Cost-Cutting Moves Could Spare Relocation Programs
In November 2011, President Obama issued an executive order requiring agencies to review their travel budgets and reduce costs by 20 percent. Then came the fallout from costs associated with the General Services Administration’s ill-famed Las Vegas conference. Now Congress is considering three pieces of government travel legislation that would beef up oversight and cost containment even more.
Amid the all uproar, one travel program should be reviewed separately on its own merits -- the Federal Employee Relocation Management Program. The program was authorized by legislation in 1983 to facilitate permanent transfers to new assignments. The nation was in a recession at the time. The idea was that professional relocation services could improve mobility in support of missions, save agencies money through efficient and cost-effective moves, and reduce out-of-pocket costs for employees. The legislation authorized contracts for relocation services as an employee benefit to replace or supplement self-managed moves.
The latest recession is far deeper than that of the early 1980s, and its impact on government operations and productivity is well-documented.
Law enforcement agencies have had to issue waivers and create alternative programs for employees who cannot comply with their mandatory mobility agreements. The Defense Department’s civilian agencies, which transfer employees as part of career advancement programs, also have been affected. Agencies that have specialized workforces requiring mobility for food safety, air traffic control and disaster relief report that employees turn down relocation assignments 40 percent of the time on average because of the recession.
The Worldwide Employee Relocation Council’s 2011 Transfer Volume and Cost Survey showed that employees are turning down transfers because of depressed housing markets, negative home equity situations, and family resistance to moving.
Agencies must evaluate their relocation programs separately from temporary duty travel budgets. Permanent transfers are critical to missions, and managers should preserve relocation programs that address the needs of employees during tough economic times.
Some agencies have eliminated direct reimbursement programs for employee transfers and have announced “hire local only” policies to save money. But if local talent does not meet requirements, agencies can end up having to advertise nationally and paying moving costs for new hires. Restricting agencies to hiring locally can impair the recruitment of top talent.
Professional relocation contracts can improve cost-efficiency, recruitment and retention. Federal managers should consider the following suggestions when evaluating the cost and effectiveness of their relocation programs:
Determine how much money your agency is losing by allowing employees to manage their own moves and receive direct reimbursement for their expenses. Direct reimbursements must cover federal, state and local employment taxes, which can increase payouts by as much as 50 percent. In addition, an agency can save $8,000 to $12,000 on the sale of an average $300,000 home through a relocation contractor that can conduct an amended value transaction or buyer value option sale.
While direct reimbursements are easier to track in agency budgets, they are more expensive. The self-managed process takes significantly longer, can delay arrival at the new assignment, and requires significant outlays of employee cash. Relocation contracts eliminate the need to write a personal check at the closing table, provide 100 percent of equity in advance to find a new home and bill allowable prepaid closing costs directly to the agency.
Real Estate Expertise
Professional assistance with selling and buying real estate leads to better deals and faster decisions. Relocation contracts also can help guide employees through the short sale process, if necessary, to avoid foreclosure.
Relocation management counseling can head off financial liabilities that can jeopardize an employee’s credit ratings. This is especially important for employees who have security clearances, which are contingent on a clean financial record. Loss of a security clearance can lead to a job downgrade or dismissal. In that case, agencies could face the additional cost of conducting background investigations for replacement employees in need of clearances.
A Single Source
An agency can craft a relocation contract that provides a single source for the moving process, property management, entitlement counseling, expense reporting, spousal employment assistance and transition services. Professional relocation counseling is also available for renters, who comprise about half of the relocation market. This all leads to quicker, cost-effective moves and better agency productivity.
Relocation services contracts can augment in-house travel staff, which is especially beneficial at agencies with decentralized operations. Contractors can guide employees through a successful move and provide agencies with accurate and immediate accounting of expenses for the requisite reports to the Office of Management and Budget, the General Services Administration and Congress.
Permanent moves are a crucial part of government operations and must be viewed separately from temporary-duty travel and conference schedules as Congress considers new legislation and agencies evaluate spending in response to fiscal constraints.
Reducing permanent transfers by an arbitrary percentage is not the answer. Agencies can control their budgets and move necessary employees by managing moves through relocation contracts.
Linda Rothleder, president of relocation management consulting firm Rothleder Associates Inc., is a former executive director of the Public Employees Roundtable.