Today’s Relocation Policy: Modifying Repayment Agreements
In today’s ever-changing economic environment companies are re-examining many facets of their human resources programs, including relocation. Working with clients, we have seen several evolving trends in the area of relocation policy including modifications to repayment agreements, specifically in the areas of process, timing and definition.
We are partnering with clients to tighten their processes regarding repayment agreements, ensuring that the agreement is signed prior to the occurrence of any relocation related expenses. The repayment agreement should be a part of the relocation policy and included with the original offer package, ensuring that the employee fully understands the terms of the relocation package and their benefits prior to formally accepting the position and subsequent relocation. This process also allows for the company’s relocation manager to hold any authorization of relocation services until the signed agreement is received. The employee will be anxious to speak with their relocation counselor and begin confirming the details of their move. As such, this process incents the employee to review and return the signed repayment agreement, which will initiate the service authorization and allow them to begin the planning. Of course, it’s imperative that the employee be reminded that they will be working with a relocation management company and not to solicit service providers on their own.
Many of our clients are also revising the terms of the repayment agreement, extending the timeframe from 12 to 24 months. The two primary catalysts are extended home marketing periods due to the real estate environment and working to ensure a return on investment. With the average days on market increasing by over 200% in the past three years, companies are faced with extending the time period for the use of relocation benefits. Since the extensions are so frequent in today’s marketplace, companies are making this a permanent change rather than treating it as a repeated exception.
Extending the repayment terms is also leveraged as a tactic to increase employee retention. Many companies have witnessed a growing number of transferees leaving shortly after their one year payback time frame has expired and feel that a percentage of employees stay on just long enough to avoid repayment. This is leading companies to add an additional year to the repayment agreement to help reduce attrition and increase their ability to recoup the investment relocation expenses should an employee leave.
Companies have also been focusing on clarifying the definition of “termination with cause” to differentiate that term from a “voluntary termination”. When working with our clients we recommend that the company include a specific definition of “termination with cause” in the repayment agreement to avoid any potential misinterpretations.
Finally, even if companies include all of these revisions, repayment agreements are often challenging to enforce. We recommend always seeking a final review from your legal counsel to ensure the document meets your specific company needs and objectives.
Posted on 05/5/2009 in Relocation Policy | Comments (0)
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