Policy Archives

Relocation Home Sale Benefits

by WHR Global | Oct 13, 2016 | News

There are benefits to a real estate sale during a relocation. The process begins with the sale of the home. When it comes to selling a home as part of an employee relocation, corporate buyouts come in two main varieties:

An appraisal
An outside offer

There are other types of relocation-specific home sales, such as direct reimbursement of expenses, but these open the employee up to unnecessary taxation.

More on Buyouts

A guaranteed buyout (GBO) is based on the value of two appraisals, which average a guaranteed offer to buy a relocating employee’s home. A second type of buyout, a buyer value option (BVO), offers a buyout based on an outside buyer’s offer.

In both cases, the employer would take over the financial responsibility and (sometimes) title until closing with a buyer. This allows the employee to move on to his or her new location with less of a burden and to escape taxation. This happens because the money relating to the home sale never actually passes through the employee’s hands. A real estate relocation specialist can help understand these types of offers.

Additional Home Sale Bonuses

In addition to a buyout, employers often offer add-on benefits, such as loss on sale (LOS) protection or a sale bonus. Both LOS and a sale bonus can be engineered to incentivize a home sale. The former by reducing any negative impact of a sale and the latter by “sweetening” the deal if the sale happens in a timely manner.

These benefits are not tax protected. Employees may incur a tax on these benefits if the employer does not elect to “gross up” the incentive.

Home Sale Bonus Trends

A consideration for both additional home sale benefits is the employee’s status within the company. It is not uncommon for these relocation house sale benefits to only be offered to existing employees and those in higher tiers. New hires may fall into a different policy tier altogether.

Based on our benchmarking data, the average percentage of offering relocation home sale benefits is 67.5%. A breakdown of these benefit offerings by industry is detailed below.

Homesale Benefit – Manufacturing Industry 33% 33%
Homesale Benefit – Pharmaceutical Industry 91% 91%
Homesale Benefit – Restaurant & Quick-Service Chains 50% 50%
Homesale Benefit – Insurance Industry 100% 100%
Homesale Benefit – Food & Beverage Manufacturing 56% 56%

Sale Bonus

In general, employers are more prone to offer a sale bonus when a GBO is involved, since there is more risk of the home not selling. This bonus is often based on the sale price (1 – 5% being the most common), but some companies will offer a flat rate instead of a percentage.

Since some employers also require a mandatory listing period before accepting a GBO, it is common to see the bonus amount decrease over this time, starting at its highest amount before the appraisals are ordered or concluded (e.g. a 4% sale bonus before appraisals, 3% within 30 days of appraisals, 2% within 60 days, and 1% within 90 days).

It is common to see the bonus expire when the buyout expires.

Loss on Sale Protection

Homes bought during the peak of the housing bubble suffered losses in many markets over the past decade. But with the housing market strengthening and stabilizing, there are fewer losses today. To counteract any possible losses during a relocation home sale, the LOS benefit comes in many shapes and sizes.

Traditionally, loss is calculated based on the amount paid for the home and does not include capital improvements. Once the loss is determined (sale price minus purchase price), employers have two choices:

Cover all of it (often up to a capped amount)
Cover a portion of it.

As a further breakdown, some companies offer to cover 50 – 75% of the loss, and the employee must cover the remainder. Often, we see employees pay 100% of the loss but only up to a capped amount (e.g. anywhere from $20,000 – 50,000). If the loss is greater than this cap, the employee can either pay the difference and continue to market and sell the home, or decide against selling the home entirely. Our research has shown caps up to $150,000, but amounts this high are uncommon.

On average, 49.5% of companies offer LOS benefits. A breakdown by industry is detailed below.

LOS Benefit – Manufacturing Industry 17.5% 17.5%
LOS Benefit – Pharmaceutical Industry 91% 91%
LOS Benefit – Restaurant & Quick-Service Chains 12.5% 12.5%
LOS Benefit – Insurance Industry 62% 62%
LOS Benefit – Food & Beverage Manufacturing 56% 56%

WHR Group can help with LOS benefits and a home sale bonus. We can help structure per tier to meet your organization’s unique needs. Insulating the business from unnecessary risk is important. Real estate and home relocation services can be tricky to navigate. Our 20 years of relocation service expertise will guide you to the right policy for your organization.

Building a Relocation Policy

by WHR Global | Aug 31, 2016 | News

If you are considering revising your current relocation program, or creating one for the first time, you’re probably wondering where to start. Just like building a house, you want to start with the foundation.
When building a relocation program, begin with the policy structure. Remember, you have a couple of options to consider when creating your program. If you’re looking for assistance, our benchmarking studies have uncovered key trends in building the right policy structure.

Building or Revising Your Employee Relocation Policy

A common trend among companies offering relocation assistance is to provide different levels of benefits to their relocating employees. This allows a company to be cost-conscious and flexible.

The Tiered Approach

A set, tiered policy gives a company the ability to easily select which employees will receive which benefit package. Our research indicates an average of four tiers within any relocation policy. This allows for sufficient variation among benefit packages without creating too much complexity across employee levels.
While a tiered policy allows a company to be selective about which benefits are offered and to whom, some benefits may be offered to all packages. For instance, a household goods move may be offered to all relocating employees, but only certain employees might receive a homesale benefit. You will need to consider which benefits make the most sense for your different employee levels.

of surveyed companies use three tiers

of surveyed companies use four tiers

Building Tiers

There are several different factors companies use when creating a tiered policy. In fact, most companies use multiple factors. The most common factors we’ve identified in our studies include employee position level, homeowner versus renter status, new-hire versus existing-employee status, and budget.

The most frequently used factor to create policy tiers is the employee’s position or level within the company. Companies will most often offer richer benefits to C-level employees compared to middle managers, as the C-level role may be considered more integral to the employer. Cash allowances may be larger, timeframes may be less stringent, and the policy itself may become less constrictive overall for higher-tier tiers.

Homeowner versus renter status is another factor commonly used in creating a tiered policy. For example, a homeowner tier will likely be richer than a renter tier. Homeowners have higher associated moving costs to complete home repairs and get their homes ready for the market. Longer househunting might also be offered for homeowner tiers, as more time is typically needed to purchase a home than to rent.

The A La Carte Approach

An alternative to a tiered policy is an à la carte, or menu, policy. This can be ideal for companies that like to be extremely selective about which benefits are given on an individual basis.

Building à la carte benefits

The discretion used in deciding which benefits to offer can be based on the employee’s need to relocate, the distance the employee is moving, or simply on budget.

Employees can also decide which benefits they receive. The company may offer an employee a specific lump sum amount or use a “points” system. The employee can then determine, based on the dollars or points received, which benefits he or she would like the employer to provide and which the employee would like to manage on his or her own.

This type of policy is currently more “on trend” due to several factors, such as more employees electing to retain their homes in their departure location and therefore not needing a formal homesale benefit.

Your company’s culture, talent development strategies, and much more need to be taken into consideration when you’re deciding how to develop your employee relocation policy. Offering too many benefits can be costly for your organization, while not offering enough can negatively impact your success in recruiting and retaining employees. Take careful consideration when determining which structure best fits your relocating employees’ needs.