How Implementing a Data Accumulation Service Can Reduce Cost and Improve Efficiencies in Your Relocation Program
Big Business today generates ‘Big Data’. As the amount of data generated increases exponentially, we are faced with the problem of how to collect, protect, and aggregate information effectively. Equally important is the ability to leverage information available to reduce costs, make better management decisions, and satisfy business requirements. When data comes from a single source, collection and collation is easy. However, the world of global mobility poses a much greater challenge to data users because information comes from a myriad of sources, often from different countries and in different currencies; Human Resources, Payroll, Accounts Payable, Third Party Suppliers, Benefits Administrators, and Government Agencies. Figure (i) provides a realistic illustration of some of the critical data components of an international assignment.
The Mobility Manager today must have access to a variety of data relating to assignees located in different countries across the world. The ability to access this data in real time allows HR managers to better support their line of business. Many Mobility Managers can identify with the last minute call from leadership regarding total spend for an assignment as budgets are reviewed against accruals or when performance evaluations are in cycle and assignment investment is being evaluated against performance return. As we examine global mobility data more closely, we find three major areas where data drives results; cost containment, program management, and compliance. The challenge today is the aggregation of data in a way that allows both a large picture assessment, while supporting multiple users who need to drill down and provide significant detail on an individual or single focus basis.
With the focus on international assignment compliance increasing, information that is readily available can alert managers when action is required and help organizations remain compliant. If a key employee’s immigration documents expire without their or the HR team’s knowledge, there can be legal and business implications. A project may be affected while the assignee attends to matters at a foreign consulate, renewing documentation. A more difficult situation can arise if an assignee is deported or detained at a border post.
Relocation Operations, illustrated in Figure (i), supports both program management and cost allocation and containment. Each employee going on an assignment can be supported by multiple vendors, each managing an element of their relocation process; immigration applications, household goods removal, home finding, language lessons, cultural training etc. Each vendor will submit an invoice for their service.
Depending on the service model, the organization may manage the vendors in-house or contract with a Global Relocation Management Company (RMC) to manage their assignment program. Vendor data represents potential taxable benefits supplied to the international assignee, corporate business expenses which must be properly accounted for, and program costs which must be controlled. Challenges are amplified when costs are allocated across multiple business units and disbursed in different currencies. In many emerging markets there can be significant surcharges for billing in foreign currencies so the ability to invoice and record payments in for instance Brazilian Real (BRL) or in Chinese Renmimbi (RMB) is becoming increasingly important.
Travel is a good example to illustrate the complexity of Relocation Operations and resultant financial data. An employee who relocates incurs relocation travel expenses, i.e. their flight to the destination, the hotel bill whilst they find permanent accommodation, meals en-route, etc. In most companies there is an established T&E or expense payment process, which often resides in the finance function, not under the control of the HR teams. The expense function may not be centralized and expenses incurred and submitted in different locations (home and host assignee location) may not be properly reported to those involved in wage and tax reporting. In addition the organization may not correctly code each expense during processing, adequately distinguishing between normal business expense and relocation expenses. In order to determine the correct tax application of each expense it must be clearly distinguished as a relocation expense. Internal processes may further complicate the ability to record all assignment expenses incurred with different methods of payment being used for the same expense. For example, travel costs may be reimbursed via the expense process if the employee has a corporate credit card or direct billed to a third party travel department if the employee is a new hire and yet to receive a corporate card.
Another complex data source is payroll. An employee on assignment may have their salary paid in the home or host location dependent on the assignment policy, compensation plan, and local requirements. In addition, assignees may be offered the ability to split benefit funding between the home and host location to manage any negative exchange rate impact to their benefits. Even if the assignees payroll is managed internally, there are already two data points. However, many companies outsource their payroll function to third party providers. As there are few, true global payroll providers, organizations can work with multiple payroll vendors, creating multiple data collection points. The end result is an array of vendors – internal or external – providing varying elements of data in different formats. The benefits of having access to all facets of assignment data from a single source are clear – if organizations have comprehensive and complete data, they have knowledge. Knowledge enables organizations to make informed decisions and ensure each of their operations remain compliant in multiple jurisdictions. In the world of Global Relocation today the traditional functions of moving household goods, applying for a visa or finding a home have become the commodity elements of the business. Each Relocation Management Company (RMC) manages these tasks in a similar manner. What differentiates the RMCs is how they deliver back to Global Mobility Managers the data associated with each move and how they integrate this data with additional data from other vendors such as payroll or tax providers.
A competent RMC will be able to record relocation related expenses and if necessary make the actual payment. At a minimum, the RMC can audit expenses to policy and pass payment instructions to the payroll or established expense process. What truly differentiates RMCs is the ability to provide a Global Compensation Data Accumulation Service that allows Global Mobility Managers full visibility into program costs. In having operational and financial information readily available, HR teams can better support their organizations and use their talents and focus on global mobility strategy rather than merely gather data.
Requests for Pricing (RFPs) typically focus on the cost elements of the traditional relocation services. Global organizations today however are looking for cost reductions in areas that are not usually quantified – Human Resource headcount and its utilization or compliance costs associated with tax and immigration etc. The optimal solution is to have a single data repository that is neutral to the front-line provider. Ensuring all the data associated with each relocation is captured at the assignee file level delivers significant benefits.
Traditional methods of managing a relocation program relying on quarterly or annual reviews are becoming redundant. Global mobility managers are being increasingly asked to produce management reports instantly, via the click of a mouse. Information can be readily available, however many mobility managers spend too many hours, manually collating data requested by their organization’s executive team. This resource can be better utilized dealing with Talent Development or other higher level HR activities.
It is clear that the ability to integrate commercial with operational data is much needed by mobility managers and moves mobility programs to a different level. Until recently most RMCs managed separate financial and operational systems so the integration of data was difficult. Recent enhancements have allowed some RMCs to integrate their operations and accounting systems into one operating platform which transforms reporting opportunities.
Once an organization has possession of comprehensive data associated with their relocation program, they can measure and manage more effectively. While it is cliché it is still true that if you can’t measure something you can’t manage it accurately. If information is captured in one place with a powerful report generator the ability to analyse data increases exponentially.
As the assignment data accumulates over time, the mobility manager can work better with procurement to supply critical category information that will allow their organisation to best utilize their purchasing power. Many times these authors have asked potential clients how much they spend on relocation and the response is usually a confirmation that they don’t actually know.
As outlined previously, the industry has typically focused on the commodity elements of each relocation; immigration fees, household goods container costs, home finding fees, etc. Often there are greater saving opportunities in costs that are not measured in an RFP. A common part of a relocation policy is to provide a consultation with a tax provider to complete an annual tax return. In many cases the consultation fee is agreed but the reality is that additional “Time & Materials” charges accrue when data is not readily available to the tax provider. Difficult cases can involve seeking documentation from disparate sources and this is then analysed on an hourly cost basis. What may be contracted as a flat fee Tax Consultation can mushroom by several thousand Euro when Time & Materials charges are levied by the Tax Provider.
Many corporations view these costs as a ‘necessary evil’ in maintaining compliance. Many hours of internal HR resource and assignee time is also consumed during this process.
These costs can be avoided if utilizing a Compensation Data Accumulation Service from an RMC. Focusing on Total Compensation gathering allows for the production of a Global Statements of Earnings, providing aggregated data with the click of a mouse. This global presentation of data in relevant currency is critical in reducing unbudgeted administrative costs. The data is prepared for ultimate submission to a Tax Provider, putting them in an execution only service model and hence reducing their fee.
Extensive Service Provision
The integration of data and the generation of reports cannot happen by magic. Behind the IT front-line there is an extensive service provision that allows the data accumulation to occur alongside the relocation operations. A detailed implementation plan creates the links to the payroll teams and tax providers. Once implemented the service runs to a calendarized schedule based on the different payroll timings across the world. In many cases there is no charge for the actual software and implementation costs are a function of the Relocation Service fees. A distinct advantage of an RMC provided service is there is no requirement on internal IT teams to manage another application. HR teams often find themselves down a list of IT priorities so it makes sense to secure a robust IT service when procuring Relocation services.
In 2013 organizations are increasingly focused on the data associated with relocation rather than the actual physical characteristics of the move. Each physical move is handled by RMCs with skill and experience gained over many years of providing relocation support – the new focus originates from extensive IT investments made by some RMCs and the demands on the HR function.
It is now possible to gather data from around the world, in real time to enable the tracking of key milestones necessary to remain compliant. It is now possible to integrate operational data with financial data to create powerful management reports regarding the entire assignment population at the click of a mouse. The data is a by-product of a relocation program and is collected in real time throughout the life cycle of a move. The ability to make exponential cost savings can be realized by utilizing an integrated Compensation Data Accumulation service.
Having access to this data can make HR teams better internal suppliers to their lines of business and procurement teams and release resource to manage the higher level HR activities such as Talent Management and employee development.
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