Relocation Services Sourcing — Best Practices for 2011 and Beyond (Part 2)

Spend Matters would like to welcome a guest post from Pete Kolp, CEO of AIS (Advanced Integrated Solutions). See Part 1 of this post as well.

To enhance productivity and reduce attrition, you must provide top-notch services. But you've awarded your program to the lowest bidder, likely at the expense of service quality. What's more, you're paying hidden fees and can't get comprehensive enterprise-wide reports that indicate what you're truly spending. Compounding the situation, you may have some internal divisions doing their own thing, negotiating inconsistent packages, creating potential discrimination issues and diluting your volume leverage. Here are some things to consider:

  1. Accurate Budgeting and Cost Reporting
    Most companies can't establish accrual budgets and have limited cost tracking capabilities. This significantly impedes the procurement professional's ability to accurately predict total spend, let alone project and verify savings.
  2. Maverick Spend
    Decentralized activity can magnify costs because managers at the local level are not capable of negotiating effectively and lack the resources to monitor vendors. Moreover, they typically lack the big picture perspective and the result is often poor service compounded by excessive costs.
  3. Lack of Expertise
    Today, relocation, tax and compliance issues are more challenging than ever. Few companies can devote limited HR, Finance, and Accounting resources to ensuring accurate and timely processing and compliance.
  4. Too Many Costly Exceptions
    The most expensive benefits are the ones you didn't plan for. Unknowingly, managers can exacerbate the problem by granting exceptions that destroy program consistency and dramatically increase relocation costs.
  5. Giving the Government Only Their Fair Share
    If you're like many employers, your accounting and payroll departments may not know all the tax ramifications of relocation reimbursements. We have tax experts that analyze client policies and follow uncompromising procedures that ensure error-free gross-up calculations. We collect from the transferee their filing status, exemptions, usage of itemized deductions and other vital information so that you only pay the required taxes. This kind of accuracy can result in savings of more than $1,000 per employee. Because of our tax experts, we know how to calculate gross-up to maximize tax savings while ensuring that your employees feel they've been treated fairly. For instance, final move costs and household goods transportation are deductible and don't need to be reported as income; therefore, they shouldn't be tax protected. As a result of AIS's audit of policy, we were able to save a client a significant amount of money in unnecessary gross-up expenses.
  6. Fine Tune Your Policy
    If your policy is more than three years old, it doesn't reflect the most up-to-date cost efficiencies. For example, we completed a policy review for a major manufacturer and identified $2.1M in benefits that were either unnecessary or overly generous in comparison to peer group companies. In collaboration with HR and procurement, we earmarked provisions that were no longer necessary, like a Mortgage Interest Differential program, unused temporary living and others that could be eliminated "under the radar" without being perceived as a "take away."

-- Pete Kolp, CEO of AIS (Advanced Integrated Solutions)

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