State of the Sector Relocation

By Joe Mullich

Apr. 8, 2005

Relocation is undergoing a revival. As the economy warms up, companies are focusing new attention on services for transferees and new hires–and are demanding more from relocation providers.

    Kevin Kelleher, president and CEO of Cendant Mobility, one of the nation’s largest relocation companies, says he sees a dramatic escalation of the range of services clients want. They are driven by the pressure to control costs and increase productivity, by the trend toward full outsourcing for relocation and by global expansion.

    “Smaller companies, who had not previously been major players in the outsourcing trend, are moving increasingly to outsource services as well,” he notes.

    At Primacy Relocation, another of the nation’s largest relocation firms, traditional offerings are being supplemented by new services such as immigration law, repatriation and cross-cultural counseling. 

    “We are often asked to support expatriate transferees the whole time they are on their assignments, not just getting them there and getting them back,” says Primacy CFO Michelle Vallejo, a former member of the board of directors of Worldwide ERC, a leading relocation trade group in Washington, D.C.

    As a result of a stronger economy, the number of people who are being transferred by their company increased about 15 percent last year, says Cris Collie, executive vice president of Worldwide ERC.

    However, firms are outsourcing more of their relocation services for a variety of reasons other than sheer volume: In the wake of staffing cuts, human resource departments have fewer dedicated relocation specialists.

    Other factors–ranging from globalization to increased security concerns following 9/11–require relocation specialists to have a depth of knowledge that most firms can’t maintain in-house. And as companies grapple with increased government scrutiny, a greater desire to cut costs and more demands from savvy workers, relocation has simply become more complex.

    “If an employee has been moved before and is being recruited by another company, they want all the bells and whistles, from home buyouts to bonuses if they sell their home themselves,” says Jo Lay, vice president of relocation for Coldwell Banker Residential Brokerage.

    All this has caused relocation firms to be more attuned to the needs of individual transferees. For example, one employee may need assistance with pet boarding during home-finding trips while another needs support in finding fitness facilities, education centers and networking opportunities in the new community.

    “Traditionally, companies were offering a home sale program and spousal assistance to a married person moving an entire family to a new location,” says David Motherwell, COO of domestic relocation for Sirva Relocation. “Increasingly, we are seeing more single transferees or those who rent rather than own a home.”

    There are at least three different types of companies that use the word “relocation” in their name–brokers, movers and third-party relocation providers that consult and administer employers’ relocation benefit programs. Relocation services can range from real estate appraisers to providers of temporary housing and rental furniture to security companies and immigration attorneys.

    “Some companies may see relocation services as commodities, especially if their procurement department is driving the selection process,” Motherwell says. “The challenge is to educate companies that, unlike a commodity environment, the majority of expenses associated with relocating employees is not reduced by volume.”

    Increasingly, relocation companies are taking over from human resources departments more of the core duties involved in moving workers. Organizations are being pushed toward “single sourcing” for expatriate administration because of the legal ramifications of Sarbanes-Oxley.

    Cendant Mobility, for instance, has seen a 61 percent increase in the number of companies seeking full expatriate administration services.

    Weichert Relocation Resources Inc. in Norwell, Massachusetts, now often tracks all relocation and assignment expenses over the entire period that an employee is abroad. Some of the payments made to the employee during that time are treated as income, and some are not. WRRI calculates this information according to the tax laws of both the departure and destination countries and uploads it into the company’s payroll system.

    Relocation services are changing because of the dramatic growth in emerging countries such as Russia, India and China. As growth continues, companies and their transferring employees face new challenges in terms of policy and compensation structures.

    Kelleher says human resources executives are paying more attention to relocation services because of the “stealth expatriate” phenomenon. Such an employee is sent on assignment without the knowledge or participation of human resources. That can place a company at risk for visa, tax and work permit compliance problems.

    In a recent survey sponsored by Cendant Mobility and Worldwide ERC, 78 percent of respondents either confirmed or suspected that they had stealth expats in their organizations, although an overwhelming majority–83 percent–did not have systems in place to track them.

    Increased outsourcing relocation is also being fueled by greater corporate governance scrutiny and a realization that human resources and payroll should concentrate on their core expertise, which does not typically include moving people.

    “It’s a matter of risk management, since companies can look to providers like us to be responsible for making sure everything is done right,” says Ellie Sullivan, director of consulting services for WRRI.

Workforce Management, April 2005, pp. 49-50Subscribe Now!

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