If you've read our Relocation Statistic eBook (and if you haven’t, you should), you learned a number of alarming statistics about relocating and the monetary impact it can have on a company.
We conveyed some big numbers about relocation, and we want to dive into exactly how these numbers are determined and the factors that play a part in them.
Some statistics touched on in the above guide are:
1.) It costs on average $97,166 to relocate a current employee homeowner
2.) It costs on average $72,672 to relocate a new hire homeowner
3.) It costs on average $24,216 to relocate a current employee renter
4.) It costs on average $19,309 to relocate a new hire renter
You're probably wondering how or why there is nearly a $80,000 difference between the first and last number. Or, maybe you are wondering how we even came up with those numbers in the first place. Well, we didn’t make them up, if that’s what you’re thinking. Here’s the science behind it all.
After the housing market crash in 2007, things became a little...complicated. Going from a time when selling your house was just another thing to check off your to-do list (okay, maybe it was a little more extensive than that, but you catch my drift) to nearly an impossible feat, relocating homeowners became a huge financial burden on companies.
There are many costs and financial technicalities that go into the process of selling and buying a new home, and these costs grew exponentially after the market crash. The amount of money required to relocate a current employee who owned a home skyrocketed and hit an all-time high of $97,166 in 2012 (a number which is just now beginning to level out, as the Worldwide ERC reports that 2013 saw a 6% decline). The bulk of this cost comes from the average home sale assistance cost, which ERC estimates at $45,000. These costs however, change based on how much assistance the company is willing to provide to their employee.
For instance, some companies offer Purchase Assistance. Essentially, this is where if your employee sells their house to an agency for $160,000, and their replacement home costs $172,000, they are eligible for a $12,000 refund (some companies offer mortgage interest differential payment as well, which is explained in detail here.).
Employers may also cover Incidental Expenses which can cover anything from the cost of preparing the deed, to home inspections. Additionally, trips to and from the old home to new home may be covered, as well as temporary living in the new location if the house is not ready upon arrival.
Other factors that play a part in this number are the cost of shipping household goods (such as beds, dressers, and other furniture), closing costs on the house, familial relocation needs, job-search for a trailing spouse, and more. Thankfully, as the housing market recovers, this number will experience a steady decline.
The relocation cost goes down to $24,216 for a current employee renter because the people who most often fall under this category are recent-grads who do not have as much “baggage” in their relocation needs. A recent college graduate likely does not have a family, probably does not have a lot of money tied up in their house or other properties, and does not require as much money to ship household goods to their new location.
You may be wondering where the discrepancy comes from between relocating current employees compared to new hires. It’s simple, really. What it boils down to is that companies are willing to shell out top dollar to relocate their top-tier executives.
This is where that big number ($97,166) comes from in that first statistic we listed. These employees are likely crucial to the success of a business and are invaluable assets, hence why they can negotiate to get some hefty benefits in their relocation. However, while new hires are still important parts of a company, they are not going to be eligible for the same reimbursements that current employees are (the economic recession certainly plays a part in this as well).
The most common type of reimbursement that new hires are going to see are lump sums. Companies will likely offer somewhere in the neighborhood of $5,000-$10,000 to cover a new hire’s relocation costs, but assistance will not be as bountiful as with a current employee. This is not to say that companies should write a check to their relocating new hires and send them on their way (some tips on how to advise employees to manage lump sum), but involvement certainly does not need to be as extravagant.
Hopefully this breakdown helps to better understand the "why" behind these statistics!