Policy Archives

What is a Buyer Value Option (BVO) Home Sale Program?

by WHR Global | Aug 13, 2024 | News

A BVO home sale program is a program which is designed to help relocating employees sell their homes quickly and efficiently without the company taking ownership of the property.

According to WHR’s 2024 Global Mobility Benchmark, a BVO program remains one of the most competitive relocation offerings.

60% of respondents offer home sale and/or purchase benefits.
- Of those,
  - 59% offer BVOs to new hire non-executives
  - 78% offer BVOs to new hire executives
  - 67% offer BVOs to existing employee non-executives
  - 74% offer BVOs to existing employee executives

Buyer Value Option (BVO) Home Sale Program

The best way to describe a BVO is in the context of
a traditional Guaranteed Buyout (GBO) program

Under a GBO, the relocation management company (RMC) orders two home appraisals and simply averages the two to determine a guaranteed offer.
As an example:

Appraiser A values a relocating employee’s home at $330,000
Appraiser B values the same home at $335,000
$332,500 is considered the “GBO”

The relocating employee then takes the offer of $332,500 and moves to their new location, unencumbered by their former home. In turn, the RMC sells the property on the
open market, and the employer is charged for all of the associated real estate expenses upon the conclusion of the sale.

The employer can treat the home sale costs as “business expenses,” so none of the expenses are considered income to the employee (for federal tax purposes).
This process is validated by the IRS in Revenue Ruling (2005-74), which specifically addresses this type of home sale program.

What is a Buyer Value Option (BVO)?

Read the Buyer Value Option (BVO) Whitepaper

Essentially, BVO is very similar to a GBO, with the exception that with a BVO home sale program, no appraisals are completed. Instead, the buyout offer is based on a bona fide fair market offer received by the employee from a qualified third-party buyer. With BVO, the employee is responsible for listing their home for sale, and receives marketing assistance from the RMC.

Once a contract is deemed valid, the RMC offers to buy the home from the employee at a price based on the outside sale price, and the employee is funded their equity based on this amount. The RMC will enter into a new listing agreement with the employee’s broker and proceed to close the transaction with the outside buyer while honoring all agreed terms and conditions. All home sale costs are treated in the same manner as with a GBO program.

The BVO home sale program provides all the tax benefits to both the employer and employee. However, it is the responsibility of the employee to secure an outside buyer ready, willing, and able to purchase the property at a fair market value.

Why should you offer your relocating employees a BVO?

- Tax Savings: A properly structured BVO program that adheres to IRS requirements provides significant tax savings that benefit employees as well as employers.
- Minimized Risk for Employees: Employees avoid the financial risk and stress of carrying two mortgages if they have to move before their home is sold.
- Expedited Relocation: Employees can move to their new location more quickly, knowing that their home sale is being managed.
- Cost Efficiency for Employers: Employers can manage relocation costs more effectively and help maintain employee productivity by reducing the stress and financial burden associated with home selling.

WHR Global provides the following
BVO support to help your employee
sell the home to an outside buyer:

- Obtain two Broker Price Opinions (Broker Market Analyses)
- Reconcile the two opinions of value
- Suggest a listing price
- Develop a comprehensive marketing strategy
- Obtain pictures of the home
- Provide tips to paint, declutter, etc.
- Assist with Realtor selection
- Obtain weekly feedback from Realtor
- Assist in contract negotiation

Read the Buyer Value Option (BVO) Whitepaper

Be aware: From a cost standpoint, when selling a home, the following expenditures are typical in a home sale transaction.

When selling a home, there are several expenditures in a typical home sale transaction

Real Estate Commissions
Recording Fees
Transfer Taxes
Title Expenses
Notary

Escrow Fees
Seller Concessions
Repairs
Inspections
Miscellaneous

A Buyer Value Option home sale program is a valuable tool for companies looking to support their relocating employees. By assisting with the home sale process, companies can alleviate a significant source of stress for their employees, ensuring a smoother transition and enhancing overall job satisfaction.

For the company, this can translate into higher retention rates, more successful relocations, and a stronger ability to attract top talent.

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What is COLA (Cost of Living Adjustment)?

by WHR Global | Jul 26, 2023 | News

Cost of Living Adjustment (COLA) is a crucial aspect corporations consider when relocating employees or hiring talent from different geographical regions. What is COLA? COLAs are payments designed to compensate employees for the higher cost of living they encounter in their new destination. Learn more about calculating cost of living adjustments, definition, and factors in cola payments.

Understanding Cost of Living Adjustment (COLA)

Cost of Living Allowances or Adjustments, commonly known as COLA, serve a common purpose: to bridge the gap between the cost of living in a low or moderate region and that in a higher-cost location. The employer compensates the employee based on housing, goods and services, and taxes, enabling them to maintain the same standard of living in their new area. This is the purest definition of a cola, but many nuances go into the calculation.

Calculating Cost of Living Adjustment

An accurate calculation is the foundation of a fair cost of living adjustment. Several providers offer services to calculate housing costs, goods, services, and other factors to determine the standard. The origination city’s cost index is then compared to the new town’s to identify the cost difference. Many employers have a limited number of potential locations for employee relocations, making it easier to assess cost indexes. Employers may also compare entire regions instead of individual cities for easy calculation. WHR can help our clients understand the COLA formula and make the best decision.

Factors in Calculating COLA

Employers must decide under what conditions they will offer a cost-of-living adjustment. The percentage of change in the cost of living between the locations is a critical factor in determining COLA. The question becomes, what is a standard cost of living raise? Some employers may require a cost-of-living shift greater than 3%, 5%, or 10% to provide the COLA. Those aiming to offer more generous benefits may set a lower threshold for cost-of-living changes to benefit a more significant number of employees. Every employer will determine their COLA benefits differently. The cost of living adjustment will also vary by employee and, of course, location. Many of these are case-by-case situations for COLA payments.

Duration and Payment of COLA

Once a COLA is determined to be provided, the next consideration is the duration and payment method. Traditionally, U.S. domestic COLAs are calculated once and paid as a lump sum allowance or distributed over a specified period. Companies may maintain the adjustment for an extended period to allow employees more time to adapt to their new location.

On the other hand, international COLAs are recommended to be recalculated more frequently due to fluctuating currency rates, inflation, and other uncontrollable factors. For international assignments with pre-determined end dates, companies often offer the cost of living adjustment for the entire duration. However, if the assignment is open-ended, the company may transition the employee to the local standard of living (localizing) and discontinue the COLA after a set period.

Importance of Benchmarking

Relocation benefits can vary significantly across industries. Therefore, benchmarking your organization’s COLA policy against peers is crucial. Some industries may offer more frequent and generous COLAs, while others may not consider it at all. Understanding these variations can help determine whether a COLA adjustment or increase is needed. Ultimately, it can help you tailor your policy to meet your organization’s needs. The last piece to consider in benchmarking is understanding market rates in target relocation areas.

Conclusion

Cost of Living Adjustment is a vital tool/formula corporations use to ensure their employees can maintain the same standard of living when relocating to higher-cost locations. Companies can design worker compensation and relocation packages that attract and retain top talent by understanding the factors involved in calculating COLA and benchmarking against industry peers.

Improve your COLA benefits with our Allowances & Per Diems Benchmark.

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ESG in Global Mobility: Turning the Tide on Air Shipments.

by Sean | Jun 20, 2023 | News

In an era where environmental, social, and corporate governance (ESG) is gaining significant traction, it is crucial for global mobility programs to evaluate and modify their transportation methods accordingly. Air shipments have long been the go-to choice for international relocations and corporate moves due to their speed and efficiency. However, the environmental impact of air cargo emissions cannot be overlooked. As a greener alternative, sea container shipments present a compelling case for global mobility programs to transition towards more eco-friendly transportation modes. In this article, we explore the advantages of sea container shipments and emphasize the need for a shift away from air shipments.

How Air Shipments Impact ESG in Global Mobility:

Air cargo plays a vital role in global trade and mobility due to its rapid delivery times and efficient logistics. However, the environmental repercussions are substantial. Aircraft emit greenhouse gases, including carbon dioxide, nitrous oxide, and particulate matter, contributing significantly to global warming and air pollution. The carbon footprint of air shipments is disproportionately high compared to other transportation modes, making it imperative for businesses and global mobility programs to seek sustainable alternatives.

The image below is a comparison of typical CO₂ emissions between modes of transport (measured in grams of CO₂ per metric ton of goods shipped per mile). Other sources estimate that flights emit 500 grams of CO₂/metric ton of cargo per kilometer of transportation. However, ships emit only between 10 to 40 grams of CO₂ per kilometer.

The Advantages of Sea Container Shipments:

Reduced carbon footprint:

Sea container shipments emit significantly lower carbon dioxide per ton-mile compared to air shipments. Large cargo vessels have higher fuel efficiency and capacity, allowing them to transport goods in bulk, thus reducing per-unit emissions. This makes sea container shipments a more environmentally friendly option, particularly for long-distance relocations.

When paired with environmentally-friendly services such as Discard & Donate, global mobility programs take their ESG commitments to the next level. Not only does Discard & Donate reduce the cost of each household goods shipment for employers, it reduces the overall carbon footprint of air, sea, and ground shipments by eliminating the transportation of unneeded items and reducing the amount of packaging materials.

Cost-effectiveness:

Sea freight is generally more cost-effective than air transportation, especially for bulky or heavy shipments. By embracing sea container shipments, global mobility programs can potentially reduce shipping expenses, allowing for more flexible budget allocations or investments in sustainable practices.

Improved packaging and consolidation:

Sea container shipments necessitate careful packaging and consolidation due to the longer transit times involved. This requirement often results in more efficient use of space, reducing the overall volume of shipments. Effective consolidation reduces the number of containers needed and maximizes the use of vessel capacity, contributing to a more sustainable supply chain.

ESG-friendly modes for last-mile delivery:

While sea container shipments are not as fast as air shipments, various sustainable last-mile delivery options, such as rail or road transport, can be utilized to bridge the gap. This multimodal approach ensures that sustainability is maintained throughout the entire logistics process, from port to final destination.

Promoting circular economy practices:

The longer transit times of sea container shipments provide an opportunity for companies and individuals to adopt circular economy principles. By embracing sustainable packaging, reusing materials, and optimizing supply chains, global mobility programs can contribute to reducing waste and promoting responsible consumption practices.

Conclusion:

As the world continues to grapple with environmental challenges, it is crucial for global mobility programs to proactively shift away from air shipments and embrace ESG-friendly transportation alternatives. Sea container shipments provide numerous advantages in terms of reduced carbon emissions, cost-effectiveness, improved packaging practices, and opportunities for circular economy practices. Global mobility programs should consider the following steps to reduce their carbon footprint:

Communicate the difference in CO₂ emissions between air, road, and sea shipments. Your employees may self-select a more eco-friendly option (if feasible), sending fewer items in their air shipments or not utilizing them at all.
Reduce the size of the air shipments offered. Instead of an LDN air shipment container which has a weight capacity of 750 lbs, consider reducing this entitlement to a D air shipment container which has a weight capacity of approximately 500 lbs.
Implement programs such as Discard & Donate to reduce shipment sizes, thereby reducing organizational costs and CO₂ emissions.
Offer a cash allowance in lieu of the air shipment, or eliminate the air shipment option altogether.

By transitioning to sea container shipments, global mobility programs can play an active role in minimizing their environmental impact and contributing to a greener future. Embracing sustainable shipment modes is not only an ethical responsibility but also a business imperative that aligns with the growing global focus on environmental sustainability.

Corporate Culture & Your Relocation Program

by WHR Global | Nov 27, 2018 | News

Corporate Culture refers to the beliefs and behaviors that determine how a company’s employees and its management interact and handle business. Corporate culture is often implied, rather than expressed or defined, and it is something that develops organically over time. A company’s culture reveal itself in a variety of ways from dress code to the treatment of clients.

We’ve seen the results when relocation policies and programs match corporate culture and wanted to see how other companies stack up. That’s why we surveyed some of the largest and most successful companies around the world to participate in the 2018 Mobility + Culture benchmark study. Our unique Culture Guide analyzes each respondent’s cultural values through eight A/B style questions.

**Do you prefer your partners to be High Tech or High Touch?**

Is your company’s primary focus on technological advances or on relationship building? Of companies surveyed, 85% prefer to partner with high-touch companies. At WHR Group, we understand that relocating can be stressful on the transferee and their family. We heavily rely on the relationships that we build with our clients and their employees so that we can assist and help them to move forward in the best way possible.

While relationships and person-to-person communication is large component to how WHR handles relocation, technology is the tool that allows us to bring every factor included in the relocation to one destination. Our business is based on a “high-tech, human-touch” model, where we blend our intelligent, proprietary relocation technology with a dedicated team of real estate licensed relocation experts.

**Do you primarily focus on budget or employee satisfaction?**

When asking companies if they are primarily focused on budget or employee satisfaction, only 13% reported that there is more concern about budget. It’s clear that surveyed companies also understand the stressful nature of relocation and have placed their importance on employee satisfaction in their programs.

At WHR, we also value our employees. This is realized through our 5-time award winning culture in the Top Workplaces program by the Milwaukee Journal Sentinel. By hiring based off of WHR’s core values, we are able to guarantee the best service you will ever experience, regardless of the industry. Our inherently empathetic employees create high-touch relationships with transferring employees, creating a stress-free relocation experience.

**Is your program designed to be proactive or reactive?**

Being a “proactive” company means that the corporation actively plans ahead, and they are preparing for the needs of their employees. Of companies surveyed, 67% of them related to this culture. At WHR Group, one of our core values is to be proactive, and this is executed every day. When a transferee’s file is initiated, a call is made within 24-hours to introduce the Counseling team, and to explain what the employee can expect throughout the life cycle of the relocation. The initial call is a critical time to reveal any potential issues, set expectations, and lay the foundation for a smooth relocation.

At WHR Group, we place the utmost importance on culture as it relates to your relocation or mobility programs. We believe this goes hand in hand with our dedication to advancing lives forward.

See how WHR Group has became a leader in the global mobility industry with these 6 policies.

3 Benefits to Offer Your International Assignees

by WHR Global | Mar 6, 2018 | News

A strong cultural and language training program is one of the most important benefits you can offer employees who are moving abroad. International relocation is stressful on the employee as well as their family, which is why it is so easy for an employee to struggle in a new country, especially if they don’t understand the culture, customs, business culture, and language. This can lead to seclusion, depression, and ultimately, a failed transfer.

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Offering cultural and language assistance will allow your employee to assimilate into the new culture as quickly as possible, providing them with the tools they will need to not only succeed in their new role but thrive in their new environment as well.

International assignments are challenging for all involved: the employee, the spouse, their children, and your company. You can make the transition easier for all by offering these 3 benefits:

1. Cultural Training

Culture shock often occurs when your employees and their families are dropped into a new situation without any knowledge of their new environment. Cultural training isn’t just about learning the host country’s environment and culture, it is also about helping your employee understand their new business culture. Even though your employee may be just transferring offices, the business practices can vary greatly between different countries.

It is also important for you to find and share outside activities that will assist your employees in meeting new people, allowing them to learn the new culture and language in a more social setting. The more they immerse themselves into the culture, the happier they will be in their new position and new lifestyle.

Help and encourage your employees to learn about their new country’s history, common business and social practices, and the local customs. This ensures they truly feel at home in their new location.

2. Language Training

Language training is a benefit that is often overlooked when transferring an employee internationally. Because English is the standard business language, it is just assumed that English is the only language they will need. While this may be true in the sense that they will be able to communicate the essentials at their new office, you also have to consider how they will be able to interact outside of work. Things that were once simple, like going to the grocery store or hosting a dinner party, become daunting.

Language skills are essential to not only help your employees advance in their new positions, but also fully assimilate into their new country. Language training can begin the moment the employee accepts their new position with the use of online tools and/or in person language training sessions, and can continue even after they make the transfer.

3. Spousal and Family Assistance

Spousal and family assistance is another way of ensuring your employees experience success in their new location. The most common reason for failed transfers is family related issues. Often times, the family is forgotten about when it comes to the benefits offered. Spouses and partners leave behind careers and extended family; children leave the schools and friends they’ve come to rely on.

Offering assistance to the families of relocating employees makes the transfer more successful. The employee’s spouse may need help finding a new job or even finding the best stores to shop at. They, too, may need to find social groups to help them engage in their new environment and assistance in learning the new language. Schools are another major consideration when relocating families abroad. Children will need to learn the new culture and language as well, all while acclimating to their new school system.

Spousal and family assistance should include both cultural and language training and should begin as soon as your employee accepts their new role.

Download our Sample International Relocation Letter Today!

Use this sample International Relocation Letter to help move your employees to any location, across the globe. This template includes everything you need to get started!

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How WHR Group Can Help

WHR has global partnerships with industry experts all over the world, allowing us to deliver cultural and language training services to relocating employees and their families. These experts have been evaluated to design flexible training programs based on a professional assessment of the individual’s and family’s needs, including online and/or face-to-face training preferences. We also track and report on training completion, which is provided to ensure the effectiveness of the program for everyone involved.

Contact WHR Group today for more information on our global mobility services and how to implement your culture and language training program: 800-523-3318 or [email protected].