Are you Leveraging the Power of Domestic Mobility?
Low unemployment, rapidly changing technology, and multiple generations in the workforce, each with unique personas and expectations, are putting pressure on HR to deliver talent-led change by developing and enriching the organization’s value proposition. Including domestic mobility as part of the employee experience may be an important step for your organization.
Mercer’s recently published Global Talent Trends 2019 identifies four trends that leading companies are currently pursuing:
- Aligning work to future value
- Building brand resonance
- Curating the work experience
- Delivering talent-led change
Of these, both “aligning work to future value” and “curating the work experience” directly highlight a need for companies to understand and leverage mobility. By utilizing an intra-country (domestic) mobility program to relocate employees, the company can align employees with the work and locations that will deliver future value. Additionally, moving people within the country to take on new assignments is a critical development tool for employees and a powerful way to deliver an engaging work experience. (Find helpful information on each of these trends and the detailed findings of this year’s study by accessing the Global Talent Trends 2019 website.)
What is Domestic Mobility?
Domestic mobility, or domestic relocation, is the program by which employers can efficiently move employees from one location to another in the same country with the goal of having them reside in that new location and work on a semi-permanent to permanent basis. Typically, we’re talking about domestic mobility, rather than business travel, when specific accommodations must be considered, such as:
- Housing – Is the relocation going to be for a timeframe beyond that which would be reasonable to expect the employee to stay in a hotel?
- Family – Is the assignment in another location for a length of time that would cause stress on the employee’s family due to his/her absence? It is reasonable to expect that the family should be relocated along with the employee?
If these questions are being asked, you’re managing more than just a business trip. By putting in place a mobility plan, you can ensure that considerations of this nature are managed efficiently and effectively.
Characteristics of an Effective Mobility Plan
When faced with managing multiple employee moves, having a well-designed mobility plan will greatly minimize challenges and help ensure moves are an effective and beneficial part of employees’ experiences. There are three key factors that must be addressed when planning and managing the relocation of an employee: 1) base pay, 2) cost of living versus cost of wages, and 3) relocation assistance. Let’s review each of these.
If you are part of a multi-national or global company, you’re likely utilizing country-specific pay structures. However, within a specific country, there are questions about whether regional or local pay structures exist that allow compensation adjustments to account for local labor costs. Remember, when looking at base pay, we’re not talking about cost of living, but rather cost of labor. Though the two tend to go hand in hand; however, when locations have a very high or very low supply of talent, market-driven base pay may vary significantly from what one would expect.
According to the Mercer 2018 North America Domestic Relocation Policies and Practices Report, in the US, less than half (44%) of companies have a local/regional salary structure. Fifty-six percent of companies operate with only a national salary structure. Depending on the design of that salary structure, managing base pay for the same jobs in locations with vastly different costs of labor can be challenging. If your company is one with a national salary structure and you’re struggling to ensure pay is competitive across the nation or planning to move people to new locations, it’s probably time to consider redesigning your salary structure. Utilizing a current and comprehensive source of cost of labor differentials, such as Mercer’s Geographic Salary Differential Tool, is essential to good decision making. Mercer’s salary differential information is based on actual market data collected annually through extensive compensation surveys, rather than data interpolation. This ensures the highest-quality, reliable, and current data reflects the latest market conditions. The tool includes over 230 US and over 85 Canada locations. The example below shows how base salary levels will differ based on the cost of labor from one location to the next.
Data such as this, from Mercer’s Geographic Salary Differential tool, is used to assess the variability among locations to determine what system of salary structures and/or policy on base pay adjustments are necessary to pay competitively.
Cost of Living versus Cost of Wages
Although cost of living may influence market-based pay levels (cost of wages), there are many scenarios where the actual cost of living (housing, utilities, goods, services, transportation, state and local income taxes, etc.) far exceeds a given location’s labor cost premium. In those cases, employers may need to consider whether additional incentives are necessary to attract talent and ease employees’ transition from a low- to high-cost location.
A well-structured domestic mobility program can help employees with the shock of encountering a significantly higher cost of living. Transition assistance typically involves payment outside of the base salary designed to defray higher expenses such as housing, utilities, transportation, taxes, and groceries for a period of time, typically 1 to 3 years, depending on the type of relocation and the cost differences.
In order to understand what, if any, transition assistance is warranted, you need a reliable source of information to understand the differences in costs of living between one location and another. Typically, you would assess the differences in housing, taxes, goods, and services holistically between locations to develop a comparison and determine if a significant differential exists. An example of such a comparison for two US locations is provided below.
Whether you manage relocation assistance internally or contract with a vendor to do so, you need to be confident in the methodology and data sources used to develop your company’s policies and offerings.
Policies and design typically include:
- Home sale and purchase assistance
- Household goods shipping and storage
- House hunting trips
- Temporary living
- Spousal assistance
- Relocation travel
- Transfers to high-cost locations (cost of living differentials, housing allowances, tax differentials)
- Miscellaneous relocation allowances
- Lump-sum payment approaches
- Repayment agreements
Understanding current market trends as well as costs for relocation-related transactions, such as transportation of goods and services, real estate transaction services, and temporary housing, are all critical to ensuring that your company’s domestic mobility offerings are perceived as competitive and necessary benefits by the employees involved. In addition to typical market practices and costs, you need to determine the offering that fits your company’s employer brand and the value proposition offered to your employees. This is no small feat. It may make sense to take advantage of the expertise that a company such as Mercer can provide to review your policies and offerings. Mercer’s review can provide a comparison to market, assess the alignment to your employer brand and value proposition, and provide cost-effective alternatives.
Mercer’s domestic mobility experts can walk you through the considerations and develop a customized program and policies for your organization.
With a well-designed plan in place, you and the employee will also benefit by establishing a cadence of frequent, transparent conversations regarding the relocation. The employee will have questions about a variety of topics, all of which you need to be prepared to answer.
Questions will likely include:
- What assistance will be provided in relocating – financial and other?
- How will the job differ from the current job when working at the new location?
- What is the new city or town like? Are there good schools? How does the cost of living compare to the current location?
- What if the relocation doesn’t work, for one reason or another? Can the employee return to the old job?
As an HR professional, you are often responsible for addressing the employee’s concerns and questions. In order for the relocation to be mutually beneficial, encourage frequent and open conversations with the employee, his/her current and future managers, and even the family members of the relocating employee. You may have a relocation company engaged to handle many of the details of the move, but you still should be careful to ensure the employee’s questions are addressed. It’s your responsibility to make sure that this relocation is viewed as a positive experience and a meaningful part of delivering on the value proposition and your employer brand.
For more information, visit our Domestic Relocation Cost Comparisons page.
About the Author
Vadim Kostovski is a Senior Associate and part of Mercer’s Northeast Mobility Practice with over 15 years of experience supporting client mobility policy and compensation strategy.