Case Studies

For designated Tier 2 and 3 cities, many of the familiar amenities and infrastructure that could be found in the West and in the modern Chinese cities such as Beijing, and Shanghai is not available. But because businesses need to go to these Tier 2 or Tier 3 cities so do their talented employees. Therefore questions arise about how to relocate employees to these cities such as, how do companies fairly compensate employees who make the journey to the far reaches of rural China to live and work? How does an employee secure housing in more remote locations in China? Paragon’s latest survey explored these questions and more.

Although “Staging a Home” is a subject with great popularity proven by the success of shows on cable channel HGTV — Designed to Sell, Design on a Dime, Curb Appeal, to name a few, only 10% of our survey respondents offer a Staging Allowance as a formal component of their relocation policy. However, for those who have provided such support, approximately two-thirds have witnessed an increase in sale activity prior to resale and/or buyer activity when a Staging Allowance was utilized.

The definition of payback, the act or fact of paying back from Dictionary.com supports our latest survey results. Eighty six percent of our respondents require a repayment/payback agreement for relocation costs expended on behalf of their transferees. Based on these results, 56% of respondents state their repayment policy applies to terminations within the first year from an employee’s effective start date in the new job with the amount being owed either a percentage or 100% of the total relocation monies spent by the employer. As far as the success rate, 93% indicate they typically collect the funds.

US outbound assignments show no signs of slowing down, despite the continued weakening of the US dollar. In fact, 75% of the companies surveyed noted no change in the interest of US candidates to accept assignments abroad. An even greater majority of those surveyed have no plans to adjust relocation policies to respond to the current conditions, suggesting that programs are already structured to keep their global mobility programs on track.

The perceived glamorous life of an expat living and working abroad can immediately turn to chaos when faced with a natural disaster, which is what happened to our client’s 40 assignees and families living and working in Japan in March, 2011. A magnitude 9.0 undersea earthquake triggered a massive tsunami that left many of Japan’s eastern coastal towns in ruins and ignited a nuclear meltdown that is still affecting the environment today. But this high-volume global client had another problem to worry about: Immediately after the earthquake and tsunami, it was unknown if their assignees in Japan were safe and out of harm’s way.

Overwhelmingly, survey results indicate that US Domestic relocation volume will either stay the same as last year or even increase over the previous year. Is it possible that the bottom of this down economy has been reached? Of the respondents to the survey 62% indicated that that there will neither be an increase or a decrease over the volume that they had last year. However, 19% of respondents indicated that there will be an increase of volume in 2010 as opposed to just 5% saying there will be a decrease in volume over the same period of time. This makes sense because since November of last year hiring has slowly been on the rise.

Relocation appraisals differ from mortgage appraisals in that they emphasize the sales comparison approach in estimating value which is based on the market’s perception, not the intrinsic or replacement cost of the residence and / or improvements. Using a technique called forecasting, the appraiser analyzes the past and present trends of the housing market to anticipate the most likely sales price within a 120-day listing period. The appraiser evaluates comparable closed sales, pending transactions, and competing listings to set a benchmark value for the subject property. Additional forecasting adjustments may be applied based on supply and demand, property location, and market conditions.

Short-term assignments are useful in completing specific projects, transferring knowledge and also offer possible solutions to employees who may decline a long-term assignment. Our survey also indicates that 50% of companies benefit from the cost savings of short-term assignments. As with any assignment requiring temporary separation of family, there are stressors associated with the short-term assignment including: working in a foreign country; family challenges; and leaving one’s comfort zone, all of which may lead to less than stellar business results.

As an indication of how important and complicated global payroll can be, 47% of Paragon survey respondents said they utilize “over 5” different payroll systems/ providers with 1 to 10 internal employees dedicated to this initiative world wide. To keep pace with reporting, 50% of respondents collect international payroll data monthly, bimonthly or quarterly with 57% further reporting the same information for tax purposes up to 13 times or more in a calendar year.

Under the guidance of FannieMae, mortgage lenders are reinstating stricter underwriting guidelines and returning to conservative product offerings. Markets, as well as buyers are subject to scrutiny. In January 2008, most lenders instituted a Declining Markets policy requiring purchasers to come up with an additional down payment in designated markets. Lenders are also instituting additional fees and/or higher interest rates for those with credit scores less than 720, posing additional challenges for buyers and sellers forcing many to turn to rentals as the only viable housing option.