Understanding Cost Containment
Every relocation program manager has a job to contain costs. And it is not an easy job. Especially if managing a relocation program is not the only job you have. Here are 3 steps you can take today to start saving significant dollars for your company.
Step 1 – Collect The Data
The best cost containment strategies begin with an incredibly clear and accurate understanding of how each and every dollar is spent. Having custom reporting is crucial here. Know your budget by subsidiary, cost center, policy tier, specific benefit offering, etc. The more you get to know this data, the easier it will be to focus on the “A” priorities.
Tax Gross Up
Final Move Trip
Lump Sum / Allowances
Relocation Management Company Fees
This is an example of how you can break down the categories of your spend. You’ll want to start reviewing the higher percentage categories. Often times, the fees from relocation management companies (RMCs) are the first thought when cost containment comes up in the discussion. You can see by this example that you cannot have a serious impact on the overall costs by trying to cut RMC fees. Keep reading and you’ll see WHR Global’s pricing methodology below.
Step 2 – Review & Analyze Your Current Program
Once you have a holistic view of the overall relocation spend, you can start to break down each category further. Do a thorough review of each policy and tier to get an understanding of how often each policy is being used. Take a deep look into each policy to get a feel for which benefits are being used the most.
This is a great time to benchmark your relocation policy. Getting an understanding of trends in the relocation industry can be an easy way to find areas of cost containment.
Step 3 – Identify Cost Savings
A solid relocation policy finds the balance point between how much your company is willing to spend on a particular employee, and the level of service they would like them to receive. Companies seldom decide they are going to cut major components of their relocation program such as the movement of household goods or the reimbursement of home sale costs. Without these benefits, most employees wouldn’t accept a job that requires relocation defeating the purpose of your relocation program. Within these benefits though, you can find areas to reduce significant costs without sacrificing your employee’s experience.
Here are some examples of ways our customers previously cut costs from their relocation programs.
There have been a lot of tax changes over the years. While moving expenses are no longer tax exempt, there are still areas within the relocation industry where you can still receive certain tax benefits, specifically if you are offering a home sale program. Offering a direct reimbursement of home sale expenses may sound like the easiest option, but with no tax benefit, it may not be the best option for you or your employee. You may be better off using the Guaranteed Buyout or Buyer Value Options. And, as long as these programs adhere to IRS requirements, your company can still benefit from certain tax savings. Also, be sure you aren’t unnecessarily grossing up some items. Gross up is designed so employees don’t take on a financial burden of their relocation. Therefore, home sale bonuses, miscellaneous allowances, etc. should be taxed per usual.
Be very clear on what items your company is willing to pay to be crated. This is great way for keep costs down on one of the more expense relocation categories, the movement of household goods.
This is a must. Your policies are put in place for a reason. You must track anytime an employee receives approval to act outside of your policy. On a monthly, quarterly, and annual basis you should review the exceptions and trends. This will give you the ability to understand how these exceptions affect your bottom line. Once you know this, you can make adjustment to your policy or put your foot down on approving the requests.
Pay attention to real estate markets and adjust your policy accordingly. Do your employees truly need a cash incentive to sell their home? In many areas throughout the U.S., homes are selling with little friction just by going on the market. Don’t offer a home sale bonus just because you always have. If you continue offering this type of benefit, be sure to put a cap on it.
Similarly, you need to keep an eye on foreign exchange rates when managing a population of international assignees. Reviewing cost of living allowances on a regular basis can save thousands of dollars by seeking to maintain buying power based on the market fluctuations.
More on Caps
You likely cap how many days your employees can use temporary housing or storage of their household goods. You can avoid massive household goods bills by putting a cap on the weight of the individual’s goods including limiting the container size for international shipments.
Tier The Policy to Match The Need
No one wants to keep track of 10+ relocation policies but it can also be expensive to offer everyone top of the line benefits even if some are volunteering to move. Strike a balance of having enough relocation policies to address your most common move types. This is especially true on international transfers that can have different durations and benefit components ranging from commuters and long-term assignments to localizations.
WHR Global’s Pricing Methodology
Our pricing model is built on transparency, simplicity, and flexibility. Companies are made to make money and we are no different. However, we are unique in our openness and willingness to work with our clients to find a fee that works for both companies. Our most common pricing model is called pricing by tier and it was developed out of our fiduciary duty to our clients. This is how it works:
1. Policies – we like to complete an in-depth review of your policies. We can get a clear picture into the time and resources it would take to service each transferee.
2. Volume – we need to know how many WHR Global employees will be required to provide exceptional service for your program. Knowing how many home sale files vs. renters or international assignments vs. permanent transfers is critical.
3. Referral Fees – as the relocation industry has gotten more and more competitive over the years, the majority of revenue comes from our vendors. Much of this comes from referral fees from real estate agents. Knowing how often we can collect referral fees can reduce your files fees.
4. Locations – referral fees can be based home values. If you move your employees in and out of areas with high home values, we can collect higher referral fees and lower your file fees more. Often times down to $0. We’ll even discuss sharing referral fees to show our dedication to a long term partnership.
5. Fee – we then assign one simple price to each policy tier. We don’t have technology fees, reporting fees, or markup fees. All you pay for is the tier fee anytime you move an employee.
Why is this beneficial to you?
This prevents multiple fees for similar services offered to the transferee. For instance, if you take lease break cancellation and house hunting trips: our model recognizes that these services boil down to expense management. By charging for the entire tier, we make sure you’re not double-charged; expense management as a holistic service would simply be factored into the overall fee.
Pricing for Relocation Tiers vs A La Cart Policies
WHR Global only works in our client’s best interest and vows to provide year over year cost savings. We would be happy to talk you through policy consultation or cost containment strategies. We put these practices into play everyday and can do the same for your company.