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Lump Sum – Is this the end?

Over the last five years the trend has been for Mobility Professionals to find new ways to manage their busy caseload(s) and reduce the overall cost of company funded relocations. A popular method has been to move transferees onto lump sums as a method of reimbursement. This method has proved easy to administrate and provides flexibility for the transferee.

Many transferees prefer to receive a lump sum. It’s not unusual for them to spend as little as possible on their relocation and pocket a portion of the lump sum. Typically they do not invest in settlement or home finding services and the kiwi ‘can do’ attitude prevails. However, there are some alarming trends that suggest destination settlement support should be mandatory for employer’s looking to transfer existing or new hires to Auckland, Wellington or Christchurch.

Auckland is in the midst of an unprecedented long term housing shortage. Every day there is another news story about this issue. With the average cost of purchasing a property at record levels the only option for many is to rent. What rarely makes the news is the extreme shortage of rental properties, causing rents to balloon and chronic overcrowding. Rental properties are snapped up immediately or transferees are put into an intensive screening and auction process with up to 20 others at a time. In short, the process of finding housing in Auckland (unassisted) is time consuming, demoralising and disappointing.

Wellington is similarly experiencing a rental housing crisis. In 2018 there have been significant rent increases fueled by a growth in government staff, more students (attracted by a year’s free tertiary education) and a shortage of ‘family friendly’ housing. Many landlords have exited portfolios or divided up their inner city properties to achieve higher returns. The city is also in the country’s highest risk earthquake zone and has experienced several major shakes over the last 5 years. The combination of these factors has made Wellington a less appealing prospect for candidates considering a permanent transfer.

While Christchurch is experiencing a post-earthquake(s) investment boom there are still many barriers for employers wanting to attract and relocate candidates. For example it’s estimated that adequate roading repairs across the city will take a further 20 years. The ‘red zone’ and city centre are ever present reminders that Christchurch is rebuilding after two catastrophic earthquakes. For those looking to purchase a property there is the issue of ‘on sold’ houses where botched earthquake repairs are commonplace. While EQC do transfer liability to a new owner the repair costs are ‘capped’ and in many cases this is not sufficient to perform the required work.

Even before an ‘out of town’ appointment to any of these cities can be made the first task facing employers may be to convince their preferred candidate(s) to actually relocate their family. Many are now wanting to commute and keep their families at home while they ‘try out’ the new job and life style. Our experience is that long term commuting has a negative effect on family life, productivity and job satisfaction not to mention the additional costs to the employer and high risk of a failed relocation.

At Crown World Mobility we advise all mobility professionals to reconsider their packages for domestic relocations and put the focus on providing families with housing support at destination. We don’t believe that transferees will use their allowances for these services and the downside will far outweigh the cost associated with a company provided support package.

During recruitment a carefully planned ‘preview visit’ with a housing component can be used to get shortlisted candidates (and their spouses) ‘over the line’ during the decision making process. Similarly a structured ‘preview visit’ can also be used in conjunction with a ‘home find’ destination service to get families settled very quickly into permanent accommodation and close the door on the ongoing cost and risks associated with a prolonged transit time.

We know from experience that transferees moving without assistance will typically struggle to come to terms with their new situation, post arrival. They may be facing the prospect of competing with numerous applicants for desirable properties and navigating other issues around the suitability of housing and school zones. Ultimately the longer a transferee is in a temporary situation the more emotional and financial stress on the family and the employer.

Once the decision is made to provide transferees with a preview and/or ‘home find’ service it is important to the right service provider. Professional relocation consultants in our industry should not be licensed real estate agents, nor receive ‘finder’s fees’ from realtors. The right consultant will provide transferees with unencumbered support, tailored specifically to their situation. They will know all of the reputable landlords and real estate agents and be experienced in reviewing and negotiating leases. The whole idea of destination support is to achieve a seamless relocation experience and get transferees out of temporary and into permanent accommodation as quickly as possible.

If you are unsure as to what’s the best approach for you and your organisation, please don’t hesitate to contact us, anytime, for a free, no obligation consultation.

Written by Kerry James, Mobility Services Manager of Crown World Mobility. If you wish to discuss this article you can contact Kerry via email: [email protected] or call: 027 471 7290