More relocation costs being paid by the worker

June 14, 1992|By Andree Brooks | Andree Brooks,New York Times News Service

In the heady days of the '70s and '80s, corporate employees could rely on their companies to pick up virtually all the expenses of a transfer to a different community.

Today, transferees will find a somewhat frayed welcome mat at their relocation department door as recession and business cost-cutting pare traditional expectations. Increasingly, employees are being asked to bear some relocation costs themselves -- a change that will force many to take a more active role in the move.

"We are seeing caps being put on all types of relocation benefits," said Chris Collie, executive vice president of the Employee Relocation Council, a trade group based in Washington.

Corporate officials defend the change by insisting that the cost of transferring an employee at a time of declining real estate values is proving steeper than anticipated. It now costs an average of $45,000 to move a home-owning employee, up from $31,000 10 years ago, according to the Employee Relocation Council.

Take, for example, the loss-on-sale benefit given to a transferee whose home has dipped in value since it was bought. This benefit alone costs about $15,000 an employee, reports Terry Portale, senior relocation specialist at Colgate-Palmolive Co. He said the figure can rise to $40,000 or more in the Northeast.

The biggest loss facing transferees will probably come from the refusal of their companies to buy their homes if they do not sell on the open market before the scheduled moving date -- a benefit known as a "buyout."

Ann Moore, vice president of William Pitt Relocation Corp. Services of Stamford, Conn., estimates that only 60 percent of the transferees she handles are being given buyouts today, compared to virtually everyone years ago.

Starting in July 1990, USAir, which moves about 500 home-owning employees a year, began dividing them into two categories: Senior executives and those with special technical skills, who could still count on a buyout, and lower rank employees, who would have to make do with a "settling allowance" equal to two weeks' salary.

Other companies are making their buyouts contingent on the transferee's doing more to sell the home before the scheduled move, said Karen Alpi, manager of the New York regional office of Home Buyers' Assistance Corp., a national relocation counseling service.

To qualify for a buyout, said Ms. Alpi, the transferee may be required to establish a listing price that conforms to company policy, such as taking the average of three brokers' opinions rather than putting the house on the market at the highest possible price.

They also may be limited to a selling agent on the company's recommended list. And they may have to make cosmetic improvements along guidelines provided by the brokers and counselors. But these should not prove onerous, said Ms. Alpi, being most often limited to removing clutter, getting rid of pet odors, cleaning or removing soiled or worn carpeting and painting a shabby room.

If they work for a company that prefers to use the carrot rather than the stick, they could actually end up with more, not less, money. Typical of this approach is AT&T, which is motivating its transferees to sell their own homes by offering a bonus equal to 3 percent of the sale price if they are successful. The bonus provides cash benefits of about $4,500 a family, said John Bemont, the company's relocation director.

Some companies are also providing a "marketing allowance" of around $1,500 to pay for improvements such as painting or repairs or to subsidize a buyer's closing costs, said Susan

Bankes, director of marketing at PHH Homequity of Wilton, Conn., which buys transferees' homes on behalf of their employers.

This option can be particularly valuable now because selling a home independently should bring a better price than a buyout -- a result, say these experts, of a new method of buyout appraisals that factors in a possible further decline in market values during the period the home might have to remain in corporate inventory.

Another setback facing transferees is the retreat of employers -- from paying all the auxiliary costs of a move, such as house-hunting trips and temporary accommodations. In lieu of total reimbursement, the transferee is increasingly likely to be offered a lump sum.

Runzheimer International, a corporate relocation policy research company headquartered in Rochester, Wis., said that 36 percent of companies regularly involved in relocations have gone over to lump-sum allowances compared to 20 percent in 1989. It reports that the sum ranges from a low of $2,200 to a high of $15,000.

For transferees, this may mean cutting corners. But it might also mean cash to spare if a resourceful way can be found to pare costs.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.