by Renita Charrlin, Runzheimer International, and Margery Marshall, Vandover
The changing economic landscape plays a critical role in employee relocation, both for employers and employees. Overall unemployment rates in the United States have reached 10%, the promise of real estate recovery has yet to be realized, and mortgage guidelines are more stringent. Employers are facing budget cuts and workforce reductions, yet still need talent in the right positions and locations.
For employees, spouse and family issues have long been a top concern during relocation, but new issues continue to emerge that further complicate an already challenging process. Top concerns for relocating employees now center on economic factors like real estate values, job market woes, and mortgage financing.
New Mortgage Guidelines Add to Challenges
For many families, spousal income is a key consideration in the relocation process, and recent mortgage guideline changes will create additional obstacles for relocating families. The Federal National Mortgage Association (more commonly known as Fannie Mae) has reversed a policy permitting mortgage applicants to include the current income of trailing spouses in data supplied to qualify for a loan. In other words, when applying for loans through Fannie Mae, applicants can note the income of their spouse only when he or she has secured documented and verified employment in the destination.
The U.S. Bureau of Labor Statistics reports that 57% of married couples are dual earners. Although not all dual-career households will face relocation, the prominence of dual-career households means that spousal income will continue to be a factor in relocation decisions.
Because of these new guidelines, some transferees will either have to qualify on the basis of one income if the trailing spouse/partner is unable to quickly secure a job in the new location and buy less house than they wanted, or they may be required to rent for an extended period of time until the spouse or partner is reemployed. This could drag out the relocation process—which is already slowed by the economy—even further.
If a spouse’s income contributes 30% to 60% or more to the overall household income, real estate purchasing power diminishes greatly until the spouse is able to secure employment. The current real estate market had already sparked an increase in length of temporary housing arrangements and prior homeowners renting in the new location.
In addition, more families have settled on a split family arrangement where the employee relocates to temporary housing and the spouse/family remain in the old location until the house can sell or the spouse can secure employment.
With these new mortgage guidelines, even families able to sell their current home may find themselves unable to fully relocate together. Double moves are expensive and stressful for a family, and in some cases the best employees will decline a relocation to avoid the stress.
Taking a Harder Look At Relocation Support
Budget decisions and employee reluctance have reduced relocations by 40% to 50% compared to 2008, and companies continue to take a closer look at where telecommuting, position shifts, and other steps could accomplish the same goal at a lower cost than full relocation.
Yet even during the current crisis, workforce mobility is a necessity. Despite growing employee concerns and increased reluctance, employers need the best people where they are needed most.
Think of it as quality over quantity. Employers might be moving fewer employees, but they are willing to invest more in a single relocation to ensure success. Fewer relocations mean employers must make doubly sure each move is as smooth as possible; employees need to be fully transitioned and focused on work as quickly as possible.
Top employers seeking to recruit and retain top talent will continue to invest in broader talent management initiatives and mobility support, regardless of the economy.
Many employers are seeking to increase relocation success rates by providing support for relocation candidates during the decision process. Decision-making support helps employees and their families examine personal, financial, and career considerations to determine their ability to accept relocation. Even at the decision-making stage, employees can begin exploring spousal job market and income potential and critical family transition concerns related to the new location.
An increasing number of employers are providing tools, data, and counseling to help employees understand the overall family and financial changes between the old and new locations. Budgeting tools and cost of living comparisons can help determine the overall effect of relocation on all aspects of family life and lead the employee/family to an informed decision.
In today’s economy, some moves simply shouldn’t happen. More employers are recognizing the risk of failed relocation and investing in determining the right relocation decision for critical talent.
By supporting employees in evaluating their personal circumstances in light of relocation, employers are not only saving themselves the cost of a failed move, but also sending a clear message that they value their employees and want to identify the best decision for both employee and company.
Support Can Ease Mortgage Concerns
The value of predecision support is that an initial “no” can become a “yes” if obstacles (or perceived obstacles) to relocation can be removed. Yet even when the relocation answer is yes, employees and employers still benefit from ongoing relocation support to guide the employee/family through the transition.
These prerelocation decision support mechanisms and ongoing relocation support are a low-cost investment by the employer that help minimize the risk and high cost of reduced productivity and/or a failed relocation.
When employees can see their family and financial situation—from purchasing power to cash flow and spending options—they are better able to make necessary adjustments, manage the relocation benefits that have been provided to them, and accomplish a more successful and less stressful move.
A job search can be more difficult than it once was, especially for the relocating spouse, but by offering job search support, the employer helps the trailing spouse get established in the new community more rapidly.
According to Worldwide ERC®, 60% of employers provide some level of support (formal policy or on an exception basis) for job-seeking spouses to help them secure employment. Yet that means that 40% of employers still offer no support to spouses during relocation.
At one time, a trailing spouse might have delayed the job search in favor of focusing on family concerns and getting settled in the new area.
With changing mortgage restrictions and increased financial concerns, more spouses are seeking employment as quickly as possible. Just as some real estate is moving in this market, some spouses are also securing employment. A job search supported by top-quality marketing materials, effective networking methods, strong interviewing skills and negotiation abilities, and cutting-edge research and resources has a greater likelihood of success than a job search without support.
Providing job search support for the relocating spouse can even help with the loan application process, even in light of the changing guidelines. The following key elements might be considered by some lenders in order to use trailing spouse income in the loan application process:
• ‑Trailing co-borrower income will be accepted on a case-by-case basis. Mortgage underwriters will consider whether job opportunities for the trailing spouse’s profession and income level in the new location are similar to the opportunities in the old location.
• ‑Letter from the co-borrower certifying intent to seek employment, type of employment sought, and qualifications.
• ‑Two-year minimum recent employment history of co-borrower.
Relocating employees should speak with their mortgage loan officers early and often to determine the options available, but providing spouse employment support can assist with the examples above in a number of ways. For example:
• ‑Providing research on the employment market in the location
• ‑Detailing the employment and salary outlook for an individual in the spouse’s industry
• ‑Providing a detailed job search action plan
Some national relocation lenders have reported the continued ability to originate loans using trailing spouse income based on their company’s investor guidelines and mortgage underwriters. It’s important for employers to proactively determine the position of national lenders on trailing spouse income.
Some action steps for employers facing this challenge include:
• ‑Assess the potential challenges to be faced in this matter.
• ‑Ask lenders to provide historical reports of the number/percentage of employees who have used trailing spouse income to qualify.
• ‑Link employees with lenders for prequalification counseling during the relocation decision process.
The paradigm is shifting. Talent management professionals are revisiting the purpose of relocation and considering alternatives including telecommuting. Relocations that do occur in this economic climate are critical for business continuity.
Employees and their families have access to more support than at any time in history. And, they need it more than ever. All who provide services to support relocation are coming together to meet the very real needs of people in transition.
Those employers that are able to mobilize key talent under current conditions will be able to achieve critical business objectives by having the right people in the right places at the right time.
2 ‑Renita Charrlin is vice president–Relocation at Runzheimer International (www.runzheimer.com), the leader in workforce mobility programs including business vehicle, business travel, corporate aircraft, employee relocation and compensation, and virtual office. She has over 25 years of business ownership, executive management, and fee-paid consulting experience in the global relocation industry.
2 ‑Margery Marshall is president of Vandover (www.vandover.com), the leader in providing complete TalentMobility™ solutions, serving employers worldwide as they recruit, retain, relocate, and sometimes release employees. She leads all areas of the company as it supports strategic initiatives to partner with major employers worldwide and effectively manage services for employees and families in transition.