Relocation is a significant investment for companies, and as budgets tighten, many are exploring ways to reduce the costs of defined benefits relocation packages. One of the most effective strategies to cut expenses is by modifying the relocation policy—specifically by removing or limiting home sale benefits. While this approach provides immediate savings, it also comes with several potential challenges that need careful consideration.
The Fastest Way to Cut Costs: Removing Home Sale Benefits
Home sale benefits are typically one of the most expensive components of a relocation package, especially when the company covers real estate commissions. Removing this benefit from a defined benefits policy can yield substantial savings quickly. On the surface, this strategy seems like a straightforward win for companies looking to rein in relocation expenses. After all, without the need to cover real estate commissions and other associated selling costs, the overall relocation cost decreases significantly.
However, eliminating this benefit can introduce new challenges, especially in today’s housing market. It should be said that a hot real estate market is the best real estate market, in which to remove real estate benefits, but this isn’t always the case, and certainly not uniformly across Canada.
The Risks of Removing Home Sale Benefits
While removing home sale benefits is the quickest way to reduce costs, companies need to be wary of the broader implications:
- Employees May Decline the Relocation Offer In an employee-driven job market, where workers have more leverage, the removal of home sale benefits could lead to employees turning down relocation opportunities. If employees feel that they won’t be adequately compensated for the sale of their home, they might opt to stay in their current role or seek opportunities elsewhere. This is particularly true for those who own property in slower real estate markets, where homes take longer to sell or prices are lower than what homeowners might expect.
- Market Conditions Affect Employee Willingness to Relocate In recent years, real estate markets in Canada have cooled down, particularly in areas outside major urban centers. In less robust markets, employees may feel anxious about selling their homes, worrying that they won’t get the price they desire (when an employee gets home sale benefits covered, they tend to psychologically be more ready for a lower price). This uncertainty can lead to delays in the relocation process, as employees hold off on making a move until they are satisfied with the offers they receive. As a result, relocations might be stalled for months, impacting both the employee’s work and the company’s overall goals.
- Potential for Increased Temporary Accommodation Costs When home sale benefits are removed, employees may not relocate as quickly. They may require additional time to sell their homes and may need extended temporary accommodation benefits as a result. In a sluggish housing market, some employees may hold out for a higher price, hoping to recoup what they consider to be their home’s true value. This can lead to longer stays in temporary housing, which can drive up costs, offsetting some of the savings from cutting home sale benefits.
Finding a Balance: Cost-Cutting with Flexibility
Although removing home sale benefits can provide immediate cost savings, companies need to strike a balance between reducing costs and maintaining a competitive relocation policy. Here are a few strategies to consider:
- Partial Home Sale Assistance: Rather than fully removing home sale benefits, companies could offer partial support, such as covering a percentage of the home sale commission. This would reduce costs while still providing some relief to employees during the relocation process. In addition, companies could cover mortgage discharge penalties or legal fees.
- Setting Realistic Expectations: Clear communication about the local real estate market conditions can help manage employees’ expectations when selling their homes. Get a Relocation Management Company involved who specializes in Real Estate. Employers can offer home valuation services, so employees have a realistic understanding of what they can expect from the sale. This can help prevent delays caused by employees holding out for an unattainable price.
- Offering a “Relocation Bonus”: Instead of covering home sale costs, companies could offer a one-time relocation bonus. This gives the employee the flexibility to use the funds as they see fit—whether to cover moving expenses, home sale commissions, or temporary housing—while keeping the company’s relocation costs fixed and predictable.
Conclusion
While removing home sale benefits is one of the fastest ways to reduce relocation costs, it’s important to be aware of the potential challenges this may create. Companies need to consider how these changes will impact employees’ willingness to relocate and how delays in the process could offset savings. By adopting a flexible approach—such as partial home sale assistance, relocation bonuses, or more cost-effective temporary housing solutions—employers can cut costs while still offering a competitive relocation package that encourages employees to make a move.
Ultimately, the key to managing relocation costs effectively lies in finding a balance between reducing expenses and providing enough support to ensure a smooth transition for transferees.
