GBO

Some policies offer a Guaranteed Buyout Program (GBO), where the company or a third-party relocation service purchases the home if it does not sell within a certain period. This ensures the employee can move without financial strain.

Pros

• Tax advantage for your company and the employee.
• Employees are not required to attend closing.
• Professional appraisers ensure your company is offering a competitive market price.
• Guaranteed offer expedites the relocation process so that transferee can relocate faster.

Cons

• The company carries the risk of owning and maintaining the home until it is sold.

BVO

With the Buyer Value Option (BVO) program, the employee is responsible for marketing and selling their home on the open market, but once they secure a bona fide offer from a buyer, the company or a third-party relocation service steps in to purchase the home at the agreed-upon price. This approach allows the employee to sell their home at fair market value, while the company handles the closing and resale, streamlining the process and minimizing the employee’s involvement in the transaction after the offer is secured.

Pros

• Tax advantage for your company & transferee.
• Employees are not required to attend closing.
• Minimizes company costs as buyer is secured by employee.
• Broker Market Analysis completed by two real estate agents to establish an appropriate marketing parameter.

Cons

• If home sale falls through, homes go into corporate owned inventory.
• Employees remain financially responsible for their home until an outside offer is accepted which might delay their move to the new work location.

Home Sale Bonus

A home sale bonus can be an incentive for employees to sell their homes quickly.

• • Beneficial to your company if you offer a GBO; offered less in a BVO program.
  • Decide where you will cap this benefit, and if the cap will vary dependent on employee’s role. Many companies base it on a percentage of the sale and/or offer a higher bonus for those that can sell their homes within a desired timeframe.
  • This is not required in today’s real estate market as homes are selling quickly as demand greatly outweighs the supply of available inventory.

Home Inspections

Most companies require a full home inspection for a GBO and BVO program. The home inspection is ordered by the Relocation Management Company (RMC).

An inspection helps reduce risks of the company purchasing a home with unknown significant defects.

The transferee is required to complete all necessary repairs before moving forward in a BVO or GBO program.

Some companies want to avoid being too picky about required repairs, so an alternative to a full home inspection would be a major component inspection.

Employees at different life stages have varied housing needs. Rental assistance benefits ensure that the company’s relocation policy is inclusive and supportive of diverse situations, such as younger employees or those relocating to urban areas where renting is more common.

Additionally, providing rental assistance helps minimize the stress of moving and eases the transition into the new work role. An essential component of this benefit is helping transferees with early lease termination.

If you choose to offer rental assistance, consider the following:

• • • How many days of rental search you want to provide.
    • Placing caps on rental assistance ensures your company is containing costs. If an employee exceeds the cap, decide whether to provide an exception benefit on an individual basis.
    • Encourage employees to negotiate with landlords to insert a diplomatic clause into the lease that reduces future lease break fees.

Temporary Housing

Relocating to a new location can be an overwhelming experience for employees. Destination services play a crucial role in easing this transition by providing support that helps employees settle in more quickly and comfortably. Essential destination services include temporary housing, home-finding assistance, settling in services, among others.

By offering comprehensive destination services, companies can significantly reduce the stress associated with relocation, allowing employees to focus on their new role and become productive sooner.

A well-supported transition not only enhances the employee’s experience but also contributes to their overall satisfaction and success in their new position.

The HHG move is one of the most stressful stages of a relocation. Covering the cost and logistics of household goods shipping significantly reduces this stress, helping employees focus on transitioning to their new role.

• • Make sure your RMC is proactive in their communications and provides opportunities for employees to give live feedback so that any issues can be addressed immediately.
  • Verify that the RMC provides transparent pricing, detailed tracking of expenses, and comprehensive insurance coverage to mitigate risks.
  • Most companies will provide tax assistance with HHG moves, especially since the Tax Cuts and Jobs Act (TCJA) of 2018 was passed.

Vehicle Shipment

Create cost savings by basing the number of vehicles authorized on move distance. It is common for companies to offer at least one vehicle to be shipped if the distance will be over 500 miles, and up to two if the distance is over 1000 miles. This reduces the stress of requiring the employee and family to travel long distances in separate vehicles.

Lump Sum Only Benefit
(no counseling)

The transferee receives one lump sum payment. The employee decides how they plan to spend these funds.

• Commonly used with non-executives including entry-level hires and employees in development programs who rotate locations frequently.
• Typically, not utilized with higher-level relocations.
• Majority of lump sums are less than $5K

Managed Lump Sum
(with counseling)

Allows your company to retain partial control over how the employee uses the money while still allowing some flexibility. The RMC counsels the employee on approved ways they can use their managed lump sum, and the funds are provided as a reimbursement after the employee incurs the cost or is direct billed to one of your RMC’s supplier partners.

• Managed lump sums are used more often as the only benefit to executives or higher-level employees versus a lump sum only (no counseling), used more often with entry-level employees.

Some of your employees may be moving to an area with a lower cost of living and some may be moving to a much higher cost destination. If higher costs exist, some companies will provide a limited term cost of living allowance to bridge the financial gap. Options for payout could include monthly, quarterly, annually or a one-time lump sum.

• Set an ending time-period for this benefit and decide whether the benefit will slowly decrease/taper during that time-period.
• Companies should also consider the tax implications of COLA payments and ensure clear communication with employees about how the adjustment is determined.

It is best to only offer this benefit to those employees moving to higher cost destinations. If your employee is moving from one high cost of living area to another, consider withholding this benefit. Often employers will establish a threshold (typically a percentage), to offer the benefit. Others will identify specific areas/cities and only offer the benefit to employees moving to these pre-determined locations.

Some common policy exception requests might include the following:

• Extended temporary housing or household goods storage
• Additional crating of items, vehicles to be shipped or other services for a household goods move

Policy Tiers

With policy tiers, the company selects which employees receive specific benefit packages. Often, policy tiers categorize employees into different levels (tiers) based on factors like job level, seniority, or relocation distance, with each tier offering a predefined set of benefits.

For example, relocation benefits provided to an executive might be different than benefits provided to an entry-level employee. While a tiered policy allows a company to be selective regarding which benefits are offered to each level of employee, some benefits may be offered in all packages.

In other words, a HHG move could be offered to all relocating employees, but the cost of the move could have caps for lower-level employees. Some companies will only offer home sale assistance to higher level employees, but all other benefits may be the same regardless of role/job level of the employee.

In addition to employee position level, other factors that could affect which tier an employee fits into might include whether they are a homeowner versus renter, or a new hire versus an existing employee.

In Conclusion

In crafting an effective US domestic relocation policy, it is crucial to consider a variety of best practices that address both employee needs and organizational goals. Regularly compare your policy with industry standards and competitors to ensure it remains competitive and effective.

Consider partnering with a good RMC who can help write your policy, benchmark it regularly, and administer it cost-effectively.

For more best practices, get our 2024 Global Mobility Benchmark Report.