After realtor’s fees, closing costs, points and transfer fees,
the next biggest expense in relocation is moving costs. If a number
of employees are moving at once, Anderson notes, the company can
negotiate for better prices for shipping household goods. In addition,
if the current home sells faster than the new home is available,
the corporation pays for temporary housing. “Most companies have
limits on how much a family can spend on duplicate housing costs,
depending on the stature of the employee,” Anderson points out.
Some organizations, Anderson says, are going to the lump sum method
of relocating employees. “Employees receive a maximum amount to
move and then use that amount like a debit card and subtract from
it what they need to relocate,” she notes.
Hard costs, such as buying and selling homes, and moving expenses,
aren’t the only ones companies must fork over to relocate a key
employee. “It’s the soft issues or costs that can really add up,”
Schutze says. An example she cites is that employees are asking
for help moving an aging in-law or parent. Another example is
setting up nanny or day-care services. A major soft cost is finding
work for the trailing spouse. “A number of corporations pay a
trailing spouse’s salary for six months while the company helps
him or her look for new employment,” Schutze notes.
Anderson says there are two kinds of companies—those that focus
on costs and those that are more concerned about the welfare of
their employees. “Companies in our region are more paternalistic;
they’re interested in costs, but they want a smooth move. They’re
more interested in what’s best for the families,” she states.
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Relocating
- By The Numbers
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- The
top 10 metropolitan areas in terms of relocating employees:
Washington, Atlanta, Chicago, Phoenix, Dallas, Los Angeles,
Lake County, Ill., Seattle, New York and Boston. St.
Louis was the 21st most active market in 1999. (American
Moving and Storage Association)
- In
1998, the average cost to relocate a home-owning current
employee was $53,696. For a home-owning new employee
the cost was $40,676. (Employee Relocation Council)
- In
1998, the average cost to relocate a renting current
employee was $15,605; the corresponding cost for a new
hire renter was $11,491. (Employee Relocation Council)
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Liese L. Hutchison is an assistant professor in the department
of communication at Saint Louis University and a free-lance writer.
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