Wide Variance in Generosity Among Employer Relocation Benefits

Learning of a job transfer is a strike of lightning for most employees and their families. During the excitement of anticipated new experiences, there’s much to plan. One issue that takes thought is the employer’s relocation policies for home owners. Policies for employers in Anchorage vary widely, from very little assistance, to extremely generous.

For the national perspective, consider a recent survey by the Employee Relocation Council (ERC), a national organization consisting of employers, appraisers, real estate brokers and other service providers that play a role in moving employees around the country and around the world. This survey of 191 responding member organizations revealed that two-thirds of them work with an outside relocation contractor. The relocation contractor’s job is to help the employee and the broker to secure a buyer for the home. If that effort fails, the employee gets to sell the home to the relocation service for appraised value. Then the relocation contractor markets the property, after the employee has moved away.

Among other types of assistance in the ERC study, 14 percent of employers say they run an in-house relocation service instead of contracting it out. About an equal number of employers reimburse employees directly for home sale costs. Only three percent of surveyed ERC members offer no real estate assistance.

In the Alaska market it is generally true of the larger national companies, especially in the oil industry, that third-party relocation service is a normal employee benefit. Many government agencies also offer similar, but usually less generous, relocation benefits.

Of course, ERC consists of organizations in the relocation business, so most of its members logically offer relocation assistance. These benefits are less common, however, among smaller employers. In Anchorage many of these employers are contractors performing out-sourced functions that used to be done in-house. The cost savings to the major employer includes more than wages and traditional benefits. The major employer trims from the employee relations costs the traditional home benefit programs. That’s a bottom-line savings, if to the detriment of employees who used to have more generous home sale allowances.

It is a lot less expensive for an employer to transfer someone who rents. In 1995, according to the ERC survey, the average cost to relocate an employee who rents was only $12,962. Employees who owned their homes, by contrast, cost their employers $45,373 to relocate. These costs can include direct reimbursement of real estate fees and closing costs, acquisition and holding costs for properties obtained under home sale programs, and reimbursement of employees for a loss on sale.

This last category, paying and employee the difference between the purchase price and the sale in a declining market, has come under pressure in this decade’s more cost-conscious corporate environment. While policies vary widely, new hires are less likely to find a “loss-on-sale” provision in their employment agreement, than senior employees who got this assurance ten or more years ago.

Loss-on-sale has not been an issue in the past six years of steady price appreciation in the Anchorage market. But loss-on-sale saved the bacon of many families in the 1985-89 period, when major employers moved employees out wholesale, bought their houses, made up their employees’ loss with cash, and resold the properties to local buyers at deeply discounted prices.

This was a massive infusion of future equity into this market; it came from corporate employee relations budgets. Those who took advantage of that discounted market now enjoy considerable equity in their homes. These are the current upgraders in the market: people moving to better homes, or hiring builders to create a new home for them.

Nationally, the ERC found that 59 percent of its surveyed employers have formalized loss-on-sale programs. The number of its members willing to cover all of an employee’s losses “continues to decline, with only 21 percent of respondents doing so,” according to the survey report. In exchange, perhaps, more employers offer lump-sum payments to cover such expenses as temporary living and househunting. Also prevalent are cost of living allowances, either for specific cities (with Anchorage normally being on such lists), or where the employee is moving to a community with a higher cost of living than the current home town. Other types of assistance in high-cost areas include mortgage subsidies or buy-downs, salary adjustments, or loans in excess of equity.

Employer policies also vary in what assistance they give to partners of unmarried transferees. Among the ERC members, 47 percent give no assistance and 14 percent have a formal policies. The rest of them said they give assistance on request, under special circumstances, or said they didn’t know if they had a policy.