We were recently asked via circulated email whether the sale costs of an expatriate’s home in Canada should be reimbursed if the company was already paying for housing in the host location. In order to provide a response twenty more questions were required but two things occurred to me:
- How granular international mobility solutions need to be; and
- When these are required how ill-suited email can be in collecting opinions
In the busy life of an HR executive being able to grab a quick response from a trusted peer via email or social media is a powerful tool but without care can sow the seeds for a harvest of unintended consequences. By way of example let’s look at the issues surrounding different approaches to expatriate housing:
- The Cost of Housing – Employers generally want expatriates to contribute toward the cost of their shelter either by maintaining their home country house (whether the cost is defrayed by rental income or not) or by an amount deducted from pay or host housing allowance.
- Host Country Housing – The host country may not permit a foreigner to purchase a home or may dictate the location in which to live or the supply of housing may be dissimilar, or local housing might already be furnished or the standard may not be comparable causing claims of inequity amongst those transferred. These all contribute to expatriate frustration and employers deciding typically to pay for host housing. In some cases even enhanced housing to motivate acceptance of the assignment.
- Double Dipping – Some employers do not want to be involved with their employee’s home country house concerned that by reimbursing host country expenses and the sale costs at home the expatriate would have no shelter costs.
- Equity between Homeowners and Renters – Now assume that the expatriate does not own but rents their home country residence – not uncommon in many countries – and is required to give up the lease on moving abroad. In most cases an employer would reimburse lease termination costs as a relocation expense and because they vary dependent upon the length of the lease but might justify not reimbursing the sale costs of a home on the grounds that an owned home is a personal asset and should be for the expense of the employee. Employer policy needs to be clear on what employees will pay toward housing both host and home.
- Home Equity – Notwithstanding whether the employer participates in the cost should an employer have a position on whether employees retain or sell their home? Will this expose the employer to additional liability? For example housing market inflation over the return on the equity removed from the housing market and currency impact if the equity is taken offshore. Will the employer underwrite these risks?
A clear policy on home and host housing and ownership is essential for multi location employers to maintaining internal employee equity and containing future liabilities. Ongoing shelter costs need to be separated from one time relocation expenses thus avoiding tainting other areas of mobility policy and using housing as an incentive dilutes a pay for performance culture and can result in leaders having inflated sense of their importance.
A standard contribution to housing treats all employees consistently irrespective of their home or host country situation and avoids double dipping. Housing cost reimbursement should not be treated as an incentive but targeted at keeping the employee “whole” with their past situation or future peer group.
Questions on international mobility are notoriously detailed and involve consideration of compensation philosophy, relocation practice, internal equity, and talent management. Email and social media are excellent tools for sharing but can result in misleading conclusions where any solution to be effective must be tailored to the goals and culture of the company.