Relocation Policy & Benefits with Amy Smith

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Navigating Changes in Corporate Relocation and Benefits

NEI recently completed our 2023 U.S. Domestic All Benefits Survey. The survey covered all components of a typical U.S. domestic program, including policy overview, origination/departure services, destination services, the home sale process, and tax assistance. The top participant industries were Manufacturing, Medical/Pharma, Technology, Energy & Utilities, and Oil & Gas. There were 224 participants and forty-five policy components included in the survey, the key takeaways focused on flexibility in mobility programs, economic impact of policy changes, an increase in the number of renters, and the addition of Diversity, Equity & Inclusion (DEI) options for relocating families.

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Program Flexibility & Policy Structure

The survey indicates that more and more companies are responding to the ever-changing needs of employees and internal business units by including more flexibility in their policy structures. The 4-tiered policy structure is the most common way to meet these needs, which is a slight increase from 3 tiers in 2022.The usage of core-flex programs has also increased, as have lump sum-only programs, which have increased from 2% to 3% by offering incentives to lower-tiered employees.

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Influx of Renters

Traditionally, it was common for companies to assume their higher-tier employees would receive home sale benefits as part of their relocation package. However, survey results show that companies have noticed an increase in higher-tier renters and have responded by adjusting their lease cancellation benefits, with executive-level rental finding assistance increasing from 53% to 56%. Lease cancellation reimbursement ordinarily equals up to two months’ rent, but our research shows that nearly 11% of companies offer up to three months’ rent, likely at the higher policy levels.

Because an increase in the offering of rental finding assistance has been noted and is consistent with the increase of lease cancellation benefits, NEI recommends that companies offer all employees rental finding assistance, regardless of housing status in the old location.

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Economic Impact on Policy

Another factor influencing client decisions is the economic impact of policy parameters such as Loss on Sale, Cost of Living Adjustments (COLA), and Mortgage Interest Deferral Assistance (MIDA). Though the housing market is slowing slightly, Case-Shiller reports that prices are still increasing. While it is still possible for employees to experience loss, NEI recommends companies prepare an addendum to policy for unique or “one-off” loss on sale situations.

One question NEI kept in mind while preparing the survey was “Are more companies offering COLA and MIDA with the cost of living increasing and the mortgage interest rates climbing so much?”

According to the survey, the answer is not really. With the cost of living increasing everywhere, the use of COLAs has risen from 7% to 11%, which is a relatively small increase compared to the rise in living expenses, but the expectation is that usage could increase more in the coming years. Additionally, for MIDA, only 2% of companies offer it for their Executives and 1% for their Directors and VPs.

When considering implementation of a MIDA program, NEI encourages companies to consider the interest rate differential increase rather than the interest rate itself. While MIDAs of old used to impose an 8% minimum rate for eligibility, the differential was typically only 2-3%. Though rates are now still below that prior 8% threshold, we’ve seen an increase of nearly 5% for some homeowners who purchased around 2%. A more appropriate method would incorporate the MIDA based on a minimum differential vs. the rate.

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Diversity, Equity & Inclusion

The Benefits Survey shows that companies are incorporating DEI into many aspects of their corporate structure, including their relocation programs. Because the most common reason for an unsuccessful or declined relocation is spouse/family issues, there has been a significant shift from career assistance to family acclimation services.

New to the survey this year, DEI benefits are now outlined by 9% of survey respondents, a trend that NEI expects will continue to grow. The most common type of DEI benefit is employee/family integration assistance (44%), followed by DEI-specific allowance (28%) and flex benefit options to meet any need (22%). Also noted by some was their desire to minimize the gap between homeowner and renter benefits, bringing more equity to their programs in that way. As a result, new home closing costs are being more frequently offered to former renters.

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Looking to Stay Ahead of the Curve

In addition to the topics outlined above, one subject expected to receive even more attention in 2024 is the 2017 Tax Cuts and Jobs Act, which will either be extended or expire in 2025. If the Act expires and the excludability of some tax expenses is reinstated (e.g. household goods and final move benefits), companies may experience a decrease in tax gross-up expenses, lessening the burden of otherwise rising costs.

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If you would like a copy of the 2023 U.S. Domestic All Benefits Survey in its entirety, please contact your NEI representative or click here.

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