The role of employee and family relocation support in the current cost of living crisis

The rising cost of living affects assignees and their families through increased rental and household expenses. Dr Sue Shortland explains why family support is needed alongside financial interventions.

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This article is taken from the Winter 2023/24 issue of

Think Global People magazine

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View your copy of the Winter 2023 issue of Think Global People magazine.
Media headlines abound in relation to rises in rental costs, food prices, and utility charges. Interest rate rises have affected those attempting to purchase property as well as landlords who offer rental properties based upon buy-to-let mortgages. Cities across Europe are affected by some of the highest rental increases since 2022 – some of which have been recorded as just below 20%.It is not only rental costs that are causing problems for those seeking accommodation in Europe's cities. Demand outstrips supply as people return to more city-based living styles post-pandemic. The combination of rental property shortages and rising costs is leading to tremendous pressure upon locals and international assignees alike, all of whom are chasing too few properties at ever spiralling cost.While the situation is difficult for local people, it is potentially even harder for those coming from abroad who are not based locally yet still have to view properties and compete in this ever-shrinking market. The situation is particularly challenging in London where average rental increases have been reported as being around 17% last year.The cost of living in terms of food and other household essentials is also rising rapidly. While inflation rates in the UK appear now to be levelling off or even falling slightly, it is important to remember that these current increases are applying to an increased base cost – prices are not falling below rises already applied by retailers.Utilities have also received much publicity in terms of the rising cost of gas and electricity. Again, although there seems to be a little more stability currently, prices are not falling; they are simply rising a little more slowly.

Cost of living allowances

Price increases in food, household goods, utilities, etc. all feature within the basket as applied to the calculation of cost of living allowances when determining expatriate rewards. Over the years, employers have typically moved away from basing cost of living allowances on so-called standardised indices reflecting replicating home country consumption patterns, moving instead towards more efficient purchaser indices (EPI). These reflect local spending patterns and help to reduce the assignment cost for employers.While the EPI may well be appropriate to reflect careful shopping, it is important to note that when assignees first arrive in their destination location, they may not have local knowledge sufficient to be able to make the most efficient purchases. With the increasing cost of goods, it is likely that inefficient spending in the early stages of the assignment will have a negative impact not only on the financial well-being of those moving to the new location but also on expectations as to the financial value of their international assignment.

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Talent implications

Organisations need the best talent that they can possibly employ in order to ensure true competitiveness. Employees know their worth. They look for flexibility in the assignment deployment, often seeking a combination of remote and on-site working. They also want to be compensated such that they do not lose out through the international move.Employers have over the years responded to employee requests for greater flexibility by introducing lump sum arrangements within their reward policies enabling employees to choose how they spend allowances given to them according to their own personal needs. In theory, this sounds very good from the perspective of improving the employee experience – employees and their families can make the best use of the budgets that they are given and tailor these to their precise requirements. This works particularly well, for example, when the housing supply enables employees to choose accommodation that suits them best – for example to be close to international schools or to local services which they particularly wish to use and value.However, a lump sum approach whereby employees are simply given a budget to sort out their own moving and accommodation requirements presents a very stressful situation when international employees and their families are trying to compete in particularly tight housing markets where costs are rising rapidly and multiple households are chasing every property that comes on to the rental market.In London, for example, individual viewings are now being replaced by open house approaches whereby anybody wishing to view a property needs to go within a time window specified alongside others also viewing the same property and then even bid in order to secure the rental. It is also the case that landlords have become increasingly selective, not wishing to take single individuals, preferring instead couples who are both working such that they can their rental incomes will be maintained should one individual lose their job. International assignee couples who may have only one working partner may not look particularly good on paper compared to those where there are two incomes. Landlords also may not wish to entertain tenants with pets or indeed even young children, such is the nature of competitiveness within the housing market.It is no doubt extremely discouraging for families trying to source accommodation that is appropriate to their needs from abroad or even locally from a hotel when the demand clearly outstrips the supply of suitable accommodation.

Temporary accommodation implications

If relocating families are left to their own devices in the current climate to source rental accommodation for the duration of their assignments, it is likely that the period and cost of temporary accommodation will increase. Organisations need to factor this in to their relocation policies, ensuring sufficient flexibility to cover any extensions needed to temporary accommodation. The second point though, and this is crucial when trying to attract and retain the best talent, is that employee productivity and family happiness and welfare are likely to be negatively affected when international assignees have to live and work out of hotels and are put under extreme stress when trying to source and secure appropriate accommodation.Employers might wish to consider the option of serviced apartments rather than hotels as these do provide a more comfortable and homely environment. Using serviced apartment providers who cater specifically to the relocation industry will be beneficial in this regard.

Home search providers

The current rental market presents a formidable challenge to individuals and families trying to relocate from abroad particularly when they have no detailed understanding of the practical and legal processes involved. Potentially, therefore, the trend will be to move away from providing a lump sum, do-it-yourself approach, to sourcing accommodation towards the use of home search specialists who have more power and experience in dealing with local landlords.The use of employee support services for securing housing provides a means of improving the employee experience as well as increasing productivity. This is essential if global talent is to be encouraged and retained.

Financial policy aspects

Turning to the financial aspects, employers need to regularly review their relocation allowances that relate to accommodation costs as well as support that is given financially with the payment of utilities. It is important though not to write a blank cheque here – with utilities, a sustainable approach is important. Assignees should be encouraged to use gas, electricity, and water sensibly. It is therefore advisable not to reimburse all utility costs as this does not encourage any savings measures. Setting limits that the company will pay provides a sensible option but given the rising costs of utilities, organisations will need to review any caps set carefully and regularly.With respect to rising prices of food and household goods, organisations will also need to review their cost of living allowances regularly. If, for example, organisations up-rated their cost of living benefits annually or twice a year, thought should now be given to a review quarterly. If organisations use an efficient purchaser index, thought might also be given to providing additional support within the first few weeks of the assignment such that assignees have the time to get used to local spending approaches. It is worthwhile using the expertise of home search agents who are also very familiar with local services to provide advice to families relocating into an area as to where they might find the best deals in respect of purchasing food and household goods.

The value of employee support

The rapidly changing housing market and cost of living crisis has made international relocation into expensive city areas particularly challenging. Since the pandemic, organisations increasingly wish to move employees and families physically in order to undertake their assignments. This means that organisations must review not only the financial elements of their relocation policies but also consider the support that is needed if individuals and families on the move are going to be both productive and settled in their new locations. This might mean moving away from a lump sum compensation approach to more hand-held guidance thereby giving the necessary support to ensure that employees can not only compete in exceptionally demanding rental markets but also be able to live and work effectively once they have secured appropriate accommodation.Providing employee support will reap dividends in terms of reducing employee and family stress, improving well-being and ensuring the attraction, deployment and retention of the very best talent.

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