What Does a Relocation Management Company Do?

December 11, 2014

At some point, almost every business needs to relocate an employee at the company’s expense. Companies relocate employees for many reasons: to move an employee to an office where her particular skills are needed; to support the hiring process when a new employee is not where the company would like him to be; to expose an employee to a particular business activity or function; and to support a company move of a facility or operation to a new location.

For most companies, even large ones, relocation is not an everyday activity. Nevertheless, when the need arises, it becomes extremely important to complete the task quickly and efficiently so that employees can be productive at their new location.

This is the primary reason why corporations typically outsource the relocation process to a Relocation Management Company (RMC). Therefore, the fundamental value-add of an RMC is to minimize the downtime of the relocating employee.

Relocation is Complex, Time-Critical, Personal, and Expensive
Complex: Employee relocation can involve any or all of the following: selling a home, buying a home, renting an apartment, exploring a new area, finding schools for children, moving and storing household goods, locating temporary housing, traveling to and from the new location, and more. If the move is international, you can add: adjusting to a different culture, complying with immigration rules, learning a new language, and more.

Time-Critical: Employers typically want newly hired or relocated employees at their new jobs as soon as possible. Therefore, it is imperative that all necessary relocation activities must be completed in a compressed time period.

Personal: Employee relocation crosses into an employee’s personal life. A move usually involves a spouse, partner, or family. It requires that the relocating employee make important personal decisions in response to business demands.

Expensive: Relocation can be expensive. The Worldwide Employee Relocation Council (WERC), the relocation trade association, recently reported that the average cost of a domestic relocation of a homeowner was $85,673 and the average cost for a renter was $27,327. Importantly, these are out-of-pocket costs to the employer and do not include employee down time.

Most Relocation Logistics are Outsourced Today
Prior to the 1970s, employee relocation was typically handled by corporate HR departments. The combination of characteristics described above made relocation an excellent candidate for outsourcing. As a result, this function has become increasingly outsourced. WERC reports that today 61% of corporations fully outsource the relocation function, and another 30% outsource selected aspects of the function.

One of the major activities required in many relocations is the tax-protected sale of the employee’s home. By its very nature, this service is best provided by real estate specialists that are outside the corporate structure. As a point of history, managing an employer’s home buyout program was the original activity outsourced to the predecessors of today’s RMCs.

In the 1990s, another strong impetus for outsourcing was the corporate movement toward “downsizing” or “right-sizing.” During this period, corporations looked to eliminate internal functions that were staff intensive and not related to their core business. Relocation was one of the first to qualify.

RMCs Provide Outsourced, Relocation Logistics Management
Even though employee relocation is a logical function for corporations to outsource, it is not the primary justification for their existence. In reality, employers could outsource the process to the employee, and most employees could handle their own relocation at the company’s expense. The problem with this approach is that employees don’t relocate very often and managing an unfamiliar process without assistance can be extremely time-consuming, disruptive, and expensive.

As we have noted, relocation is expensive, but what can be even more costly is employee downtime. Professional help from a RMC, which deals with employee relocation every day, greatly expedites the process.

Written by Frank Patitucci
CEO

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