February 12, 2021

What Does a Relocation Management Company Do?

what does a relocation management company do


Relocation Management Companies (RMCs) provide outsourced employee relocation management services for companies of various sizes and needs. RMCs benefit companies by providing efficiencies, cost savings, and an overall better employee relocation experience than they would achieve by managing the relocation program themselves in-house. 

At some point, practically every organization requires to move an employee at the company's expense. 

Why do companies relocate employees?

Organizations relocate staff for numerous reasons: 

  • to move a staff member to an office where her particular skills are required; 
  • to support recruitment when current employee skill sets do not match the need in a particular region or office location; 
  • to expose an employee to a specific service activity or function to build their experience; 
  • and to support a business move of a headquarters or operations to a brand-new location. (When moving an entire group or office of people, this is commonly referred to as an Employee Group Move

For most companies, even large ones, relocation is not a daily activity. Nevertheless, when the requirement arises, it becomes essential to relocate the employee quickly, seamlessly, and efficiently to be productive at their brand-new location. While this varies considerably based on industry type, it is commonly held among relocation experts that most companies relocate about 1% of their employee population each year. 


Which type of employees are typically relocated most often? 

  • Senior Executives who would be responsible for the successful management of onsite or regional employees
  • Engineers whose hands-on expertise is needed to support company goals.
  • Technical Employees with specializes skill sets.
  • New Hire Recruits recruited from other markets to the company live and work at the headquarters location or operations center where in-person work is deemed beneficial to the organization's goals. 

How do companies relocate employees?

There are many different ways and corporate philosophies that shape how companies relocate employees—these range based on need, budget, and goal. These questions shape corporate priorities when considering relocating either current or new hire employees. 

  • Is the company able to find that skillset in the current location? If yes, it might be in the organization's financial interest to actually not look to relocation as the solution. 
  • What is the company willing to budget for employee relocation expenses? This can significantly affect the benefits offered to relocate employees as well as relocation acceptance rates. 
  • How important is it to relocate a specific employee or skillset? Suppose it is critical to support strategic goals to have that skill set in a new location. In that case, it is critical to put the right pieces in place to either attract that skillset to the new area or convince a current employee to move there. 
  • How do I convince a current employee to relocate? Put yourself in the shoes of the employee. If you can convince the employee that the experience will be mostly stress-free. That they will have a better life in the new location. You have a much better chance of getting the employee to move. 

How do companies reduce employee stress during a relocation for work? 

The short answer is to get some help. We recommend partnering with a Relocation Management Company (RMC), like Paragon.

Improving employee experience is the primary reason that corporations usually outsource the relocation procedure to RMC. In addition to reducing stress, an RMC can also reduce relocation costs, limit IRS tax audit risks, and help the employee be productive faster in the new location. These benefits go beyond the benefits of helping each employee move. They can also provide complete program management, policy benchmarking, and more to give you the confidence that you have a competitive program compared to those in your industry. 


Why do most companies outsource their relocation program today? 

Before the 1970s, employee relocation was typically handled by business HR departments. The combination of characteristics described above made relocation an excellent prospect for outsourcing. As a result, this function has actually become increasingly outsourced. The Worldwide Employee Relocation Council reports that today 61% of corporations completely contract out the relocation function. Another 30% outsource chosen elements of the process.

In the 1990s, another strong inspiration for contracting out was the business movement toward "scaling down" or "right-sizing." During this duration, corporations sought to eliminate internal functions that were staff intensive and not related to their core organization. The relocation function was one of the first to qualify.

One of the biggest reasons companies outsource their relocation programs is because of taxes. 

How do taxes affect employee relocation?

how do taxes affect employee relocation


When it comes to relocating employees, taxes represent some of the most significant risks and opportunities for both employee and employer. Taxes are an important consideration when moving an employee because the IRS treats many relocation benefits differently from business expenses. If the employee reimbursement of relocation expenses is not given the appropriate tax treatment by the organization, it could cause an IRS audit. An audit could be embarrassing for the company and could ruin an employee's otherwise good relocation experience. However, the IRS also provides deductions that, if used correctly, can maximize the organization's relocation budget, increase the number of accepted employee relocations, and improve satisfaction. The best example is a tax-advantaged employee homesale assistance program as managed by a relocation management company. 


What are the benefits of using a homesale assistance program through an RMC? 

There are many benefits of using a homesale assistance program through an RMC. These benefits include: 

  • Tax Savings – the IRS allows organizations who move employees certain deductions when it helps employees sell their homes to be relocated for work. RMC's are experts at maximizing these benefits. 
  • Real Estate Broker Network Agents – RMC's are experts at vetting, overseeing, and managing real estate agents across the country. This helps employees sell homes faster for more money, which makes them happier. Word of advice: use an RMC that does not own or is not owned by a real estate company to make sure they always recommend the best available agents in a market.   
  • Employee Satisfaction – when employees are moved and receive homesale assistance, they feel that the company is invested in helping them make the move. By working with an RMC to manage the homesale assistance program, you can be assured that the employee will receive the best experience possible.

How has the employee relocation industry changed over the years?



How do Relocation Companies help support the employee relocation process? 

Although it makes logical sense to outsource relocation to an RMC, it is not always the first instinct of many organizations. 

Why do companies try to manage employee relocation in-house? 

Many companies today often try to manage employee relocation in-house. Why is this the case? Most in-house programs begin because companies often think of relocation as expensive and will save money by going it alone. 

So in-house relocation programs are often how many relocation programs begin. In some cases, they work out pretty well. A hiring manager or HR may do some research, and they try to figure it out on their own. They then give an employee a budget and send them off to the internet to find and vet moving companies themselves with the expectation that the employee would be reimbursed for expenses after the fact.    

However, is this the best way to manage an employee relocation? In most cases, the answer is no because the company will waste valuable time and organizational resources on a task that is not part of their expertise. 

Why is it a bad idea to manage employee relocation in-house?

It is a bad idea to manage an employee relocation program in-house because company resources could be better focused on the core business goals. Suppose the company opts to use a relocation management company instead. In this case, the organization can be freed up to focus on its strategic talent management and organizational growth goals. Today's leading companies who are always competing for the best talent do not risk a bad current employee or new hire employee relocation experience. Therefore they source a trusted partner to help guide them on their journey of crafting a best in class relocation management program. 


Do you need a relocation management company? 

If yes, look no further! Paragon Relocation has been in business moving thousands of employees for companies of all shapes and sizes for 30+ years to all 50 states (in the US) and over 100 countries worldwide. If getting the employee relocation experience right the first time is essential, we can help! 

Contact Paragon today to get started! 


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