Choosing the Right Home Sale Benefit: BVO vs Direct Reimbursement

by WHR Global | Nov 7, 2017 | News

The Guaranteed Buyout (GBO) home sale program is typically the highest-level home sale benefit a company will offer its relocating employees, as it guarantees a home sale for employees based on appraisal value. However, the risk associated with this type of home sale, considering the employee’s home is then taken into inventory to be resold, may not be the best option for your relocation program. There are two additional home sale options that present less risk for your company—the Buyer Value Option (BVO) and Direct Reimbursement (DR).

So, what’s the difference between DR and BVO?

The BVO program is similar to a GBO in that you will be purchasing the home from your employee. However, with the BVO program, you will only purchase the employee’s home if they secure an outside buyer first. The great thing about the BVO program is that your company and employee will experience the same tax benefits that you would receive with the GBO. This means the home sale cost can be considered a business expense for your company as opposed to taxable income for the employee. This can occur because it is a three-part transaction, which includes your employee securing the buyer, the company purchasing the home from the employee for the agreed sales price, and then your company will sell the home to the outside buyer. Your employee won’t have to pay for any home sale costs or attend closing.

With a DR program, your employees will be responsible for selling their homes on their own. They will need to secure the buyer, as well as pay closing costs and commission fees up-front. You may then reimburse the employee all or part of these costs depending on your relocation policy. The IRS considers this type of reimbursement as taxable income, so, in order to cover that additional cost for your employee, you will need to gross-up the reimbursement.

Pros

Cons

Direct Reimbursement

> No risk of bringing homes into company inventory

> No tax benefits for your company

> Additional cost of gross-up

> Employee responsible for all costs up-front (closing costs, commission fees, inspections, etc.)

> Employee must attend closing

> Longer relocation process

Buyer Value Option

> Tax benefits for your company

> Employee not required to attend closing

> Broker Market Analysis completed by two qualified Real Estate Agents

> Home sale could fall through, resulting in home going into inventory

How do you choose which home sale benefit to offer your relocating employees?

It’s really all about what is going to work best for your employees, your company, and your bottom dollar. While it may seem easier and less costly to have your employees sell their homes on their own and reimburse them later, this isn’t necessarily the case. You could be spending an exponential amount more using DR because of tax and gross-up

A concern many companies have with the BVO program is they may still have to take homes into inventory. So, why then would you want to offer a BVO when there is still that possibility? While there is a chance a home could go into inventory if a sale falls through, it is minimal. The BVO process typically includes two qualified agents completing Broker Market Analysis reports, a comprehensive marketing strategy created by your relocation counselors, and a full review of all offers with your employees to make sure the offer is bona fide. Your employee’s relocation counselor will then follow the offer through to closing to ensure everything goes smoothly.

When a corporation reimburses an employee for relocation expenses, the IRS treats that reimbursement as ordinary income, taxing it at the rate dictated by the employee’s tax bracket.

	Direct Reimbursement	Buyer Value Option
Home Sale Price	$300,000	$300,000
Real Estate Commission (6%)	$18,000	$18,000
Closing Costs (2%)	$6,000	$6,000
TOTAL COST TO SELL HOME	$24,000	$24,000
Gross-Up Tax Assistance (40%)	$9,600	$0
TOTAL COST FOR CLIENT	$33,600	$24,000

CLIENT SAVINGS	$0	$9,600

The average home costs $300,000, which means if you are offering just 10 employees a home sale benefit, you could be saving roughly $96,000 annually by using a relocation management company and offering a BVO program.

The Pros and Cons of Going Out to Bid for a Relocation Supplier

by WHR Global | Oct 24, 2017 | News

Read the updated version of this article here.

So, you have made the decision to outsource your employee relocations to a Relocation Management Company, or RMC. If only that was where the work ended!

Now, you must choose the one RMC that best fits your workplace culture, employee needs, company budget, and any other criteria that you require in a supplier. With so many RMCs to choose from, the question becomes how do you find the right one?

The Procurement Process

When selecting a relocation supplier, it really comes down to two options: Going out to bid (competitive procurement), or selecting a supplier on your own (non-competitive procurement).

Procurement Option 1

Going out to bid, also known as competitive procurement or open tendering, occurs when you send out a bid request, typically in the form of a request for proposals (RFP). RMCs can choose to respond to your request and submit a proposal explaining their company, capabilities, and pricing. Once you receive the proposals, you will compare each against your most important evaluation criteria. This process can include multiple rounds of meetings or bidding.

Procurement Option 2

If you’ve already decided which RMC you want to pursue based on your research and previous communications, then you don’t need to open your search to other suppliers. This non-competitive procurement process, also known as sole sourcing, occurs when you choose an RMC without a bidding process. However, in some instances, a company will choose two or three RMCs to reach out to, resulting in a smaller, more intimate bidding process.

Each procurement process has its own pros and cons, so it’s essential that you choose the path that best suits your company’s and relocating employees’ needs.

Advantages of Going Out to Bid

It encourages competition: Typically, when you go out to bid, you will have a greater pool of RMCs to choose from, and those responding are likely to offer you their best pricing right away. Another consideration is you may learn about other benefits or service offerings that you didn’t think to ask for initially.

Advocates transparency: The idea behind the bidding process is each RMC will essentially lay all their cards on the table: They show you their pricing, services, and value-adds, and you choose a supplier based on those responses. This results in a fair selection process while offering you a clear vision of what is most important to your company.

Easily compare different RMCs: Having RMCs follow a certain format, and each answering the same questions, allows you to easily compare answers and rule out any RMCs that don’t meet your immediate requirements.

Fully vet your options: Creating an RFP lets you choose what you want to learn about the responding suppliers. This helps you fully understand what each RMC has to offer and allows you to ultimately choose the company that best fits your needs.

Disadvantages of Going Out to Bid

It can be time-consuming: The bidding process can take anywhere from 2 – 6 months, or even longer, depending on your internal decision-making process. It also involves several intricate steps from RFP development to initial bids and follow-up questions to final presentations and on-site visits to help you make your decision.

Associated costs: It will undoubtedly cost more to go through the RFP process than to simply choose an RMC to work with. The cost of developing the RFP, screening suppliers, reviewing responses, and follow-ups can take a toll on your company’s time and budget. Typically, a company’s relocation program accounts for 90-95% of the relocation “spend”, with only 5-10% being paid out to the RMC.

Eliminating the wrong suppliers: There are many viable RMCs that simply don’t participate in competitive bidding opportunities. The reasons vary from high associated costs to having a different pricing structure that does not compare easily in an “apples to apples” review process. You could be missing out on an RMC that would be your ideal fit.

Promises of unattainable pricing: For some RMCs, winning new business is more important than upholding your needs throughout a long-term partnership. These RMCs will solely bid for your business to undermine competitors, even if their proposed pricing is unattainable for their own bottom line. This can cause a headache during the implementation process, or result in a requested fee increase in the first or second year.

Choosing Non-competitive Procurement

If going out to bid doesn’t sound like the best option for your company, the other option is the non-competitive procurement process.

You can select a supplier you know will best service your relocation requirements based on your research and prior communications. This process really works best if you know one or two RMCs that already fit your needs and company culture.

This option also works best if you are working within a small window of time. You won’t have to review multiple in-depth proposals—just the pricing proposals from the RMCs of your choosing.

Next Steps

So, ask yourself, what is in the best interest for your company? Do you have the time to fully vet RMCs through a competitive procurement process, or do you need an RMC now? Do you have a couple RMCs already in mind, or do you need more information on other options out there?

Selecting an RMC is an important business decision for your company. You want to find an RMC that best meets your company’s needs, whether that be high-quality support for your relocating employees, lowest cost, the most advanced technology, or a combination of all three.

How to Have a Successful Implementation

by WHR Global | Oct 10, 2017 | News

Choosing to outsource your employee relocation program is a considerable but necessary task to remain competitive in your search for top talent. For employers that have already selected a relocation supplier, the most important step in your relationship now begins: Implementation.

Implementation consists of developing or sharing your existing relocation policies with your supplier, customizing the supplier’s technology to match these policies, process-mapping workflows, determining invoicing and expense requirements, and everything else that gets your relocation program up and running.

For any relocation supplier, the fundamental role and purpose of a formal implementation process is to ensure the guidelines and controls are in place to provide your employees consistent and top-quality relocation services while meeting your performance standards.

Implementing a New Relocation Management Company

In a typical implementation for relocation services, the supplier collects all necessary information on your current relocation process to understand the following:

A process map of the current state of your relocation program
The need for policy creation and benchmarking against your competitors
Exceptions that might occur when your policies don’t always match employee needs
Identification of expenses paid and the delivery method
Integrating payroll system(s) and confirming tax gross-ups provided to your employees
Confirmation of any third-party contracts, partnerships, processes, and spend for companies such as real estate brokerages, van lines, and international service providers working directly with your employees

Implementation Plan

A good rule of thumb to implement relocation services is to break the process into more manageable phases. At WHR Group, we break the implementation process into six different phases for our new clients:

Start-Up: Schedule an on-site meeting, complete all contracts, and prepare a formal implementation guide based on your policy and contract terms.
Transition: Finalize implementation schedule with start/finish dates, and establish the process for relocations already in progress with a corresponding schedule.
First Steps: Draft process flows for all services, and identify deliverables for any preferred third-parties.
Payroll: Outline the invoice, payroll, and expense process with all deliverables.
Technology: Ensure relocation supplier’s IT staff will update company technology with your policy specifics plus financial requirements.
Training: Supplier to conduct internal training on your policy and procedures, schedule training with your relocation/admin team on using supplier’s technology, schedule an internal meeting to review process on exceptions to your policy, and ensure a fundamental understanding of your culture and needs with each supplier staff member on your account.

Relocations in Progress

If you already have a relocation supplier but are transitioning your program to a new supplier, make sure this new supplier has a plan in place for employees already in the midst of their relocations.

This transition plan might look similar to WHR Group’s, which ensures the least disruptive process as possible for all relocating employees:

Homeowners: These relocations should remain with the current supplier through the home sale process.
Non-homeowners or Renters: These relocations should remain with the current supplier, unless they are on hold and can be easily transitioned to the new supplier.
Expense Process: If possible, these files should be completed with the current supplier through cut-off at year-end (or your fiscal year) to avoid confusion with two different teams calculating tax and providing reports.
Transportation: For household goods moves in progress, the employee will most likely complete this phase with the current supplier. For moves that have not yet started, transportation services can be transitioned to the new supplier based on status and timing of other relocation services for each employee.

Typical Implementation Timeline

Depending on the size of your relocation program, the typical implementation process is 4 weeks. This encompasses the full process, from the first on-site meeting to “go live”.

This timeline is, of course, dependent upon many factors—specifically the availability and access to your key shareholders. The relocation supplier should coordinate your timeline to include specific meetings with the appropriate people for their input into all relocation processes. These meetings can vary dependent upon the scope, complexity, and size of your relocation program, but the impact to your schedule should be nominal if planned appropriately by your relocation supplier.

The full implementation plan with your relocation supplier might look like this:

Implemenation Plan for Success

Week 1

Key Personnel
Client Stakeholders • Client Services Manager • Director of Operations • Accounting

Key Tasks
-Initial Meeting with Day-to-Day Personnel
-Review Implementation Timeline
-Discuss Client Culture, Policy, and Exceptions
-Discuss Invoicing, AP, AR, Payroll, and Exceptions
-Discuss Policy, Process Flow, Survey Recommendations, and Reporting Needs

Week 2

Key Personnel
Client Stakeholders • Client Services Manager • Director of Operations • Accounting • IT

Key Tasks
-Identify Files in Process for Transistion
-IT Discussions/Integration Needs
-Follow-Up Discussion: AP, AR, Payroll-Process Approvals

Week 3

Key Personnel
Client Stakeholders • Client Services Manager • Director of Operations • IT

Key Tasks
-System Training (Client Team)
-Portals and Apps Approved

Week 4

Key Personnel
Client Stakeholders • Client Services Manager • Director of Operations • IT

Key Tasks
-System Training Completed
-Review File Transition
-Reports Approved and Final Systems Test
-Go Live!

The implementation timeline can be adjusted based on your company’s needs. In special circumstances—such as an underperforming existing supplier—WHR Group has implemented new clients in 1 – 2 weeks.

Implementation Fees

Relocation suppliers should not typically charge fees related to implementing your program or setting up technology.

The supplier’s goal is to limit takeover expenses. However, based on services transitioned and your employees’ progress in their relocations, a service fee may be applicable. Make sure to review these with your new supplier early in the implementation process, as full-service fees might not be applicable.

8 Things to Look for in a Relocation Supplier

by WHR Global | Sep 12, 2017 | News

There are many reasons you could be looking for a relocation supplier right now. Maybe your company has outgrown managing its relocations in-house. Maybe your procurement department is driving a need to go out to bid. Or maybe you’re just unhappy with your existing relocation supplier.

While relocating employees to new job opportunities can be stressful, selecting a relocation management company to ease the process doesn’t have to be.

Relocation management companies, or RMCs, ease the stress of moving employees on your own. RMCs organize employees’ departures, help them find new homes, move their belongings, and assist with settling into their new communities.

If this is what you’re looking for, how do you know which RMC is the best choice for your company and employees?

Before You Choose a Relocation Supplier

Before you even begin looking for a supplier, you and your company’s other decision-makers need to define what you’re looking for most in an RMC.

Make a list of your top wants and needs, and stick with this list throughout your selection process.

Start by considering your own company: Is cost your company’s most important motivator? Is service satisfaction? Is it both, or something else entirely—like the RMC’s management structure or years of experience?

Also take into consideration your company’s size and anticipated number of relocations per year. RMCs range in size from thousands of employees across multiple continents or companies located in one office to streamline delivery and communications. Do you want to be a small fish in a big pond, or do you need to be a big fish in a smaller pond? Really get to the heart of what your company values most in a supplier.

Note: Contrary to what you hear, all RMCs are not the same. While they might offer similar services and guarantees, it’s in their delivery where you find their differences. This is where you will want to keep your “list of wants” handy, so you find the RMC that best fits your needs.

Want some help getting started? Here are 8 things to look for when selecting an RMC.

8 Things to Look for When Selecting a Relocation Supplier

1. Partner Mindset

First and foremost, you’ll want to make sure the supplier you choose is more of a partner. Long-term partnerships with an RMC will yield better and more consistent service plus significant cost savings. (WHR Group’s longest client has saved over $22 million throughout our partnership.) The RMC you choose should uphold a commitment to long-term partnerships with incentives such as ongoing policy consulting and proactive recommendations for your relocation program.

2. Flexibility and Responsiveness to Change

The key to any well-oiled process is flexibility and responsiveness to change. If your business opens a new location, is the RMC experienced in managing group moves? If your management structure or culture changes, is your RMC flexible enough to incorporate these changes into your existing relocation policies?

Don’t forget about incorporating your business into the RMC’s technology and reporting tools. Can they make the data customizations you need—and quickly—to keep you productive in your role?

3. Comprehensive Support

How does the RMC define relocation “success”? Look for commitments to helping you succeed in your role and easing the relocation process for your employees, too.

How does the RMC set you and your employees up for success?

4. Above-and-Beyond Customer Service

What experience does the RMC have with not just maintaining but improving satisfaction of employees’ moves? How can they truly guarantee your company stress-free relocations?

Ask about their service delivery structure, how they motivate their own employees to deliver top-notch relocation experiences, and how they keep customer service as a core offering—not a commodity.

5. Marrying Service with Cost Savings

Working with an RMC that offers stellar customer service doesn’t mean you have to pay extra. In fact, working with a service-first company often leads to less exception requests in your policies, less fires to put out, and more money saved in the long run.

You’ll want to be aware of two things:

How does the RMC structure its fees? Far too many RMCs have hidden program costs that will never be discussed with you. Collection of fees from downstream providers, mark-ups, and non-compliance fees are just a few of these hidden costs, so be sure to ask about fees and transparency with your RMC.
Collect proof: Ask what innovative tools or processes the company has implemented to increase cost savings for clients.

6. Supply Chain Management

What is the RMC’s own supplier management process? RMCs manage their own network of suppliers, like brokers, appraisers, movers, and international service providers. What is the RMC’s selection and qualification process for consistency across all touchpoints in employees’ experiences?

Are RMCs affiliated with their suppliers in any way, limiting the options your employees have to work with? There should be a clear mechanism in place to choose the best supplier for each employee and every service.

7. Network Coverage

Network coverage is also key. Really, no one RMC can be located in all areas your employees are moving in and out of. That’s why it’s important to work with an experienced supplier with a vast network and the capability to streamline services across their offices, or better yet one point of administration for ultimate control in service delivery.

Ask how many brokers and appraisers in particular the RMC can work with. This is especially important to know for the more rural locations your company may have.

8. Company Management Structure

A final factor to consider is the RMC’s own management style, how they operate, and how they treat their employees. Make sure the RMC has a solid training and education program in place.

Are their employees real estate licensed to assist with homeowners? Has the company been voted a Top Workplace or similar? After all, happy relocation counselors mean happy employees on your end.

For more information on how WHR Group can take your relocation program to the next level, please call 800-523-3318 or email [email protected].

2017 WiERC and CRC Joint Meeting on Relocation

by WHR Global | Aug 17, 2017 | News

As a member of the Wisconsin Employee Relocation Council (WiERC), I had the pleasure of sponsoring and attending the Joint Meeting between the WiERC and the Corporate Relocation Council of Chicago (CRC) yesterday at the incredibly beautiful and prestigious Grand Geneva Resort and Spa in Lake Geneva, WI.

Titled “The Grand networking event of the year,” the occasion brought in over one hundred and twenty professionals from both councils, which included those in HR, global mobility, relocation management companies (like myself), van line representatives, and real estate brokers.

The agenda included two educational sessions in the morning followed by the option of a boat tour around the lake, a nine-hole scramble on the difficult Brute golf course, massages at the spa, or a cooking class—so a tough day had by all.

Trends in Relocation

The first educational session talked national trends and the potential negative effects on the relocation industry. The five-person panel included professionals from two separate real estate agencies, a van line, a corporate housing agency, and a destination service provider.

Local Markets

The two real estate agencies provided some staggering, but not surprising, figures pertaining to the national real estate market, as well as markets in both Wisconsin and Chicago-land. The numbers concluded that we are amid a heavy seller’s market with extremely low inventories; homes are flying off the market quickly, and prices continue to gradually rise. Both Wisconsin and Chicago followed these national trends closely. One fact that remains true, even as property values continue to rise, is the Midwest is the most affordable area in the country, making it incredibly attractive to corporations as well as new people entering the workforce.

Real Estate Technology

The “monster under the bed” identified by these real estate professionals was how technology is threatening the real estate industry as buyers, sellers, and renters are looking for a quick fix through websites like Zillow. Amazon.com was mentioned several times as another company trying to get into the real estate industry and possibly take away from what agents do best—provide a person-to-person, hands-on, and caring experience the industry has been built on for so many years.

All in the all, the real estate industry continues to scramble, like the rest of the world, to keep pace with technology and the needs of the new workforce.

Household Goods

The van line representative outlined some current difficulties within the moving industry, which was headlined by the shortage of drivers throughout the United States. The current shortage is roughly 40,000 drivers and is estimated to quadruple over the next decade. Van lines are struggling to find solutions to reach the younger generation as well as attract more diversity, as many current drivers are older Caucasians retiring from the workforce.

The moving industry is also struggling to keep up with smaller shipments, more demanding move times, and, of course, technology-based difficulties.

Other Services

The final two speakers both continued the trend of technology disrupting their industry; although, the corporate housing and destination services sectors seemed to be doing a better job of finding and implementing solutions.

Data Security and Relocation

The second educational session was incredibly interesting.

The speaker discussed data security from a personal and business standpoint and how we are all responsible for managing the risk related to data security. Whether it be protecting yourself by not using a debit card online, or protecting your clients by being vigilant with the emails you open, we all need to pay attention to the details of our online activity—not just with relocation data.

Main Takeaway

Technology, technology, technology! Technology struggles was the opening topic and conclusion to the event.

Companies like Amazon.com are infiltrating every industry by finding the gaps in the services we provide and developing better solutions at a much faster rate. If we all don’t adapt and evolve, we as employees will be left by the wayside and our companies will struggle to stay afloat.

I hope this offers you some food for thought and ideas for improving the relocation industry as we know it today.

Thanks to all who helped put on this amazing event!

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