Domestic U.S.

In the domestic U.S. relocation world, a big issue will be changes to the RESPA (Real Estate Settlement Procedures Act) and TILA (Truth in Lending Act) procedures. These changes go into effect on August 1,2015. We will say good bye to the Good Faith Estimate and the HUD-1, and will welcome (respectively) the Loan Estimate and the Closing Disclosure. The use of the new forms may necessitate some edits to relocation policies that refer to either of the old documents, but especially to any policies that contain samples of the HUD-1 and list covered home sale or new home purchase costs based on the old HUD form.

Along with the new forms come new disclosure requirements, which may affect the transferring employee and the timing of his/her move. The Closing Disclosure has to be provided at least 3 business days before consummation of the loan. Note the word “consummation” and not “closing”, though depending on the state, consummation and closing often occurs on the same day. There are specific instances where the 3-day notification period re-starts. They are: 1) the disclosed annual percentage rate (APR) changes, 2) the loan product changes or 3) a prepayment penalty is added. If any of these occur, closing could be delayed because of the new 3-day notification requirement. After August, when transferring employees encounter a closing delay because of these notification requirements, companies may need to be flexible and approve additional temporary living and/or storage. However, the early education process of the mobility industry and its clients that has already begun should help prepare everyone for the need for proper planning. Employees who carefully plan the delivery of household goods for several days after closing will be the most successful and satisfied. In addition, the use of destination closing services to help manage the closing process in the new location is gaining in popularity and may help keep delays at a minimum.

Cost containment is not new for 2015 domestic U.S. programs, but adding a focus on competitiveness may be. Obtaining talent is becoming more of a challenge for some companies and industries. The good news is that reluctance to relocate is sharply declining as the real estate markets and the economy in general stabilizes. According to Worldwide ERC’s 2014 U.S. Transfer Volume and Cost Survey, 49% of companies indicated that they are still experiencing problems with employee reluctance to relocate, a decrease of 29% over the last 2 years.

Cost containment is not new for 2015 domestic U.S. programs, but adding a focus on competitiveness may be. Obtaining talent is becoming more of a challenge for some companies and industries. The good news is that reluctance to relocate is sharply declining as the real estate markets and the economy in general stabilizes. According to Worldwide ERC’s 2014 U.S. Transfer Volume and Cost Survey, 49% of companies indicated that they are still experiencing problems with employee reluctance to relocate, a decrease of 29% over the last 2 years. So it is easier to get non-local talent, but the flip side is, that the talent you want may have more job offers to consider. Some companies are looking at changing their program structure to help provide the cost containment they need, while still offering a competitive policy to candidates. Structured core/flex programs can provide the flexibility needed. These programs provide a set of core benefits to each tier, with flexible options also delineated by tier. For example, the lowest level tier may have core benefits of 30 days of temporary living, final move and household goods shipment, with only 2 flex options: a home finding trip and a small miscellaneous expense allowance. A higher tier may provide all of those elements as core, with home sale and loss on sale as flexible options. Structure is an essential component of this type of program and helps keep exceptions to a minimum.

Global Mobility

According to a recent PwC survey, 89% of participants expect global mobility to increase in the next 2 years. The use of traditional all-encompassing (and expensive) long-term assignments continues to decrease. Like the domestic U.S. side, global mobility is seeing an increase in the development of policies that are more inherently flexible. Policy types companies are considering developing in the future include developmental assignment policies with lower levels of benefits, localization policies, and local plus transfer policies. The latter are sometimes used for employees who are technically assignees, i.e. in the host location for a limited time, but on local pay/packages while on assignment.

Compliance in the global mobility arena continues to be an issue, as countries increase their focus on revenue collection. Those companies hit the hardest by this focus are those with the loosest (or no) oversight of expats and global business travel/activity. Frequent business travel is an example of a vulnerability that can be difficult to overcome without the proper tools and tracking. Expansion into a new market can result in increased business travel, as happened to one company. This company sent assignees into the country, following proper procedures and policy. However, business travel in and out of the country became prevalent and most importantly, was not tracked. A local government official asked that a relative be hired at the local company entity, but the relative was rejected. Soon after, the company received a notice of an audit by this foreign government. The company had not been tracking their travelers’ time in-country, and had to produce two years’ worth of travel records for hundreds of trips. While this company ultimately did not have to pay any taxes or fines (which can be hefty), their costs increased as a result of having their tax firm examine all business travel into that country. One of the problems with tracking frequent business travelers is ownership of the process, which can be a hot potato at companies. Ultimately, however, when problems occur, all eyes turn to global mobility. Luckily, there are tracking tools that can be put into place to help keep those problems to a minimum. In the end, companies with tighter controls are better able to contain costs and reduce their liability.

And speaking of revenue, return on investment continues to be part of the global mobility conversation. As the focus on costs continues and even increases, the subsequent question of value for the mobility dollars spent continues to be asked. However, tracking ROI is still haphazard at best at many companies because of the difficulty in establishing the necessary rigor and processes, and the lack of resources to do so. Many companies are focusing instead on ensuring that employees have all of the tools needed to be successful in the new country and, for example, are increasing the use of cross-cultural and language training in their programs. This realization that an effective and successful employee (and his/her accompanying family, if applicable) can impact ROI is a huge step forward for the industry as a whole.