Controlling mobility costs is a two-fold exercise: establishing a program’s true monetary spend combined with managing the ‘human resources’ associated with the move. Monetary spend can only be determined by examining both the measurable and “soft” costs of mobility – but potential cost savings should always be weighed against employee experience and company goals before implementing change.
Quantifying the mobility spend associated with a single move or entire mobility program can be daunting, as there are numerous expenses that can be easily overlooked.
In most cases, it is possible to calculate and manage the spend on mobility-related expenses including departure, destination, repatriation, and counseling services, as well as corporate and advisory programs. It can more difficult, however, to identify the internal administrative costs and employee productivity impacts associated with mobility. Factors that might be considered outside of the company’s ‘line of sight’ can represent a significant portion of the overall spend of time and resources, including:
- The internal staff supporting the mobility program in both direct and administrative roles
- The time and energy of the employee, possibly impacting productivity in the destination location
SIRVA’s recent annual mobility report, Talent Mobility for Business Growth – Aligning Practices To Drive Organizational Impact, noted that up to 72% of mobility stakeholders are unable to quantify their company’s spend per relocation. Paired with the need for mobility managers to focus on cost containment due to COVID-19-related financial and physical restrictions, and the timeframe to focus on identifying and tracking expenses is significantly escalated.
What can you do to advance your program? A large part of the exercise lies in revisiting some standard industry policy options. These are proven solutions that allow for cost tracking, flexibility, and control of relocation spend.
- Core-Flex: Core-flex allows for a more deliberate, but customized selection of benefits that can better fit the employee’s specific needs and organization’s goals, while allowing the business to control the type and level of support provided (based on business need and relocation budget). Typically, there are fewer exceptions and a stronger ability to manage the program as employees/families utilize the services they need. Cost savings for the organization can be obtained with careful planning and implementation.
- Lump-Sum: In this model, the company provides employees with a lump-sum of funding, which the employee uses at his/her discretion to purchase relocation services. A lump-sum can also be incorporated into a traditional or core-flex model; a lump-sum allowance is used to purchase one of or a set of defined services. Administrative burdens are reduced, but there are risks – and greater administrative responsibility – if not handled wisely.
While these favorites are cost-saving contenders, another option is to consider move types. Though some may feel like established solutions, a new lens is bringing clarity to how they can be used to help contain costs, going forward.
- Permanent Moves: The typical costs associated with expatriate policy support and administration can be avoided using this move type, as local destination benefits apply.
- Short-Term Moves: Typically spanning three to twelve months, these can be less complex and expensive than long-term moves, as they generally don’t require moving an employee’s family, providing associated support services, selling a home, or changing the employee’s benefits.
- Local-Plus Programs: The employee transitions to a local compensation and benefits structure, but additional support is provided, such as transportation, education or housing for a finite duration. Companies find that this type of program can be more cost effective, and may appreciate that employees are paid in the same manner as their local native colleagues, which reduces inequality/fosters consistency.
- Expat Lite: This relocation benefits package is considerably lighter than standard plans; while compensation and taxes are usually covered, other policy features are diminished or removed entirely.
It is important to recognize varying preferences, priorities, and needs of all audiences when designing or reimagining your mobility program to ensure its effectiveness, focus on cost, and employee satisfaction. Controlling mobility costs is possible but requires a close look at more than the measurable expense lines associated with a relocation.
Overlooked Contributors to Mobility Spend
While most organizations calculate relocation spend (tax gross ups, household goods shipments, etc.) they often forget the many internal administrative costs associated with relocation. Even a basic policy can become very expensive if unexpected challenges occur. An internal mobility professional may require hours of research or troubleshooting to address an issue that an experienced subject matter expert or mobility partner could tackle in minutes. Though seemingly more expensive “up front,” this is why partnering with a mobility provider can often reduce spend in the long run.
To truly quantify spend per employee, company stakeholders should always consider factors that might take place outside of their “line of sight,” such as:
- Administrative costs that cover internal support staff or external staff furnished by an outsourced provider
- Interest charges on funds advanced on the company’s behalf, unless the company is funding the relocation program and not the outsourced provider
- Compensation that local payroll is involved with that may not be obvious in reports (such as local allowances)
- Service fees that are paid as a part of the company’s supply chain
In short, to quantify the true cost of mobility, stakeholders should identify, examine, and assess all hidden expenses listed above. Only when these are combined with the more measurable expenses associated with relocation can a mobility cost analysis be effective.
And, finally, while an accurate picture of the mobility spend is crucial, cost containment should always be carefully weighed and tracked against desired outcomes for the relocation, employee experience, and overall company goals. While this can be a complex puzzle to solve, the end result yields positive results for employees and organizations alike.