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MOBILITY
Magazine of Worldwide ERC 速
February 2011
Seeking a Clean Bill of Health
Legislative Developments for Mobility Professionals
Inside This Month:
Security in Latin America Technology for Expatriates I-9 Audits
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Calendar
FEBRUARY 2011 Worldwide ERC® Learning Zone™ Speedsession™ Webinar The Long and Short of It: How to Best Ensure a Successful Assignment February 1 2:00 p.m. to 3:00 p.m. EST Sponsored by SIRVA Cost: Free
MOBILITY • Vol. 32 No. 2 •February 2011
EXECUTIVE COMMITTEE President SUSAN SCHNEIDER, SCRP, GMS, Plus Relocation Services, Inc., Minneapolis, MN Vice President PAMELA (PAM) J. O’CONNOR, SCRP, Leading Real Estate Companies of the World®, Chicago, IL Secretary/Treasurer C. MATTHEW (MATT) SPINOLO, SCRP, SGMS, CARTUS, Memphis, TN Chairman, Board of Directors
Worldwide ERC® Learning Zone™ Speedsession™ Webinar What in the World is “Fapiao” and Why Is It So Important to a Company’s China Operations? February 15 2:00 p.m. to 3:00 p.m. EST Sponsored by Santa Fe Cost: Free
MICHAEL (MIKE) C. WASHBOURN, SCRP, SGMS, Pfizer Inc, Peapack, NJ
MARCH 2011
MARIO FERRARO, Deloitte Consulting Pty Ltd., SINGAPORE
Global Mobility Specialist (GMS™) Designation Program March 4, 5, and 7 Shanghai, China
WILLIAM (BILL) GRAEBEL, SGMS, Graebel Relocation Services Worldwide, Denver, CO
Global Workforce Summit: Focus on Asia-Pacific March 8-9 Shanghai, China
KAY KUTT, SCRP, SGMS, Asian Tigers Mobility Ltd, Hong Kong, CHINA
BOARD OF DIRECTORS CORI L. BEAUDET, SCRP, SGMS, SC Johnson—A Family Company, Racine, WI ANITA BLANCHETT, BP, Sunbury-on-Thames, Middlesex, UNITED KINGDOM LISA CARAVELLA, CRP, Bank of America Home Loans, Plano, TX
DAVID GAGE, SCRP, Federal Government, Baltimore, MD
LARS LYKKE IVERSEN, Santa Fe Relocation Services, Wanchai, Hong Kong, CHINA CHRISTOPHER (CHRIS) JAMES, Bechtel Corporation, Phoenix, AZ
EARL LEE, Prudential Real Estate and Relocation, Scottsdale, AZ JOY MORRISON, SCRP, SGMS, PepsiCo, Inc., Purchase, NY STEVEN A. NORD, Bainbridge, WA
In Memoriam Worldwide ERC® was saddened to learn of the sudden passing on December 8, 2010, of Linda Hawkins, SCRP, SGMS, president of Winkelmann Realty. Hawkins was responsible for general operations, continuing education, and real estate and relocation training for its offices in Orange, Los Angeles, and San Bernadino counties, CA. A licensed broker and REALTOR® in California for more than 25 years, Hawkins received her Certified Relocation Professional™ Designation (CRP®) in 1990 and her REOMAC designation in 1996. In 2004, she was awarded the Senior Global Mobility Specialist™ (SGMS™) and in 2007 received the Worldwide ERC® Distinguished Service Award. Hawkins was past president of the Fullerton Chamber of Commerce, past president of the Southern California Relocation Council, and a member of Bay Area Professionals in Relocation Management, Relocation Director’s Council, and REOMAC. She served on numerous committees with Worldwide ERC®. The family requests that donations in Hawkins name be made to the American Heart Association or Children’s Hospital of Orange County (CA).
Correction In the photo caption on page 28 of the January 2011 issue, Mark Schneider is incorrectly identified as “Mike.” MOBILITY regrets this error 2 MOBILITY/FEBRUARY 2011
JOHN PFEIFFER, GMS, Mustang Engineering, L.P., Houston, TX GAIL H. PLUMMER, SCRP, GMS, Altair Global Relocation, Plano, TX PANDRA RICHIE, SCRP, SGMS, Long & Foster Companies, Chantilly, VA PAT SPARKS, Sprint Nextel Corporation, Lenexa, KS
EX-OFFICIO Chairman, U.S. Advisory Council AL BLUMENBERG, SCRP, NEI Global Relocation, Cedar Hill, MO Chairman, Foundation for Workforce Mobility KEVIN E. RUSSELL, SCRP, PHH Mortgage, Mt. Laurel, NJ Chairman, Government Relations Council C. MATTHEW (MATT) SPINOLO, SCRP, SGMS, CARTUS, Memphis, TN
CHIEF EXECUTIVE OFFICER PEGGY SMITH, SCRP, SGMS, Worldwide ERC®, Arlington, VA
MOBILITY (ISSN 0195-8194) is published monthly by Worldwide ERC®, 4401 Wilson Boulevard, Suite 510, Arlington, VA 22203-4195, +1 703 842 3400. MOBILITY examines key issues affecting the global mobility workforce for the benefit of employers and firms or individuals providing specific services to relocated employees and their families. The opinions expressed in MOBILITY are those of the authors and do not necessarily reflect the opinions of Worldwide ERC®. MOBILITY is printed in the United States of America. Periodical postage paid at Arlington, VA, and additional mailing offices. Worldwide ERC® members receive one annual subscription with their membership dues. Subscriptions are available to both members and non-members at $48 each per year. Copyright © by Worldwide ERC®. All rights reserved. Neither all nor part of the contents published herein may be reproduced in any form without written permission of Worldwide ERC®. POSTMASTER: send address changes to M OBILITY , Worldwide ERC ®, 4401 Wilson Boulevard, Suite 510, Arlington, VA 22203-4195
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Allied wins its 17th Quest for Quality award.
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Perceptions
Health and Security: Future Focus
H
ealth care, health management, political environments, global crime issues, personnel and data security… all are growing in significance as concerns for today’s global employers, and all will receive increasing attention as global footprints are fostered and expanded.
To sum up the current backdrop, Mario Ferraro, director, Deloitte Consulting Pte Ltd, Singapore, observes, “today’s employers increasingly are focused on their duty of care obligations. With a marked increase in the number of short-term assignments and business trips, it is extremely challenging for employers to keep track of exactly where their employees are, and to have in place effective contingency plans to guarantee the health, safety, and security of the employee, as well as to protect the business.” Lisa Milovanovic, SCRP, GMS, director, global mobility for PepsiCo, Inc., breaks it down this way: “in terms of health care, I find the focus is in two areas. One is catastrophic illness—the conditions that are so expensive to care for. The other area tends to be in health management; making sure that individuals are exercising, eating right, and addressing medical conditions such as high blood pressure or diabetes with their physicians to avoid severe consequences, strokes, heart attacks, or mortality. In terms of security, companies are monitoring several areas: political conditions and crime targeted to protect global travelers and security of personnel at the work location through policies banning weapons, harassment, and safety in the workplace. Last but certainly not least, the security of proprietary information. These days, employees understand that communication and the vehicles provided for that communication are the property of the company and will be monitored to protect the interest of the company.” Although most large employers have policies in place to address health 4 MOBILITY/FEBRUARY 2011
and security issues, Ferraro notes that some can be caught completely off guard if they have not developed policy and contingency plans around certain events—and Milovanovic says it is equally critical to construct and execute policy that adheres to local laws. Developing the policy and processes is one step, but gaining the support of all stakeholders is another. Ferraro says, “I anticipate an increased focus on policies and processes where the employer and the employee share responsibility for health, safety, and security. Employees will be expected to adhere to strict policies and procedures, which could include compulsory reporting, programs, and briefings. The employers will have an obligation to build, operate, and maintain this framework of measures and ensure that the employees and the shareholders see its importance and its value, rather than perceiving it as an additional and costly administrative burden.” Certain regions bring more concern, such as Africa, Asia, Latin America, and some parts of the former Soviet Union, but Ferraro says, “it would be incorrect to assume that
these concerns do not apply to the rest of the world, and it is important to realize that the risk increases every time there is a language barrier or a significant cultural difference… therefore, the risks are not exclusive to specific regions.” There is more good advice for global workforce experts charged with an evolving health and security agenda. Both Ferraro and Milovanovic advocate close partnering with the company’s internal and external experts to determine how global expansion is going to affect the business in its destination locations, as well as the development of local contacts to provide advice or counsel regarding security and health care specific to their area. Ferraro also notes that, “risk levels may depend on the employee’s nationality, will vary by country, and can change every day, so be sure to work with specialists to monitor the local risk landscape. Hold a pre-departure briefing and provide an emergency number to call, ideally on a card that can be easily found in case of an accident. As much as possible, employers should develop a solid framework to reduce the risk exposure for their employees, and take these precautions before deployment, as it may be too late to think about it later.” And Milovanovic provides a gentle but significant reminder: “give back to the communities in which you do business, because advancing local solutions improves the wellbeing of all.” —Anita Brienza, GMS, Worldwide ERC® Communications
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2009 Fragomen Mobility Mag Full Page Ad 2.pdf 1 6/11/2009 12:59:55 PM
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MOBILITY Magazine of Worldwide ERC®
Features
26
Seeking a Clean Bill of Health— Legislative Developments for Mobility Professionals
31
By Glen Collins
31
36
Working in Latin America Today: a Diverse Landscape of Opportunity and Risk By Pablo Weisz
36 50 54 58 64 70 76
54
Destination Profile: New York City, NY By Anne Dean, GMS, and Sylvia Ehrlich, SCRP
FHA and VA Home Loan Financing in Relocation By Derek Latka, CRP, GMS
50
It’s a Great Time to Buy a Home By Steven John, CRP, GMS
58
Global Mobility Policies and Practices in a Fiscally Responsible Era By Timothy Dwyer
I-9 Enforcement Audits: Coming Soon to an Employer Near You
64
By Matthew T. Phillips
Internet or Inter-NOT? Technology for Relocating Employees By Tamara Bianchi, CRP
70
Work-life Balance: Essential for the Road to Recovery By Tom Zaunbrecher
76 MOBILITY/FEBRUARY 2011 7
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MOBILITY Magazine of Worldwide ERC®
DEPARTMENTS
2 CALENDAR 4 PERCEPTIONS Health and Security: Future Focus By Anita Brienza, GMS
10 AROUND THE WORLDWIDE ERC®
MOBILITY STAFF
Vice President & Publisher Jerry Holloman
jholloman@WorldwideERC.org Managing Editor Frank Mauck
fmauck@WorldwideERC.org EDITORIAL ADVISORY COMMITTEE
12 EXECUTIVE SPOTLIGHT
Chairman
15 INDUSTRY SPOTLIGHT
Alex Alpert, Wheaton World Wide Moving, Tucson, AZ
Jo Lay, SCRP, SGMS, Coldwell Banker Central Region Relocation, Northbrook, IL
Michele Bar-Pereg, Bar-Pereg Group, Amsterdam, THE NETHERLANDS
15 WORLDWIDE ERC® TRENDSPOTTING 18 QUICK TAKES 23 TAX AND LEGAL UPDATE
Tamara Bianchi, CRP, Capital Relocation Services, Denver, CO Robert F. Burch, SCRP, Alexander’s Mobility Services, Baltimore, MD Christopher R. Chalk, CRP, GMS, Dependable Auto Shippers, Inc., Smyrna, GA Alex Chua, Newport Real Estate Limited, Shanghai, CHINA Brenda Darrow-Fuhs, Bank of America, Longmont, CO
80 RAC REPORT
Terry Baxter Davis, SCRP, SGMS, Ernst & Young LLP, Cleveland, OH Anne Dean, GMS, Living Abroad, LLC, Norwalk, CT Tim Denney, Stirling Henry Global Migration, Sydney, AUSTRALIA Marge A. Dillon, CRP, GMS, Little Elm, TX Sean Dubberke, RW3 LLC, New York, NY Deborah A. Dull, CRP, GMS, Crown Relocations, Houston, TX Kari Hamilton, ABODA, Inc., Redmond, WA Nancy F. Harmann, CRP, GMS, Latter & Blum, Inc., Realtors, New Orleans, LA Gustavo Higuera, CRP, GMS, Prudential Real Estate and Relocation Services, Scottsdale, AZ Christine E. Holland, GMS, Massachusetts Institute of Technology, Cambridge, MA Ronald Huiskamp, GMS, Dwellworks, LLC, Kirkland, WA Rob Johnson, SCRP, SGMS, Altair Global Relocation, Plano, TX Jeff Knapton, SIRVA Relocation, Westmont, IL Anne-Claude Lambelet, SGMS, ACL Consulting, Geneva, SWITZERLAND Tacita Lewars, GMS, Globaforce Incorporated, Calgery, Alberta, CANADA Cindy Madden, CRP, Cartus, Danbury, CT Tim McCarney, GMS, Weichert Relocation Resources Inc., Norwell, MA Nino Nelissen, SGMS, Executive Mobility Group, Schlipol Airport, THE NETHERLANDS Constance Pegushin, Berry Appleman & Leiden LLP, San Francisco, CA
Design/Production: Ideas, Communicated, LLC, Vienna, VA www.ideascommunicated.com Printing: CADMUS Specialty Publications, Richmond, VA Reprints: Katina Moaney, CADMUS Reprint Services ercreprints@cadmus.com +1 866 487 5625 ext. 3736 Advertising Sales: Glen Cox, National Sales Manager, The Townsend Group, Bethesda, MD +1 410 321 4723 gcox@townsend-group.com
Elizabeth Perelstein, School Choice International, White Plains, NY Patricia Pollard, CRP, GMS, Coldwell Banker United Realtors, Houston, TX Maureen Bridget Rabotin, GMS, Effective Global Leadership, Paris, FRANCE Michelle Sandlin, CRP, John Daugherty Realtors, Inc., Houston, TX Stefanie R. Schreck, CRP, GMS, American International Group, New York, NY Scott T. Sullivan, Brookfield Global Relocation Services, Woodridge, IL Mara Terrace, Siemens Corporation, Global Shared Services NA, Orlando, FL Sherrie Tessier, CVS, Woonsocket, RI Jody Walstrom, Plus Relocation Services Inc., Minneapolis, MN Allie Williamson, CRP, OneWorld Relocation Services, Naples, FL Nick Woodhams, SGMS, Woodhams Relocation Centre, Sydney, AUSTRALIA
8 MOBILITY/FEBRUARY 2011
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Prudential Real Estate and Relocation Services
THANK YOU FOR TRUSTING US WITH YOUR MOST VALUABLE ASSETS.
Relocating can be a stressful time for transferees and their families—not to mention their employers. Prudential Relocation is committed to making the experience a positive one for all involved. Our team of relocation experts works closely with top-quality supply-chain partners who are just as dedicated to providing the best care and service in the business. Which is why we’re confident we can deliver on the trust you place in us. And why we’re proud to be the #1 choice of relocated employees and relocation managers alike.
1cd/
Job No: Job Nam
RELO TR AWARDS Pub: Mo
Issue Da Prod: bl Live size Trim siz Bleed si
_______
_______
_______
_______
_______
_______
_______
_______
1 1 st
st
by Relocated Employees
by Relocation Managers
Trippel Survey & Research, LLC*
Trippel Survey & Research, LLC
How can we make relocation easier for you?
Call 1-877-418-0617 and find out more or visit www.prudential.com/relocation
*Measured by Net Satisfaction. Sixteenth annual Nationwide Relocating Employee Survey, 2010 © Trippel Survey & Research, LLC. Sixth Annual Relocation Manager’s Survey © - International Policy and Service Providers’ Performance, 2010 © Trippel Survey & Research, LLC. ©2010 Prudential Financial, Inc., and its related entities. All rights reserved.
Prepared 213 Wash (973) 802
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Around the Worldwide ERC®
Protecting Your Peeps s employees work and travel to more diverse locations around the world, organizations are challenged to ensure that they are protected from harm and that they can continue their work effectively. As more threats declare themselves, such as natural disasters, terrorist attacks, or pandemic influenza, organizations must develop plans and programs to protect the health of their employees and the interests of the company. To better understand global health risks, and how these risks may be mitigated by implementing specific corporate health programs, take the Worldwide ERC® one-hour online course, “Global Corporate Health: Understanding Health Risks and Program.” In short, this course defines the purpose and scope for global health programs that will best support an organization, wherever employees work or travel. For more information and to register, visit www.WorldwideERC.org/pages/globalcourses.aspx. Note, participants earn one continuing education credit toward their GMSTM and/or CRP® designations for completing this course. If you have any questions, please do not hesitate to contact the Worldwide ERC® Web Team by e-mailing Webmaster@WorldwideERC.org.
A
Weichert Relocation Resources Helps Fight Breast Cancer
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mployees of Weichert Relocation Resources Inc. (WRRI), Morris Plains, NJ, recognized Breast Cancer Awareness Month by raising nearly $5,000 for Susan G. Komen for the Cure®. Fundraising efforts were coordinated by employee volunteers at WRRI’s six regional offices throughout North America, with WRRI adding a corporate donation to the final amount. “Whether it’s a family being relocated across the country or people in need within their own communities, our colleagues have a true passion for making a difference in the lives of others,” said Aram Minnetian, president of WRRI. “We are proud of our colleagues’ support of our Breast Cancer Awareness Month fundraising efforts, and their commitment to helping to find a cure for this disease.” WRRI’s donation will be sent to Komen for the Cure affiliates in communities near WRRI’s offices to aid the Foundation in its mission of educating and treating local individuals. This fundraising effort was undertaken as part of WRRI’s CommunityCares program, through which the company encourages employee volunteerism and corporate giving that supports helping families and improving communities. 10 MOBILITY/FEBRUARY 2011
Windermere Holds Community Service Day
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indermere Real Estate, Las Vegas, NV, has held a community service day annually since 1984. For 2010, Windermere Anthem Hills and Windermere Prestige Properties selected HomeAid for their 2010 Community Service Day project. Windermere agents, staff, and affiliates joined together to help WestCare, one of HomeAid’s partners, give a facelift to the Stepping Stones facility. WestCare, a non-profit providing services to at-risk teens, wanted Stepping Stones to have a more home-like and comfortable setting for the youth. Windermere volunteers arrived in the morning and painted six bedrooms—three for the girls and three for the boys. Also painted were an educational room, living area, the administrative office, a counselors office, and a large hallway. Volunteers also painted artwork and inspirational phrases in each room, and James Cooper of the Amazing Art Company brought a group of artists who painted the residents’ favorite celebrities, including Michael Jordan, Andre Agassi, Venus and Serena Williams, and Danika Patrick. In addition to the Community Service Day, the company announced its charitable foundation selected Henderson Allied Community Advocates, doing business as HopeLink, to receive a $25,000 donation to put toward its homelessness prevention efforts. A portion of every transaction a Windermere agent made in the Las Vegas valley was donated to the foundation. The grant from the Windermere Foundation will allow HopeLink to provide almost 75 weeks of temporary shelter and transportation assistance.
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Balancing every variable in your relocation equation. If experience is the best teacher, then no one can offer you a better relocation education than Cartus. Organizations of all sizes rely on us to address their precise needs by applying the insights we’ve gained through thousands of unique engagements. Your Cartus team will align your culture, your resources, and your objectives with the industry’s best practices and emerging trends – developing and delivering a program that achieves your goals in the most cost-effective way possible. And as you move into new markets, know that Cartus is ready to give you and your employees seasoned guidance every step of the way. To put our experience to the test, call on Cartus at trustedguidance@cartus.com.
www.cartus.com Primacy Relocation is now a part of Cartus. ©2010 Cartus Corporation. All rights reserved.
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Executive Spotlight
D
ependable Auto Shippers, Dallas, TX, has named Chris Chalk, CRP, GMS, director of corporate sales. Amanda Jones has been named vice president of technology. SIRVA Inc., Chicago, IL, has named Jacob George, CRP, president of the Asia and Middle East markets. Arpin Group, West Warwick, RI, has named Christiane Crown vice president of military DPS systems. RELO Direct®, Inc., Chicago, IL, has promoted Roger Atchinson senior vice president of sales and marketing. Mary Dougherty has been named vice president, sales. Coldwell Banker United, Realtors®, Charleston, SC, has added several new sales associates to its offices. Josh Calvert, Michael Laws, and
Stephanie Jellyman have joined the Summerville office. Herb Uthlaut has joined the West Ashley office. Monica Emerine and Tracy Willis have joined the Mt. Pleasant office. In addition, Laura Derrick, sales associate in the Midtown office, has been elected 2011 president of the Central Carolina Realtors® Association. Jane Drake, director of career development, was inducted into the 2011 board. RealtySouth, Birmingham, AL, has named Henry Swain an agent in its Hoover Metro office. Jessica Evans joined the Orange Beach office as an agent. Wheaton World Wide Moving, Indianapolis, IN, has named Phillip Terry, CEO of Monarch Beverage company, Indianapolis, to its board of
directors. Other members of Wheaton’s board of directors include Pat Callahan of Baker & Daniels; and Stephen F. Burns, Mark Kirschner, and David Witzerman of Wheaton World Wide Moving. Shorewest Realtors®, Brookfield, WI, has announced five of its sales associates have been elected presidents of local board of Realtors®. Glen Beder, West Bend/Hartford office, was named president of the Kettle Moraine Realtors® Association. Amy Karegeannes, Racine office, was named president of the Racine Board of Realtors®. Diane Krause, Lake Geneva office, was named president of the Lakes Area Realtors® Association. Rita Gast, Sheboygan office, was named president of the Sheboygan County Board of Realtors®. Adam Poehlman, Cedarburg/Grafton office, was named president-elect of the Ozaukee Board of Realtors®.
Join Us Online for Announcements Executive Spotlight highlights the job changes and achievements of employee mobility professionals. E-mail your hiring and promotion announcements, as well as your regional group communications, to mobility@WorldwideERC.org. Not only will the releases appear in Executive Spotlight, but also will show up in Names in the News on the Worldwide ERC® website, www.WorldwideERC.org. Please visit: http://www.worldwideerc.org/ Pages/NIN-MOBILITY.aspx for regular updates on mobility industry professionals. Does Worldwide ERC® have your most up-to-date contact information? If not, let us know at www.WorldwideERC.org/pages/ update.aspx. 12 MOBILITY/FEBRUARY 2011
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Industry Spotlight
Executives Rank Employee Satisfaction and Competitive Advantage Top Benefits of a Mobile Workforce
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here an organization’s worldwide human capital is concerned is concerned, according to a new survey, employee satisfaction and competitive advantage topped the list of benefits of maintaining a mobile workforce. The “Mobile Workforce Survey,” from Runzheimer International, Waterford, WI, queried nearly 100 executives (director level and above) from a cross-section of industries, company sizes, and geographic regions about the benefits and challenges organizations face as the workforce becomes increasingly mobile. According to the survey, 26 percent of respondents said employee satisfaction was the top benefit of having a mobile workforce. Twentyfive percent cited competitive advantage as the leading benefit. Twentytwo percent indicated cost savings was the top benefit. With regard to the leading challenges of a more mobile workforce, 54 percent pointed to the effective management of remote employees, while 23 percent cited the measurement of program success, according to the release. In addition, the survey identified interesting differences concerning the perception of what is important and the actual management processes in place. Despite 60 percent of respondents saying their companies are effectively managing their mobile workforce programs, 33 percent have not implemented formal, centralized processes. Thirty-three percent of survey respondents said that tracking mobile workforce costs was important, however, only 22 percent say cost savings is the biggest benefit of a mobile workforce program.
According to the release, other key findings include 31 percent of respondents are using best practices and benchmarks to help manage mobile workforce programs, and only 27 percent of businesses report having centralized management of mobile workforce programs in one department. Another interesting finding is that respondents reported mobile device use and business travel as the fastest growing programs when asked how they would characterize their organization’s mobile workforce programs.
“The issues raised in the survey results highlight key issues for 2011 corporate planning,” said Greg Harper, president of Runzheimer International. “Corporations need to look more deeply at the infrastructure supporting their mobile workforce and truly assess if perceptions match the actual processes and metrics that are in place. The biggest opportunities for improvement can be identified by asking employees and managers what is needed as well as using industry data to compare policies and costs.” According to Runzheimer, organizations should take a close look at
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Industry Spotlight
employee satisfaction, manager challenges, and cost/return-on-investment as they develop their corporate strategies for 2011. Identifying what employers and managers like or dislike about their current programs, as well as what would increase productivity, are key drivers of employee retention and promote higher levels of customer service. Critical insight can be gained through annual surveys and employee reviews. Also valuable, according to the release, is third-party data that offers benchmarks on policy, cost, and staff required to support programs.
FYI Briggs Freeman, Dallas, TX, has announced it is partnering with the Sotheby’s International Realty® network, and now will be known as Briggs Freeman Sotheby’s Realty. American Relocation Connections (ARC), Fairfax, VA,, has announced the launch of the “Patriot Payback Program” (PPP), a full-service home purchase program that provides discounts and assistance to the men and women of the Armed Forces through Wells Fargo’s Military Mortgage Express® Program and a team of experienced real estate agents. Richmond Group of Companies, Markham, ON, Canada, has announced that because of an expansion of business operations the company is moving to larger premises. The new location is 2651 John Street, Suite One, Markham, Ontario L3R 2W5. one-group, Basel, Switzerland, has announced the launch of a new website,
www.one-group.org.. Hayden Moore LLC, Cleveland, OH, has announced the introduction of its new ReloHealth service, which identifies best medical service providers for a transferee and his or her family in the destination location and matches individuals and families to doctors and medical facilities throughout the United States. ACS International Schools, Cobham, Surrey, United Kingdom, has announced the launch of a new website, www.acs-england.co.uk. The company also has established a new group on LinkedIn, International Baccalaureate Graduates (UK Branch), to help connect former IB students with employers. ERA Franchise Systems LLC, Parsippany, NJ, has announced the launch of a new website design, www.era.com. Century 21 Real Estate LLC, Parsippany, NJ, has announced it celebrated its 10th anniversary as a real estate provider in China. HCR Group, Basingstoke, United Kingdom, has announced the establishment of a U.S. base of operations in Florida.
16 MOBILITY/FEBRUARY 2011
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Bridging Continents & Cultures Chicago
Houston
San Francisco
Calgary
Los Angeles Toronto
Vancouver
New York London, UK
Philadelphia Hong Kong
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Quick Takes
Annual Job Forecast Reveals Expected Hiring Increase ore employers are planning to add fulltime, permanent employees in 2011 compared to 2010, with an emphasis on hiring in technology and revenue-producing fields, according to the results of a CareerBuilder’s, Chicago, IL, annual job forecast. The survey, conducted from November 15 to December 2, 2010, by Harris Interactive®, queried more than 2,400 hiring managers and human resource professionals across a spectrum of industries and company sizes. “More than half of employers reported they are in a better financial position today than they were one year ago,” said Matt Ferguson, CEO of CareerBuilder. “2011 will usher in a healthier employment picture as business leaders grow more confident in the economy. Our survey indicates more jobs will be added in 2011 than 2010, but job creation will remain gradual. The year will be charac-
M
terized by steady, measured gains across various industries.” According to the survey, 24 percent of employers plan to hire full-time, permanent employees in 2011, up from 20 percent in 2010 and 14 percent in 2009. Seven percent said they plan to decrease headcount, down from 9 percent in 2010 and 6 percent in 2009. Fifty-eight percent said they expect no change in staff levels, and 11 percent were unsure of any change. With regard to compensation, 41 percent of employers are concerned that their best talent will leave their organization once the economy improves, citing increased workloads and longer hours taking their toll on employee morale, according to the release. Sixty-one percent said they will increase compensation for their existing staff in 2011, up from 57 percent in 2010.
Corporate HR Communities
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ight now Worldwide ERC® Corporate HR members are exchanging questions, answers, and ideas online in our two eDiscussion forums and blogs, to include:
In the eDiscussions: U.S. Relocation—Policy and Program Benchmarking Forum: “Does your company include Key Performance Indicators in contracts with your relocation vendors?” “We are considering implementing a lump sum for relocation travel expenses. For those corporate clients who do something similar, when do you fund the lump sum to your new hires? If you fund it prior to their new hire start date, how far out?” In the eDiscussions: Global Mobility—Policy and Program Benchmarking Forum: “We have a series of assignments known as “unaccompanied” assignments where an employee is expected to go to the host location without their family. We are finding that a number of these employees are having their spouses/partners or even their children go on assignment anyway. Though we are generally not incurring additional fees, there is obvious concern from a benefits perspective, especially in moderate to high-risk countries. My question to the group is if anyone has the employee sign a “waiver” or other document attesting that they understand and accept the risks associated with bringing family on an unaccompanied basis?” “Recently, one of our employees localized at the end of his assignment and is now inquiring in regard to a permanent resident application. In regard to cost bearing, we are wondering what the most common practice is. In the past we have seen the following scenarios: 1. employer sponsors and bears expenses 2. employer sponsors and employee bears expenses.” To read the conversation generated by these questions and to ask or answer a question yourself, visit www.WorldwideERC.org/pages/web2.0.aspx. Note, access to our eDiscussions forums are exclusively available to Worldwide ERC® Corporate HR members. Not sure if you qualify? E-mail Webmaster@WorldwideERC.org.
18 MOBILITY/FEBRUARY 2011
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www.packimpex.ch
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THINKING AHEAD. MOVING YOU FORWARD. For 60 years, Graebel has led the relocation industry by delivering proactive, world-class service to Fortune 500 clients. Because we focus exclusively on worldwide relocation and moving services, we anticipate your needs and deliver services that are tailor-made for you. Our reputation for extraordinary value, high-quality service, and unmatched expertise is what always keeps us two-steps ahead – and you moving forward. > Single source global mobility solutions with bundled pricing for significant savings > Always-accessible, client-dedicated teams – Commitments Made. Commitments Kept.® > Global strength with on-the-ground services in 153 countries > Proprietary technology, including iPhone app and online portals, that provide you and your relocating employees with real-time access and results > Global single source solution – household goods moving and storage, full-service relocation and move management, and commercial workplace services
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Tax and Legal Update
United States Foreign Corrupt Practices Act (FCPA) Compliance
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s United States-based companies expand their relocation business abroad, the Foreign Corrupt Practices Act (FCPA) imposes a compliance and record-keeping requirement. Both accounting and training functions must take into account the stringent and often complicated requirements of the Act. And the requirements apply to employees, agents, and other entities acting in conjunction or on behalf of a company’s foreign business activities. Many European and Asian countries have active anticorruption agencies enforcing similar laws, and cooperating with U.S. federal authorities enforcing the FCPA. One commentator has suggested that this past year was the most active single year in the more than 30 years since the FCPA was enacted. For the fourth time in the last five years, the Department of Justice (DOJ) and Securities and Exchange Commission (SEC), the statute’s dual enforcers, set a record by bringing more FCPA prosecutions than in any prior year.
Requirements The FCPA is an anti-bribery and anti-corruption statute. While there are several other U.S. laws prohibiting similar conduct in international context, such as the Travel Act, the FCPA particularly targets international business activities in which a foreign government official is involved, either as a business partner, or tangentially. Businesses themselves, as well as their employees, officers, contactors, agents, and anyone working on their behalf, are covered. It is a criminal and civil law, with real teeth. The FCPA has two main sections, one prohibiting corrupt payments (bribes), and one requiring compa-
nies doing business overseas to keep detailed records of those business activities. Both sections apply to the foreign activities of companies in the employee mobility industry, and the record keeping requirements may apply to U.S. companies that do only incidental business overseas through foreign contractors or subcontractors. The dramatic increase in federal prosecutions mandates that all com-
panies in the industry review their business activities to make certain that there is proper FCPA compliance, or that it does not apply to their activities. The FCPA’s anti-bribery provisions make it illegal to offer or provide money or anything of value to officials of foreign governments or foreign political parties with the intent to obtain or retain business. The antibribery provisions apply to “issuers,” “domestic concerns,” and “agents” acting on behalf of issuers and domestic concerns, as well as “any person” who violates the FCPA while in the territory of the United States. The term “issuer” covers any business entity that is registered under U.S. securities laws, or that is required to file reports under those same laws. The approximately 1,500 foreign issuers whose American Depository Receipts (ADRs) are traded on U.S. exchanges are “issuers” for purposes of this statute. The term “domestic concern” is even broader and includes any U.S. citizen, nation-
al, or resident, as well as any business entity that is organized under the laws of a U.S. state or that has a principal place of business in the United States. Note that a contractor to an issuer or domestic concern may be in violation of the act in performing services for that company, and that the liability for the violation “flows upstream” to the purchasing company. In addition to the antibribery provisions, the FCPA’s books-and-records provision requires issuers to make and keep accurate books, records, and accounts, which in reasonable detail, accurately and fairly reflect the issuer’s transactions and disposition of assets. Finally, the FCPA’s internal controls provision requires that issuers devise and maintain reasonable internal accounting controls aimed at preventing and detecting FCPA violations. Regulators frequently have invoked these latter two sections— collectively known as the “accounting provisions”—in recent years when they cannot establish the elements for an anti-bribery prosecution or as a mechanism for compromise in settlement negotiations. Because there is no requirement that a false record or deficient control be linked to an improper payment, even a payment that does not constitute a violation of the anti-bribery provisions can lead to prosecution under the accounting provisions if inaccurately recorded or attributable to an internal controls deficiency.
Penalties The FCPA is enforced primarily by the DOJ and SEC, and has penalties and remedies that are criminal-, civil-, and government contract-related. They are potentially quite severe: MOBILITY/FEBRUARY 2011 23
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Tax and Legal Update
• corporations up to $2,000,000 per violation (total amounts have reached over $100 million in at least one case) and individuals up to $100,000 and up to five years in prison; • fines normally up to $10,000 but for egregious violations up to $100,000 for “any person” and up to $500,000 for any other violator— some fines have climbed to the tens of millions; • debarment or suspension from federal contracts; • treble damages under the Racketeer Influenced and Corrupt Organizations Act (RICO) or actions under other federal or state laws; • derivative actions by shareholders; and • employment suits from whistleblowers. The bottom line for the mobility industry is an awareness of the requirements of the FCPA, and partnering with counsel and management regarding proper recordkeeping and training. Given the penalties involved for violations, companies doing business abroad, or hiring agents or subcontractors to conduct business or activities abroad on their behalf, must have policies in place to prevent violations.
New Whistleblower Provisions The Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA) added a potent incentive for complying carefully with the FCPA by creating a whistleblower provision designed to help uncover violations. Under previous law, the SEC only had the discretion to pay whistleblowers, which it rarely did. Under Section 922 of the DFA, however, whistleblowers will be awarded between 10 percent and 30 percent of any monetary recovery exceeding $1 million, for divulging “original information” leading to the successful prosecution of a “covered judicial or administrative action,” defined to 24 MOBILITY/FEBRUARY 2011
include “any judicial or administrative action brought by the [SEC] under the securities laws.” This includes the FCPA. Whistleblowers, often disgruntled or former employees, have long been a fertile source of information and convictions in other federal statutes, such as the False Claims Act, and this provision gives even more incentives to companies doing business overseas, either directly or through subcontractors, to put in place strong FCPA policies, training, and auditing.
What a FCPA Compliance Program Should Include According to one expert, a FCPA compliance program should include, at a minimum, the following elements: • a clearly articulated written corporate anti-corruption policy that encourages ethical conduct and compliance with the FCPA and other applicable anti bribery and anti fraud laws, including applicable laws of other countries; • a system of effective oversight for the compliance program that gives the board of directors overall responsibility for the program and assigns day-today responsibility to one or more senior corporate officials for the implementation and oversight of the FCPA policies, standards, and procedures; • a communication mechanism that ensures that the FCPA policies and procedures are effectively communicated to all employees and subcontractors; • comprehensive due diligence procedures for the vetting and oversight of third-parties; • appropriate disciplinary procedures to address conduct that violates the FCPA and other applicable anticorruption laws as well as the failure
to take reasonable steps to prevent and detect misconduct by other company agents and contractors; • periodic audits and risk assessments to ensure compliance with the FCPA policies and procedures, including collecting and maintaining detailed records of financial transactions of employees, subcontractors, and thirdparties that could give rise to improper payments; and • an effective system for reporting suspected violations of the FCPA compliance policies and procedures, usually by means of secure and direct communication, that do not flow through an employee’s direct chain of command.
FCPA and Mobility Industry Suppliers There are several touch points between the FCPA and companies in the employee mobility industry. The most evident arises from the necessity for any company physically doing business overseas to have in place a robust FCPA and anti-corruption policy; most, if not all large companies in this position already have these in place as a part of their corporate risk management plan. There are less obvious ways companies become involved, however. Perhaps the second most common includes those U.S. companies that use contractors or subcontractors to perform services in a foreign country. For example, a U.S. company may hire a relocation management company (RMC) which, in turn, hires foreign destination service providers to aid transferring employees in finding housing in the employee’s new city. Under the FCPA, a payment to a local government official by the destination service provider, say giving a gratuity to speed up the utility hook up process, could be a violation attributable to the U.S. company, even if the destination service company is not a U.S. entity. International
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relocation necessarily involves interactions with foreign government officials. Moving household goods through customs and obtaining visas are common examples. A third way a company may come into contact with the FCPA is through the due diligence of one of its customers. Because of the vast increase in government prosecutions under the FCPA, many companies are requiring, as a part of their due diligence, that their suppliers have in place a viable FCPA compliance program. This usually manifests itself as a clause containing those representations and warranties in the contract, inquiry during the bid or RFP stage, and, in many cases, actual onsite inspections by the client company (pursuant to a contract provision).
include employees of state-run companies or entities (e.g., physicians), political party officials, employees of public international organizations, as well as designated government employees and political officials. • Be careful of the “facilitating payments” exemption. These payments, sometimes called “tea money” in Asia, can come under an exemption to the FCPA and consist of small payments made to foreign officials, which may be legal under the foreign law, and which are customary in order to facilitate action on the part of the official. They present a
Lessons from Recent Experience • The plethora of recent investigations drives home some lessons regarding an effective FCPA program. Perhaps the most noteworthy is the necessity to fine tune accounting entries to a much more granular level, including foreign T&E, employee reimbursements, and supplier billings in these and similar expense categories. Larger companies that are subject to the Sarbanes-Oxley (SOX) internal audit certification rules may not have sufficient granularity in their accounting because the amounts involved in the FCPA categories may not be “material” under SOX. Thus the FCPA program may require its own accounting set-up. And it certainly requires separate scrutiny, since internal auditors are not necessarily trained to look for FCPA red flags. • The Act prohibits giving a foreign official anything of value; recent investigations have shown the breadth of this prohibition by targeting such commonplace business expenses as travel, entertainment, souvenirs, gifts, jobs for relatives, and donations to charities, as well as outright cash payments. And “foreign officials” can
very discernable risk however, and if allowed, must be carefully vetted beforehand to ensure that they fall within the narrow class of exempted payments. Recent case law shows that these payments, permissible or not, have been the gateway to broader FCPA investigations by the government. Many companies ban them altogether, and those that permit them monitor them carefully. • More than 30 cases in the past few years have been based on the actions of third-parties, i.e., suppliers, partners, or joint venturers in foreign countries. Perhaps the one most important principle that can be learned from these is that the government is likely to view the absence of a full-fledged due diligence element in a FCPA policy as “conscious disregard” or “deliberate ignorance” of the Act. Neither are defenses, of course.
for Economic Cooperation and Development’s (OECD) Convention on Combating Bribery of Foreign Officials (32 signatories), the Criminal Law Convention on Corruption, the Civil Law Convention on Corruption, and the African Union Convention on Preventing and Combating Corruption. Companies in the employee mobility industry that do substantial business abroad, or that have divisions or subsidiaries abroad, need to be aware of the local law where those activities take place. Often, these are more draconian than the FCPA, so that an act permitted under the FCPA is still a violation of the foreign law. One recent example is a new United Kingdom Anti Bribery Act, which, like the FCPA, has extraterritorial jurisdiction, meaning that activities in other countries can be a violation of the British law, just as is the case with the FCPA. The UK law, which becomes effective next spring, imposes strict criminal liability for companies that even negligently fail to prevent their employees or agents from engaging in bribery. The only real affirmative defense is “adequate procedures,” a concept that places the burden of proof strongly on the company. One very interesting aspect of this law is that it prohibits bribery of private citizens, as well as government officials; there is no facilitating payments exception either.
Conclusion As the employee mobility industry globalizes, an important part of every company’s strategic risk management plan must include a comprehensive Federal Corrupt Practices Act compliance program.
Foreign Anti Corruption Laws
Peter K. Scott is tax counsel for Worldwide ERC®, Arlington, VA. He can be reached at +1 703 893 8566 or e-mail pscott@worldwideerc.org.
Most industrialized countries have anti-bribery laws that apply to transactions and officials in their countries. Of note are the Organization
Richard Mansfield is general counsel for Worldwide ERC®, Arlington, VA. He can be reached at +1 703 842 3428 or e-mail rmansfield@worldwideerc.org. MOBILITY/FEBRUARY 2011 25
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S EEKING A C LEAN B ILL OF H EALTH Legislative Developments for Mobility Professionals
26 MOBILITY/FEBRUARY 2011
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Significant U.S. legislation enacted in 2010, including Health Care Reform, the Hiring Incentives to Restore Employment (HIRE) Act, and the Foreign Account Tax Compliance Act (FATCA), could impact corporate global mobility programs, adding complexity and raising costs related to payroll and financial reporting, benefit plan administration, and international assignment tax reimbursement policies. In this article, Collins discusses some provisions of significant interest to international assignment program managers.
BY GLEN COLLINS
I
n March 2010, President Obama signed two bills that together constitute the most significant health care legislation to be passed in decades. The legislation includes two new extensions of the Medicare tax that may affect many international assignees. The first extension adds a new rate “bracket” for tax on compensation, while the other extends the Medicare tax to unearned income for some taxpayers. Both are effective beginning in tax year 2013. While there is still time to plan, global mobility program managers may want to begin reviewing their companies’ assignment and tax reimbursement policies to document their positions on the responsibility for the additional taxes.
Additional Medicare Tax on High Income Taxpayers The employee portion of the Medicare tax will be increased by an additional 0.9 percent on wages received in excess of a threshold amount, beginning in 2013. Unlike the general 1.45 percent Medicare tax on wages, this additional tax is on the combined wages of the employee and the employee’s spouse, in the case of a joint tax return filing. Also, the 0.9 percent Medicare tax is assessed only on the employee—no equivalent amount is assessed on the employer.
The threshold amount for this new tax is $250,000 for married couples filing a joint return or a surviving spouse; $125,000 for married individuals filing separately; and $200,000 for single filers. These thresholds are not indexed for inflation. Under the new law, an employer must withhold the additional tax on the portion of an employee’s wages received from the employer that exceeds $200,000, without regard to filing status or the amount of wages received by the employee’s spouse. For this reason, over- or under-withholding may result and should be closely monitored. To the extent the additional 0.9 percent Medicare tax is not paid by wage withholding, it must be reflected on the employee’s individual tax return and paid by the employee in the form of estimated tax payments to avoid potential under-payment penalties. International assignment program costs may increase by the additional 0.9 percent Medicare tax, plus related gross-up costs, if an international assignee is subject to the tax because of the inclusion of assignment-related allowances in income if tax reimbursement applies. Also, host country tax costs for employees working outside the United States may increase if the tax and gross-up costs paid by the employer are considered taxable income in the host country location. MOBILITY/FEBRUARY 2011 27
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On the Web For further resources on assignee health considerations, please visit www.WorldwideERC.org: What to Know Before You Go—Basics of Travel Health Insurance www.WorldwideERC.org/Resources/MOBILITYarticles/Pages/1109gillingham.aspx Putting Duty of Care on Your Organization’s Radar Screen www.WorldwideERC.org/Resources/MOBILITYarticles/Pages/0710Garber.aspx Preparing Assignees for a Healthy Assignment www.WorldwideERC.org/Resources/MOBILITYarticles/Pages/0809gillingham.aspx
For individuals on assignment to the United States who are exempt from FICA (Federal Insurance Contribution Act) taxes because the employer has applied for and received a Certificate of Coverage for the employee under a Social Security Totalization Agreement, the additional Medicare tax should be covered. Thus, when a Certificate of Coverage is in place, the assignee should not be subject to U.S. Social Security tax, including the additional 0.9 percent Medicare tax. In the current economic environment, with so much attention being given to program expenses, global mobility program managers may want to consider updating their assignment cost accruals to include the additional 0.9 percent Medicare tax.
Unearned Income Medicare Contribution Currently, Medicare tax is imposed only on earned income. The health care reform legislation imposes a new tax, effective in 2013, on the net investment income of high-income individuals or couples, including interest, dividends, capital gains, and annuity and rental income. The tax is 3.8 percent of the 28 MOBILITY/FEBRUARY 2011
lesser of (i) net investment income or (ii) the excess of the taxpayer’s modified adjusted gross income (“MAGI”) over a threshold amount of $200,000 for single filers or $250,000 on a married filing joint return. This tax is not withheld by the employer, and should be considered when determining whether an individual must make estimated tax payments. In calculating this tax, the foreign earned income exclusion must be added back to adjusted gross income to arrive at MAGI. Similar to the additional Medicare tax on compensation, this new tax on unearned income may increase international assignment costs if the inclusion of international assignment-related allowances in compensation raises an assignee’s level of MAGI to above the threshold amount and the assignee is tax equalized. In contrast to the additional 0.9 percent Medicare tax, it is unlikely that the 3.8 percent tax on unearned income will be covered under a totalization agreement. Thus, an individual on assignment into the United States with a valid certificate of coverage should not be exempt from the additional unearned income tax.
Foreign Account Tax Compliance Act (FATCA)—New Withholding Tax on Payments to Foreign Entities Beginning January 1, 2013, a 30 percent withholding tax will be imposed on payments of certain U.S.-source income when made to a foreign financial institution (“FFI”) with U.S. customers or certain foreign non-financial entities, overriding any applicable treaty rate. Withholding applies unless the foreign entities agree to adhere to certain reporting requirements regarding accounts held by U.S. persons. In addition to its potentially significant effect on the financial sector, this new provision may have an impact on international assignees. In 2009, prior to the enactment of FATCA, concern was expressed about reports that U.S. citizens living abroad are being denied access to U.S. banks. Further, there were reports that certain foreign banks were refusing to open new accounts for U.S. citizens and residents, and closing accounts for existing U.S. customers (including foreign nationals on temporary assignment in the United States). It appears that the new FATCA requirements may exacerbate these purported trends, making it difficult for Americans abroad to open foreign accounts, and for temporary workers in the United States to keep their foreign accounts, because some foreign banks may be unwilling to do business with U.S. clients or investors to avoid incurring the additional costs associated with FATCA compliance. For assignees trying to settle into a host country and who need local access to funds, the inability to open a local bank account is more than a mere inconvenience, and those assignees may look to their
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global mobility program managers and relocation service providers for assistance.
New Foreign Financial Asset Reporting Requirements by Individual Taxpayers In recent years, Congress and the Internal Revenue Service (IRS) have placed increased emphasis on the required reporting of income and assets from sources outside the United States to potentially augment revenues coming into government coffers and reinforce compliance. For that reason, the HIRE Act included FATCA, which creates new requirements that IRS will use to help identify persons who may be using foreign financial institutions to evade U.S. tax. As a result of the new law, new withholding, reporting, and information collection obligations have been imposed on both individual taxpayers and third-parties. Currently, an annual report known as the Report of Foreign Bank and Financial Accounts (“FBAR”, or Form TD F 90-22.1) is required of those with foreign accounts that have
an aggregate value in excess of $10,000 on any day of the year. The FBAR is not a part of, and is not filed with, the individual’s federal income tax return (Form 1040). Many international assignment programs do not include FBAR preparation as part of the services provided to international assignees. Instead, global mobility program managers often manage the FBAR filing requirement by advising international assignees of the reporting obligation, and providing them with a copy of the FBAR to complete and file on their own. Failure to file the FBAR can result in civil penalties up to a maximum $10,000 per violation. FATCA creates a new requirement to attach to Form 1040 a report of foreign asset holdings that is similar to, but not the same as, the FBAR. For tax years beginning after March 18, 2010 (which means calendar tax year 2011 and after, for most individuals), taxpayers will be required to include this disclosure statement with their tax return if they hold more than a $50,000 interest in “specified
foreign assets,” including accounts at foreign financial institutions, stock and securities issued by foreign entities, financial instruments and contracts held for investment that were issued by foreign entities, and any interest in a foreign entity. This definition also may include an interest in a foreign retirement plan, which likely would cause many international assignees to exceed the $50,000 threshold that triggers the reporting requirement. IRS is authorized to set a higher filing threshold and to grant other exceptions, but at this time there is no indication of whether it will exercise this authority. Failure to make the required disclosures could result in a penalty of $10,000 for the tax year. Continued failure to disclose after receiving a request notice from IRS can result in additional penalties, up to a maximum of $50,000. Omission of income related to reportable financial assets may result in a 40 percent tax penalty and an extension of the statute of limitations from three to six years.
MOBILITY/FEBRUARY 2011 29
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This new reporting obligation is in addition to, and does not replace, the individual’s obligation to separately file an FBAR with the U.S. Treasury. Many international assignees will be required to file both the FBAR and the new foreign financial asset disclosure. The similarity between these two requirements could add to the confusion that already exists when it comes to foreign financial asset reporting. Because the new report will constitute a part of the Form 1040, service providers that prepare Forms 1040 for assignees will have to collect the information from taxpayers, and may have to call on program managers to facilitate the data gathering. Assignees may be reluctant to provide this information, especially in situations when their interest in a foreign account or asset does not generate income subject to U.S. tax. Assignment program managers and tax return preparers can both expect to incur administrative costs associated with explaining the new requirements to taxpayers, and with actually preparing the new reports.
Payroll Tax Forgiveness The HIRE Act provides qualified employers with an exemption from the OASDI (Old Age, Survivors, and Disability Insurance) tax (but not Medicare) for workers who have been unemployed for at least 60 days. The maximum value of the incentive is $6,621 per qualified worker. The exemption applies only to the employer portion of the tax; the employee’s portion must still be withheld and deposited by the employer. In general, the term “qualified employer” includes businesses, agricultural employers, tax-exempt organizations, and public colleges and universities, and all qualify to claim 30 MOBILITY/FEBRUARY 2011
sends the qualified individual on foreign assignment and the employer and the employee meet the Hire Act’s requirements. the payroll tax benefit for eligible new-hire employees. The exemption applies to wages of qualified individuals who began employment after February 3, 2010; however, only wages earned from March 19 through December 31, 2010 qualify for the exemption. A qualified employee must certify (on Form W-11 or substitute form) that he or she was employed for a total of no more than 40 hours during the 60-day period ending on the date employment begins. The qualified employee also must not be employed to replace another employee of the employer unless such employee separated from employment voluntarily or for cause and is not a related party.
Effect on International Assignment Programs If a qualified employee transfers to a company’s expatriate payroll system, two different payrolls must track wages paid for purposes of this provision. Note that the new law does not limit the definition of a “qualified employer” to a U.S. employer or the definition of a “qualified individual” to someone who has been unemployed within the United States. Thus, it appears that a foreign employer who sends a foreign national to work in the United States may claim the payroll tax benefit if the foreign national was previously unemployed abroad and the employer and the employee meet the Hire Act’s requirements. Similarly, a U.S. employer may be eligible to claim the tax benefit if the employer hires a formerly unemployed person and
The Future Promises More Change The legislation enacted in 2010 will require international assignment program managers to re-evaluate their company’s policies, information collection and other administrative processes, and costs associated with their programs. Some employers already have started the process of updating assignment cost accruals, and reviewing tax equalization policies. The future promises more change as Congress considers a number of tax proposals in the coming months that may affect tax rates and benefits for individual taxpayers. What direction tax policy will take is still unknown. For now, it would be prudent for global mobility managers to maintain continuing dialog with and provide necessary education to their C-suite executives regarding current and anticipated changes to tax policy to help plan for changes to costs and administration, which could have a negative effect on business development and cost budgeting if not properly taken into account. This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG LLP. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser. Glen Collins is a senior manager in KPMG LLP’s International Executive Services practice, Washington, DC. He can be reached at +1 202 533 6238 or e-mail glencollins@kpmg.com.
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Working in Latin America Today: a Diverse Landscape of Opportunity and Risk BY PABLO WEISZ Latin America is a burgeoning region of international business activity, and like any area of opportunity, it often is accompanied by an element of risk. Weisz offers a risk profile of the Latin American region, focusing on security concerns for expatriates and travelers headed to the area in an attempt to aid them and their employers to understand the unique security considerations of several popular Latin American destinations.
atin America continues to present rich opportunities for the international business community, as illustrated by recent data from the U.S. Chamber of Commerce that lists countries such as Brazil, Argentina, and Ecuador among the fastest-rising destinations for U.S.-based business travelers. Things are looking up for many Latin American countries, the majority of which fared comparatively well in the wake of the global financial crisis and have achieved relative stability in the face of political unrest that has long plagued the region. American business travelers and expatriates relocating to Latin America for work should be encouraged to learn that in most cases, the region is calm
L
and conducive to a pleasant and profitable stay. However, as with any assignment abroad, living and working outside one’s home country presents certain risks that companies often address through their duty of care plans. Paramount among these risks within Latin America is the security threat posed by both common and organized crime that exists in a variety of forms across the region. Besides Costa Rica, Panama, and Chile, countries throughout Latin America are dogged by a prevalence of crime, dictating that com-
panies sending staff to this area should proactively engage with employees to educate, plan, and prepare for worst-case scenarios. Detailed and up-to-date information about the current safety environments at each destination, along with tips to mitigate risks, is a key ingredient to add to your employee’s pre-deployment “kit.” Preparing your expatriates and their families enables them to adapt to their new environment more easily. The following profiles illustrate the unique security considerations pertaining to several popular Latin American destinations. MOBILITY/FEBRUARY 2011 31
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Mexico
Security Advice for Travelers • Dress as inconspicuously as possible and avoid ostentatious displays of wealth. Avoid displaying money, wearing jewelry, or carrying valuables such as laptop computers or cameras. • Never mention that you are traveling alone or give out personal information. • Be aware of the city’s geography and avoid high-crime areas (often lower-income districts) if possible. • Avoid disputes, demonstrations, political rallies, and commotions on the street. Do not stay to watch or photograph them. • Ignore verbal “bait” from passers-by—do not get into an argument—and avoid eye contact with strangers. • If lost, do not stand in the street consulting a map—go to a busy shop and ask for directions, or consult the map there inconspicuously. • Always carry some form of communication equipment, such as a cellular phone programmed with numbers that would be useful in an emergency (police, embassy, and the like). • Memorize important local phrases (yes, no, how much, stop here, and the like). • Avoid walking in city streets after dark, especially if alone. If you are walking, take only brightly-lit, busy streets. • Always be alert to your surroundings. Be wary of loiterers and remember that attackers often pass their victim and then attack them from behind. • If you suspect that you are being followed, enter any busy public place and call for help. • Limit alcohol intake—individuals are more vulnerable to attack if they have been drinking. • Never accept food or drinks from strangers. Criminals often use such opportunities to drug victims. • Do not use public transportation at night. • Use only accredited taxi services with radio communication. • Distribute cash in more than one pocket, and keep a small amount in a top pocket to hand over to a criminal who confronts you. A dummy wallet—with a small amount of local currency, an expired credit card and some useless receipts—can be useful to satisfy a mugger. • Where possible, obtain small denominations of currency and keep the bulk of cash and cards in a money belt, which should only be accessed in private. • If attacked, cooperate with assailants and do not make eye contact or sudden movements. Resistance is more likely to provoke violence.
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Mexico’s drug war has been covered extensively by international media outlets with photos of tortured murder victims and reports of increasingly brazen cartel attacks tarnishing the country’s image. Yet, quite often the news is often presented with little context, creating a false sense among onlookers that the whole country is deep in turmoil. This is far from the truth. In fact, most of the country continues to present a relatively benign security environment for business travelers and expatriates. The fact that the conflict has taken some 30,000 lives in the past three years cannot and should not be taken lightly, but employees destined for Mexico can benefit greatly by understanding the nuances and uneven geographic distribution of the violence. The reality is that the vast majority of the victims are individuals directly involved in the drug trade, not foreigners who are in Mexico for unrelated purposes; furthermore, the likelihood of getting caught in the crossfire is extremely low. Much of the violence is concentrated in U.S.Mexico border regions, leaving large swaths of the country’s interior relatively unaffected. Even for those working near the frontier, the most salient risks continue to stem from common street crime: muggings, armed robberies of small businesses, and carjackings, which often target luxury SUVs. Mexico is unlikely to succumb to a collapse of institutions and public order, despite the opinion of some who believe that the country is beginning to resemble a “failed state.” It is more likely that the violence will be contained, though the process of subduing the cartels may
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take several years. Regardless, it is common crime and extortion, not drug violence, which continue to present the most likely threat to the business traveler or expatriate. Though these issues have persisted in Mexico for decades, in recent years authorities have become so taxed by the need to contain cartel-led violence that addressing these less-deadly (but still serious) crimes has been reprioritized. This reality necessitates increased vigilance among all travelers and expatriates who visit the countries major cities, including Mexico City, Monterrey, and Guadalajara.
Central America In Central America—the Latin American sub-region comprised of Guatemala, Honduras, and El Salvador, among other counties— gang membership and criminality is rising as a by-product of heightened unemployment rates. As migrant laborers previously employed abroad (primarily in the United States) are let go, some return back to their home countries where the sudden influx of jobless nationals has resulted in increased activity among the infamous “Mara” gangs. Crimes committed by these gangs tend to center around street-level drug peddling and human smuggling. Any traveler to the area should be acutely aware of the threat of gang activity, particularly when using public transportation.
Passengers of public buses and taxis have been targeted by robbers who hold their victims up for money, a practice that sometimes involves gratuitous violence. As a result, business travelers are advised to arrange private transportation in unmarked vehicles in advance of any journey to Central American countries.
Colombia Since the 1980s, when drug trade-fueled violence made the nation a particularly dangerous place to live, much less do business, Colombia’s security forces and leadership have achieved marked success in quelling crime and rehabilitating the country’s reputation. President Juan Manuel Santos and the preceding administration have led efforts to reign in the country’s two major leftist guerrilla groups, the FARC and the ELN. As a result, Colombia has seen substantial improvements to safety and quality of life, exemplified by the near absence of terrorist incidents in the main cities. Common crime, however, particularly in poorer urban areas, has seen a slight resurgence in recent years. In addition, travel outside of well-populated city areas continues to carry a high risk of inadvertently entering guerrilla-controlled territory. Although weakened, the guerrilla groups continue to exert power in large geographical areas of the countryside, continuing to rely on kidnapping as an important source of funding.
Preparing for Travel to Latin America: a Checklist for Companies and Expatriates • Prevention and awareness should receive as much attention as post-event response. • The company should assess all points of exposure abroad— people, properties, supply chains—at the onset of the planning process. • The company must consider its duty of care toward employees who travel abroad on corporate business. • Travel policies should reflect nuances of the particular destination(s). • Travelers and expatriates should be provided information on their destination, including details on medical, legal, cultural sensitivities, and security advice. • Strategies and channels for maintaining communication between company headquarters, the local office (if applicable), and the traveler must be in place, with additional considerations made for communication during emergency scenarios (natural disaster, political unrest). • Travelers and expatriates should conduct an audit of the specific vulnerabilities they may be exposed to during their trip. • The company should have in place a crisis management plan that accounts for specific risks faced by individuals abroad.
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Peru Peru is another country that has been affected by leftist guerilla insurgency. Fortunately, as of the mid-1990s, Peruvian authorities had all but eradicated the primary subversive groups, namely the Shining Path and Tupac Amaru. Today, Peru’s main cities are relatively secure, but the country’s remote regions have proven more difficult to police. Remnants of the guerilla groups continue to operate along the Andean ridge, where cocaine production and transport is an endemic problem. Most travelers and expatriates have little exposure to these rural locations, but those in the extractive sector should be aware
of the persisting criminal activity in these isolated areas.
Venezuela In Venezuela, President Hugo Chávez has initiated several social outreach programs aimed at providing employment, health care, and literacy to the poor. These actions have a decidedly populist element but some would say with little improvements on the ground. Unfortunately, the reality faced by many impoverished Venezuelans is in stark contrast to
Advice for Female Travelers • Dress modestly to avoid drawing attention. Observe and respect
local clothing customs. • Be aware that you may be stared at if traveling alone. Ignore any
propositions or suggestive comments. • Avoid eye contact with strangers, especially on the street and on
public transport (consider wearing sunglasses). In some cultures, eye contact with a man is considered a sign that you want his company. • Avoid walking through isolated roads and parks at any time of the day. Do not travel on public transportation after dark without a known male companion. • Try to enter taxis at hotel entrances instead of hailing them on the street. Alternatively, hire a car and driver from a reputable company. • If alone, restrict evening entertainment to five-star hotels or membership clubs. • Be prepared to ask trusted contacts to accompany you to your car, a taxi, or your hotel after dark. • Ensure that hotel room numbers remain confidential. Do not display the room’s key tag in public areas, and stress that the room number should not be given to any inquirers. When checking in, ask the receptionist to write the room number down, rather than tell you within earshot of other people. • Insist that the hotel room has a key-chain, deadlock, and spy-hole, and that the door and window locks work properly. • Never open the door to anyone without taking precautions. If someone claims to be a member of staff, get their name and department and check.
34 MOBILITY/FEBRUARY 2011
the hopeful future implied by these efforts. Both of the country’s two main cities, the capital of Caracas and the oil-rich port city of Maracaibo, have high levels of street crime. Robbery and short-term kidnapping incidents, while not openly targeted at foreigners, do occur. Foreign business executives should be advised to carefully coordinate travel with reputable car services and keep a low profile to reduce the risk of becoming a target for criminals.
Brazil As a whole, Brazil has experienced moderate success in reigning in gang violence. Community policing programs in Rio de Janeiro and Sao Paulo’s notorious slums, or favelas, have quelled these cities’ most prevalent sources of criminal threat. Moreover, the government is aiming to improve the country’s image ahead of the upcoming soccer World Cup tournament in 2014, and thereby has concentrated forces and fostered improved intelligence-sharing between the military and the police, resulting in successful anti-crime operations. The so called “re-claiming” of Rio’s most violent favelas late last year fostered popular support for further operations, which are very likely to take place in the near future and probably will lead to some overall improvements in the security environment. Such amelioration should not be overstated, however, and the threat of petty crime continues throughout both metro areas, including neighborhoods popular with travelers and expatriates.
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In the Event of an Incident • Never head toward an incident or disturbance, and be careful about
taking photographs. Find whatever safety you can at a major international hotel, a diplomatic mission, hospital, or known office location. • In the immediate aftermath, make reasonable attempts to account for other members of your party. If you are in a group, stay together. • Make an immediate and sustained attempt to communicate out. Mobile communications might break down as the volume of traffic increases following an incident. SMS texts or landline services are an alternative. • If medical care is needed, get help immediately. If possible, contact your medical assistance company for advice on finding appropriate treatment facilities. Do not let a sick or injured person be moved to a medical facility alone. Send someone along with the patient and ask where he or she is being sent. • Once at a place of safety, continue to communicate. Even when telephone lines are down, e-mail and broadband links sometimes stay in operation. If communications have failed altogether, take whatever steps you can to get a message to the nearest diplomatic mission. • Do not leave the place of safety without notifying someone of your plans. Attempt to identify other foreigners similarly affected, stay together and pool resources. In general, avoid the temptation to relocate, certainly without ensuring that the route is clear and informing someone outside of your plans. • The priority at this stage is security and communications rather than extraction.
Argentina
Understanding the Risks
ronment and the particular issues prevalent in specific regions is a first step toward a safe and successful assignment to the region. Corruption, crime, and drug and human trafficking are real threats to the stability the region is currently experiencing, but if companies and employees work together to understand and plan for these scenarios, the risks posed to individual travelers and their families can be greatly reduced. Organizations and their employees can identify risks, develop and follow travel policies and protocol, and champion continued awareness of the diverse and continually evolving Latin American landscape.
In conclusion, international business travelers and expatriates should understand that although there are risks inherent to travel in Latin America, understanding one’s envi-
Pablo Weisz is regional security manager, Travel Security Services, a joint venture between International SOS and Control Risks, city, Trevose, PA. He can be reached at +1 215 942 8047 or e-mail pablo.weisz@travelsecurity.com.
Following a deep economic crisis that spanned from 1999 to 2001, Argentina saw a previously unobserved rise in crime, including a worrying kidnapping trend in Buenos Aires, the country’s capital. As the country’s economy slowly has recovered, criminal activity has lessened. This is due in part to local authorities’ strategic focus on apprehending the operational leaders of kidnapping gangs. Travelers and expatriates, however, should remain vigilant, as underlying factors of continued poverty and unemployment continue to drive criminal activity.
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Destination Profile:
New York City, NY
36 MOBILITY/FEBRUARY 2011
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BY ANNE DEAN, GMS, AND SYLVIA S. EHRLICH, SCRP Thomas Wolfe, American short story writer and novelist, once wrote that, “one belongs to New York instantly, one belongs to it as much in five minutes as in five years.” Dean and Ehrlich offer an overview of New York City, with special attention paid to the character of the city’s various neighborhoods and housing.
N
ew York City—the Big Apple, the City that Never Sleeps, or simply the City, was founded by the Dutch in 1640 as New Amsterdam. Its skyline is unmistakable, as are many of its cultural and historical landmarks, from Wall Street to Times Square, Central Park to the Statue of Liberty; even the yellow taxis have worldwide recognition. From the influx of immigrants through Ellis Island in the 19th
century to today, New York continues to thrive as a popular expatriate destination. It is the capital of the United States in virtually all respects except political. New York has long since been recognized as a beacon of international finance, fashion, and culture, its citizens live in a 24-hour world with the frenetic pace generated by businesses of all types: finance, technology, fashion, publishing, theater, and everything in between. Business in New York
means worldwide company headquarters; it also means the corner deli run by a first-generation American. It is a city of energy and diversity. The modern city was created in 1898 when separate municipalities were consolidated. Five boroughs—separated by various waterways and connected by bridges and tunnels—comprise New York: the Bronx, Brooklyn, Manhattan, Queens, and Staten Island. The Bronx is the only bor-
MOBILITY/FEBRUARY 2011 37
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Attention Assignees:
Five Things to Know About New York City
1.
When they say “fast-paced” they mean it! Within days, you proba-
2.
Despite being surrounded by millions of people, it can be easy to feel lonely in New York City. In an average day, it is easy to have noth-
bly will be sucked into the rushed pace of Manhattan if you are working there, as opposed to one of the other boroughs. People walk fast, they talk fast, and they expect fast. Try to develop an awareness to this quickened pace of life, especially at rush hour.
ing more than a casual conversation with someone, such as “I’ll take fries with that” at lunchtime. The people you do connect with may be so busy with work and social obligations that you have to schedule weeks out to get time with them. If you are a laid-back person used to making plans last minute, you may have to tweak your habits a bit. That being said, New York has tons of things to do; classes, activities, sites... so instead of waiting for people to come to you, go out and see what the city has to offer. New Yorkers can be extremely friendly and always talkative—you will not be disappointed! New York City really never sleeps. It is true, no matter what time of day or night, you always can find something to eat, transportation to get you where you are going, and a bar or club to keep you entertained. On the flip side, you may want to avoid living above, or next to, a place that is open all night—it can be pretty noisy into the wee hours. Learn apartment lingo. Whether you plan to rent or buy a place to live, you will need to get familiar with a range of apartment terms such as “walk-up,” “studio,” and “part-time doorman.” Depending on which borough, and which part of a borough you live in, you can expect smaller or larger apartments, more or less people, and easier or more difficult commute times. It pays to do your research! The subway is your lifeline to New York City. If you are used to owning a car and driving everywhere, you may want to get rid of it. Parking fees are almost as high as rent, and finding a place to park on the street is both difficult and time-zapping because you will have to move your car in accordance with parking regulations Monday through Friday. The subway works 24/7 and can get you almost anywhere you want to go—or at least within a 5 to 10 minute walk of where you are going. However, recent budget cuts could mean longer wait times. In addition, the subway is its own culture complete with its own rules (some of which incur a financial penalty for disobeying!) and it’s ability to bring out the best and worst behavior in people at rush hour.
3. 4.
5.
—Heather J. Markel, CPC, culture transition strategist with Culture Transition Coaching, New York, NY.
38 MOBILITY/FEBRUARY 2011
ough that is connected by land to New York State. The boroughs are home to more than 8 million residents. More than 20 million people live in the tri-state (New York, Connecticut, and New Jersey) metropolitan area. Another 45 million visit annually, including almost 9 million from outside the United States. The city proper is the hub of many suburban residential communities in the states of Connecticut and New Jersey, as well as upstate New York, including Hoboken NJ, White Plains, NY, and Greenwich, CT. There is a broad range of international assignees represented in New York City. Manhattan is one of the most eclectic communities in the world; it is a true melting pot. There is no single area where expatriates live. During an average walk down any street, you will hear different languages—it is said there are more than 800 spoken in New York. Expatriates live among New Yorkers, work together, and often socialize together.
Housing Areas Where to live. Expatriates tend not to congregate in any one specific area of New York City. However some expatriates select their location based on the school they choose for their children. For example, the Upper East Side would be appropriate for families enrolling their children in the Lycée Français. Similarly, the east side of Manhattan—in the areas where the street numbers are between the 30s and 60s—would be appropriate for families whose children attend the United Nations School. Cost and location. Housing in Manhattan is very expensive. However, some people choose small, less
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expensive accommodations to be in the heart of the city. They scale down their housing size to be a part of New York’s sophistication, international flavor, culture, and world-class pursuits. If living space and amenities are more important to you, consider living “off island”—outside of Manhattan— and commuting to the city. Transportation and shopping. All areas of New York City are served by an extensive public transportation system of buses and subways that run 24 hours a day. Having a car in Manhattan is considered unnecessary.
40 MOBILITY/FEBRUARY 2011
Taxi and private car services also are ample. New York City has an extensive array of shops and other amenities that extend throughout every neighborhood. Most grocery stores and restaurants also provide delivery services, making proximity an issue of little concern for New Yorkers. Choosing an area to live. New Yorkers are very passionate about the neighborhoods in which they live. Choosing your home is an important quality-of-life decision because each area has very different characteristics in terms of culture, politics, aesthetics, lifestyle, and community. Be sure to choose an area that feels most like home to you and suits your needs and wishes. Keep in mind public transportation or parking, architec-
ture, commercial or residential zoning, security, nearby schools, convenience of shopping, and other aspects of any neighborhood you consider.
New York City Neighborhoods Upper West Side. This area includes streets numbered in the 60s, 70s, 80s, and 90s on Manhattan’s West Side. It has become the most desirable residential area in Manhattan. Grand architecture and beautiful old apartment buildings characterize the area, as do tree-lined streets of charming brownstones and townhomes. Wide shopping avenues offer everything from huge bookstores, movie theaters, cafés, taverns, and comedy clubs to designer clothing shops and trendy restaurants. An extremely eclectic, diverse culture and active community attract financial professionals as well as artists to the area. Two large parks—Riverside Park along the Hudson River and Central Park—are major draws, along with Lincoln Center and the Museum of Natural History. Midtown Manhattan is easily accessible from this area. Upper, Upper West Side, and Columbia University (Morningside Heights). This area encompasses streets in the low 100s to 118th Street and Broadway. It is an interesting area with its own unique ambiance. Columbia University, its professors, students, and campus life set the academic tone for this community. Some people find it a long commute to locations downtown, but access to subways and buses is easy. This area is in transition, so there might be some really good buys there. Upper East Side. This area is located among streets in the 60s, 70s,
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80s, and 90s on Manhattan’s East Side. A homogeneous area, and considered one of the most desirable residential areas in Manhattan, it features multi-million-dollar Fifth Avenue homes as well as studio apartments. Residents have access to Central Park, Madison Avenue’s designer boutique shopping, and many of Manhattan’s famous museums—such as The Metropolitan, Guggenheim, CooperHewitt, The Frick, and others. Amenities include gourmet food markets, movie theaters, restaurants, art galleries, trendy clubs, ethnic delis, and high-line department stores. The easternmost avenues, such as First, Second, Third, and Lexington, attract young professionals because of its relative affordability, nightlife, necessary amenities, and easy access to midtown. A note about Central Park: this huge green haven is the reason some people choose to live on the Upper West Side or Upper East Side of Manhattan. People go to Central Park for its beautiful reservoir, jogging
42 MOBILITY/FEBRUARY 2011
paths, horseback riding, lakes for boating, ice skating, tennis, ball fields, teams to join, the Central Park Zoo, croquet fields, in-line skating, and cross-country skiing. A visit to Central Park provides many with a muchneeded break from hectic city life. Exercise care in Central Park; do not venture through it alone at night. Even during the day, it is preferable to have a companion accompany you through secluded areas. Midtown East Side (Gramercy Park, Murray Hill and Turtle Bay areas). Stretching from 14th Street up to the 50s on Manhattan’s East Side, this area is popular among young professionals and families due to “affordable” housing, after-work meeting places, movie theaters, restaurants, and fun shopping. The Gramercy Park area on 17th Street is a tiny exclusive enclave of expensive townhouses and gothic apartment buildings. The park itself is a beautiful, fenced, block-square private park for residents only. Just outside of Gramercy Park is more affordable residential housing.
Murray Hill has many mid-rise buildings with some beautiful treelined side streets and oases with handsome townhomes and brownstones. Residentially, it is not as picturesque as the Upper East Side. There are no big parks, but it is conveniently located in the shadow of midtown Manhattan. Turtle Bay stretches from 42nd Street to 53rd Street and is home to such landmarks as the United Nations, the Chrysler Building, and Citicorp Center. The United Nations is located in the East 40s, and its impressive complex of buildings and international employees set the tone for that area. The Turtle Bay area contains all kinds of buildings from tenements to luxury co-ops and condos, in addition to stylish brownstones. Midtown West and Chelsea. From 59th to 14th Streets on Manhattan’s West Side, Midtown West is right in the heart of working Manhattan. There is some residential high-rise and warehouse loft-type living here, but newcomers considering this area must like living in the midst
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of a noisy industry that continues 24 hours a day. Some New Yorkers prefer this bustle. Local amenities, such as dry cleaners, shoe repairers, and grocery stores, are fewer than in other areas. Chelsea, located further south from about 34th Street to 14th Street, offers a mix of townhouses, high-rises, local merchants, and industry. It is considerably more peaceful, residential, and convenient for daily shopping needs. Images of Midtown West include CBS’s Ed Sullivan Theater; the Knicks and Rangers playing at Madison Square Garden; Broadway’s theaters, hotels, and restaurants; Carnegie Hall; and the garment center workers with their rolling clothing racks. There are pockets of tranquility in this area, but you really have to like crowds to live there. The far West side, from 9th to 11th Avenues, is seeing a lot of development in terms of new buildings with all the bells and whistles to try and attract people to live in the area.
Greenwich Village, West Village, East Village, Soho, and Tribeca. Located below 14th Street, in Manhattan’s lower end, these are the oldest residential areas of Manhattan. Many New Yorkers like the area’s small-town appeal. Famous in the 1950s and 1960s for its eclectic, artsy venues and people, it still attracts creative types. Currently, people who would have once preferred uptown are finding these areas very attractive. Winding cobblestone streets, landmark houses, artist studios, charming muses, enchanting gardens, hidden courtyards, cafÊs, coffee houses, and tiny night spots all add to the unique character of this area. Because of the landmark status of so many buildings built in the 1800s, there are fewer high-rises and urban canyons, and much more sky and light. New York University (NYU) is there, adding to the diverse characteristics. Housing includes brownstones, townhouses, some pre-war and post-war high-rises and a lot of lofts. Years ago, artists and sculptors turned pre-war factories and ware-
houses into huge open studios—or lofts—where they could live and work. You will find most of these lofts in Soho and Tribeca. Affordable living can be found in the East Village—but the West Village, Tribeca, and Soho are popular and have become very pricey. For those who like crowds, late nights, and lively weekends, lower Manhattan is the place. Life starts at about midnight and stops around 3:00 a.m. Images of the area include authentic poets; three-generation Italian and Chinese families; artists; smoky coffee houses; old speakeasies; sidewalk cafĂŠs; actors; late night music; the NYU campus; bohemians and other alternative lifestylers in the East Village; and a fair number of white-collar workers who want to live somewhere different. Battery Park City. Literally a new “cityâ€? built on landfill over the Hudson River on the Southwest tip of Manhattan, this area has views of New Jersey, the Statue of Liberty, Ellis Island, and the Verrazano Bridge. This is the financial heart of
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New York. Designed as a beautiful, waterfront residential area, this location was built to accommodate people who did not want to commute to Wall Street and the financial districts. The Battery Park area has very good housing that is reasonable, complete with a new elementary and middle school. North Battery Park has a pedestrian bridge over the water that takes you right into Tribeca. Sights that make up Battery Park City are nearby Wall Street and Stock Exchange, City Hall, the Statue of Liberty and Ellis Island, South Street Seaport with all its shops and restaurants, Fulton Fish Market, and tall ships anchored at the harbor. It is an odd but interesting mix of tourist attractions and the financial district, which vir-
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tually becomes a ghost town after about 6:00 p.m. on weekdays.
Types of Housing in New York City Housing styles in New York City are as varied its inhabitants. Choose the style that is best for you, your family, your lifestyle, and your budget. Brownstones and townhomes. Built in the late 1800s or early 1900s, this style is known for charming details such as fireplaces, original moldings and accents, gardens or back decks, and original hardwood floors. They might house a single family or be divided into individual apartments. Many have renovated kitchens and baths for modern living. Elevator buildings. Six- to 20-stories high, these buildings can be either pre-war or post-war. Instead of doormen, they usually have voice and video intercom security systems at the building entrance. Loft buildings. Lofts are warehouses and factories that have been converted into huge open spaces with very high ceilings. They are located “downtown” in neighborhoods such as Greenwich Village, Soho, Chelsea, and Tribeca. Many originally had been zoned exclusively for artist studios. They are coveted for their large, open, airy living space. In real estate, you will see the term “loft-like” or “one-room apartment with a loft.” These are not real lofts. Rather, these descriptions refer to an apartment that has an open, spacious feel or one that has a loft area meaning a space built above the living area and accessible by ladder or stairs. People use the space for either storage or sleeping. Luxury doorman buildings. These are New York City’s most contemporary high-rises with 50 or more stories (the newest one is in the downtown area, has 75 stories, and will include a New York City public school and commercial units), incredible views, and modern layouts. Amenities include Jacuzzis, granite counter tops, health clubs, concierges, and rooftop decks. Many are condominiums; some are rentals. Post-war buildings. Generally plain in style, these were built between the late 1940s and early 1970s. They have simple white, brown, or red brick facades. Apartment lay-
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We’re American Relocation Connections. We know relocating your employees can be a hassle and that’s why we’re here to make it easy!
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Assignees:
Three More Tips for Life in New York City
1.
Taxis are widely used throughout the city, as many New Yorkers do not own cars and out-of-town visitors typically do not drive in. So
2.
When you are commuting into the city from one of the neighboring states, the train is referred to as a... train! However, if you are
3.
The apartment rental process can be made less surprising by remembering a few key points. You will be required
if you are planning on using a taxi, keep in mind that when the vehicle has its light off, it means they are with a passenger. If the light is off and the “off duty” sign is on, then the driver is off duty. However, more often than not they will stop and ask what the destination is—if it is convenient for them, they will take a passenger. The shift changes for the taxi drivers around evening rush hour—it is the most inconvenient time for people and you should keep this in mind when planning your evening. There are private cars or livery services available, typically town cars or limousines. They usually charge a flat rate that may be higher than a normal cab fare. If you choose to use one of these it is always important to confirm the price prior to getting into the car. Always exercise caution when using car services, as unlicensed or “gypsy” cabs do roam the streets.
taking the train system in the city, it is referred to as the “subway.” This is by far the most efficient way to get around the city because it is not impacted by the gridlock that can occur above ground. It is also the most cost effective. To ride the train you need to purchase a “Metro Card.” The same can be used for the MTA buses as well. Note: travel is viewed in terms of the time it takes to get to your destination, not mileage.
to go through an application process for every apartment, even if you were paying cash up-front for the entire year! Plain and simple, the landlords want to know who the tenant is. The rental application process is not standardized. This means that what one landlord requires to rent an apartment may vary to the next. Fees also will vary. Apartments normally will turn over around the start of the month, with the hopes of renting the following month. This means you will not want to begin your apartment search too early. Usually 45 days prior makes sense. If you plan on renting a co-op, you should plan a little extra time because you will need board approval. Note: they can say “no” for any reason and they do not need to give the reason! If you have questionable credit or no credit, landlords may require extra security. Again, this is not standardized so what they ask for will vary. Once you rent an apartment, usually the building will restrict the day and time you can move in and what elevator you can use to do so! —Christine Haney, CRP, GMS, vice president, business development and relocation services, Prudential Douglas Elliman, New York, NY.
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outs are usually boxy but good sized. Most have doormen or a concierge desk, or both. These tend to be the most affordable of the “full service” buildings. Pre-war buildings. These buildings were constructed before World War II. Either with or without a doorman, they have the feel of an earlier, more elegant era and feature high ceilings, original details, fireplaces, and grander, more classic layouts. Many of these apartments have been renovated with modern fixtures, but many have not. Walk-up buildings. These are four- to five-story buildings without elevators. They have multiple dwellings and tend to be the least expensive housing in the city. They have a reputation for lacking charm, but the quality can vary a great deal. Some have been very nicely renovated. Should you look for a building with a doorman? Living in New York City poses this question of safety and convenience. A doorman accepts packages, allows delivery men to go into your apartment, may do some small errands for you, and generally makes your life easier. More important, he is someone watching the door. A building without a doorman may be a bit less expensive, but also may have more charm and details. There may be an outdoor garden or a roof deck, for example. There are many housing choices in New York City and each must find his or her level of comfort with style and safety issues. Everything is available in the city, at its own price. Anne Dean, GMS, is the director of editorial services for Living Abroad, LLC, Norwalk, CT, and a member of the MOBILITY Editorial Advisory Committee. She can be reached at +1 203 221 1997 or e-mail anne.dean@livingabroad.com. Sylvia Ehrlich, SCRP, is president of The Intrepid New Yorker LLC, New York, NY. She can be reached at +1 212 750 0400 or e-mail sylvia@intrepidny.com.
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Citi offers support throughout the homebuying process that takes the worry out of buying a home.
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At Citi, we are proud of our more than 25-year tenure dedicated to the relocation mortgage industry. With CitiMortgage Corporate Programs, your relocating and nonrelocating employees can take comfort in our comprehensive home financing solutions, individualized mortgage counseling and valuable financial education resources. Whether your employees are refinancing an existing mortgage, relocating across the country or moving just down the street, our mortgage experts can provide the guidance they need.
To learn more about bringing CitiMortgage Corporate Programs to your organization please contact: Wendy Morrell at 1-636-261-1296 or email
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What’s your story? Citi can help you write it.
©2011 CitiMortgage, Inc. CitiMortgage, Inc. does business as Citicorp Mortgage in NM. CitiMortgage, Inc. is an equal housing lender. Citi, Arc Design, and Citi and Arc Design are registered service marks of Citigroup Inc.
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FHA and VA Home Loan Financing in Relocation BY DEREK LATKA, CRP, GMS With few exceptions, home purchases are conventionally secured through mortgage loans. Latka highlights the many benefits of FHA and VA financing, as well as some of the challenges in which mobility program managers should be aware and how they might affect a move. 50 MOBILITY/FEBRUARY 2011
H
istorically, government mortgage programs, known as FHA (Federal Housing Administration) and VA (Department of Veterans Affairs), have accounted for fewer than 2 percent of all relocation mortgage transactions, and typically consisted of a small group of first-time or credit challenged homebuyers. This is no longer the case. Through the economic meltdown and mortgage market crisis, these programs have become much more common as customers seek the stability of their fixed-rate options, minimum down payment requirements, and reassurance of government oversight. Today, government mortgage programs make up for as much as 39 percent of some relocation programs and as underwriting guidelines have tightened, the demographics have changed as well. Now it is quite common to see seasoned professionals, even executives, taking advantage of FHA and VA financing programs when departing from a soft market or attempting to preserve their cash on hand. The FHA, part of the Department of Housing and Urban Development (HUD), has been supporting homeownership and helping people purchase homes since 1934. FHA provides insurance to lenders in order to offer more flexible credit guidelines and lower down payment requirements than typical
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conventional financing. Similarly, VA loans, as part of the Servicemen’s Readjustment Act of 1944, allow for little or no down payment and are guaranteed by the U.S. Department of Veterans Affairs (VA loans are available only to qualified veterans and persons with VA entitlement). Some of the benefits include: Non-traditional credit. Especially in the case of first-time homebuyers, potential customers may not yet have established a complete credit history simply because they have not engaged in much borrowing. It is possible in many cases to create a credit portfolio based on timely payment of rents, utility bills, and other financial obligations which are not typically found on a standard credit report. Past credit issues. Customers are not automatically disqualified if they have a foreclosure, bankruptcy, or short sale on their record. If it has been at least three years since the foreclosure or short sale, or at least two years since the bankruptcy filing, customers may qualify for financing by demonstrating that they have
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managed their finances well since the previous problem developed. Loan and income limitations. While there are no income maximums in place to qualify for FHA or VA financing, there are specific loan limits set by HUD which will vary by county in every state. As part of the American Recovery and Reinvestment Act of 2009, FHA loan limits were raised to as high as $729,750 depending on median home prices in an effort to provide financing at lower rates for customers in higher cost markets who would otherwise require unconventional financing. Competitive interest rates. FHA and VA loans are not subject to “risk-based pricing,” meaning that unlike conventional loan programs, there is no interest rate add-on for customers who may have credit challenges or a lower down payment. Self-employed customers. Those who are self-employed can generally qualify for FHA and VA loans with two years worth of tax returns, a current balance sheet, and a profit and loss statement.
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• Mortgage insurance. There are two types of mortgage insurance required on FHA loans; an up-front mortgage insurance premium (MIP), which is either paid in cash at the loan closing or financed into the loan transaction, and an annual premium, which is included in the monthly mortgage payment. While there is no mortgage insurance required for VA loans, there is a funding fee. The funding fee can be paid at closing or financed into the loan. Down payment. One of the primary draws of an FHA loan is its 3.5 percent minimum down payment, as opposed to the 5 percent minimum down payment required on conventional loans. A down payment can be in the form of gifts from members of the family or others who are demonstrably close to the customer. FHA loans do require closing costs, but the seller can contribute up to 6 percent of the purchase price toward closing costs. The VA loan usually requires no down payment (with full entitlement), but generally requires closing costs. VA allows seller to pay all borrower’s closing costs (Seller-
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paid closing costs can be a great incentive that sellers in a slow market can use to attract homebuyers.). Cost. Many customers find the lower down payment requirements of FHA loans and zero down payment requirements for VA financing to be appealing, but there are additional costs to consider: the VA funding fee as well as both the up-front mortgage insurance premium and the annual premium for FHA loans are considerable costs.
•
Impact on Relocation The impact of FHA and VA home financing on relocation is significant, with longer processing times and heavy documentation requirements. Also, FHA requires guaranteed buyout offer agreements to be fully executed before closing on the new
mortgage, limiting customers’ ability to close on their new mortgages during the required marketing period on their departure homes if they are unable to qualify with both payments in their debt ratio calculation. Further, documented verification that equity has been disbursed and received also is required. Many experts are of the belief that usage of government home financing options like FHA and VA will steadily increase in the months to come. These predictions are mainly attributed to continued economic challenges
and the expectation that our servicemen and women will return from overseas and seek re-employment in the private sector. It is important for program mangers and service providers alike to understand the nuances of government financing and work together to set appropriate expectations in order to ensure a smooth process for their transferring employee population. If you take one thing away from this article, it should be to support the development of advanced homesale and home purchase counseling during the decision-making process. Knowledge is power, after all. Derek Latka, CRP, GMS, is client relationship manager, relocation and corporate services, for Bank of America Home Loans, Grosse Point Farms, MI. He can be reached at +1 312 521 4242 or e-mail derek.latka@bankofamerica.com.
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nemployment rates are the highest they have been in 30 years, existing homesale volumes are at year 2000 levels, and foreclosures run rampant. Indeed, this is a great time to buy a home. What are the factors that make this time, more than any other, a great time to buy a home? The National Association of REALTORS® (NAR®) Housing Affordability Index was at 179.1 for September 2010, the highest level since the inception of the index. Consider the typical American home now versus October 2006. Four years ago, the principal and interest (P&I) payment on an existing home priced at the national median—$218,900—stood at $1,085 after a 20 percent down payment and with the prevailing 30-year, fixedmortgage rate of 6.31 percent. That same home today sells for $171,700 and, with a 20 percent down payment and 4 percent fixed mortgage for 30 years, carries a P&I payment of just $656—an almost 40 percent reduction in the monthly payment. According to NAR® President, Vicki Cox Golder, “… the median monthly mortgage payment for a recently purchased home is several hundred dollars less than it was five years ago. In fact, the median monthly mortgage payment in many areas is less than people are paying for rent.” As illustrated in the chart on page 56, during the boom years of 2004 to 2006, when home values were skyrocketing, affordability was at an all-time low. After values began to drop in mid-2006, affordability began to improve. As values flattened out in 2009, interest rate reductions continued to drive affordability to the lofty levels seen today.
The Role of Mortgage Interest Rates In the second chart on page 56, median price and mortgage rate combine to calculate a monthly P&I, which, when compared to the median income compo-
nent of the index, results in a indicator of monthly payment as a percentage of income. Affordability dropped below 100 in the early 1980s when mortgage interest rates jumped to 15 percent and the monthly payment as a percentage of income stood at 35 percent. During this period, median income growth kept pace with median home price growth, but the surge in mortgage interest rates made homeownership a distant dream for many Americans. Today’s low mortgage rates have the opposite effect, making homes more affordable. Today’s monthly payment as a percentage of income of 13.97 percent is the lowest on record. Says Earl Lee, president of Prudential Real Estate and Relocation Services, Scottsdale, AZ, “… the only time people really think about their home price is when they buy and when they sell. However, they think about their house payment every month and those payments won’t go much lower. If you are lucky and can squeeze another $10,000 out of that national median price of $171,700 you might lower your monthly payment by around $38 at current rates. However, a 1 percent jump in rates to 5 percent would add over twice that amount to the monthly payment.”
Affordability Has Never Been Better Median home prices are at 2002 levels and mortgage rates are at lows not seen since the Truman administration. While rates could go lower, there is not much more room to drop and most experts predict rates to rise again in the foreseeable future. For most markets, home prices have stabilized. Hoping for additional price reductions while risking a rise in interest rates is a dangerous math exercise. “We all want the best buy or the lowest price, and it is tempting to hold out, but trying to time the bottom of a market is a quixotic endeavor—one that often costs much more than it saves,” said Mike Gain, CEO/managing broker of Prudential Northwest Realty Associates, Seattle,
BY STEVEN JOHN, CRP, GMS In light of slowed economic growth and high unemployment, many would-be home purchasers remain reluctant to enter the housing market. However, writes John, housing affordability has never been better, and he illustrates how low mortgage interest rates offer an ideal situation for those who are debating a home purchase. MOBILITY/FEBRUARY 2011 55
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NAR® Housing Affordability Index
Principal & Interest as a Percentage of Income
WA. “The one thing we all know is that… prices will once again rise and so will interest rates. Affordability has never been better than it is today.” Of course, this does not discount why many consumers are hesitating to enter the housing market. Slow economic recovery and job growth have most Americans concerned about the future. Still other consumers face negative equity or have dealt with foreclosure, challenges that must play out over time. Yet, for those who can, a home still offers long-term virtues of shelter, wealth-building, and personal and civic pride now available at prices that should not be ignored. Obviously, this data is based on national averages. Your experience may vary. As we know, all real estate markets are local. That being said, averages are a powerful thing and who wants to be saying, “if only I had…” It is a great time to buy a home. Steven John, CRP, GMS, is executive vice president for Prudential Real Estate and Relocation Services, Scottsdale, AZ. He can be reached at +1 480 778 6800 or e-mail steven.john@prudential.com.
Chart Sources: National Association of REALTORS® (NAR®)
Housing Affordability NAR®’s Housing Affordability Index (HAI) measures whether or not a typical family could qualify for a mortgage loan on a typical home. A typical home is defined as the national median-priced, existing single-family home as calculated by NAR®. The typical family is defined as one earning the median family income as reported by the U.S. Bureau of the Census. The prevailing mortgage interest rate is the effective rate on loans closed on existing homes from the Federal Housing Finance Board and HSH Associates, Butler, NJ. These components are used to determine if the median income family can qualify for a mortgage on a typical home. To interpret the indices, a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that a family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment. For example, a composite HAI of 120.0 means a family earning the median family income has 120 percent of the income necessary to qualify for a conventional loan covering 80 percent of a median-priced existing single-family home. An increase in the HAI, then, shows that this family is more able to afford the median priced home. The calculation assumes a down payment of 20 percent of the home price and a qualifying ratio of 25 percent. That means the monthly P&I payment cannot exceed 25 percent of the median family monthly income.
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Global Mobility Policies
and Practices in a Fiscally Responsible Era BY TIMOTHY DWYER
T
he sudden and sharp onset of the recession caused many organizations to respond with rapid across-the-board cuts in mobility-related benefits and a general rush toward localization. Now that the initial panic is over and much of the dust of the recession has settled, employers have an opportunity to evaluate policies, reviewing what worked and what did not, and come up with new policies and practices that support the goals of their mobility programs. This includes reviewing even the emotionladen area of education policies to determine how savings can be achieved without causing transferees to refuse assignments.
The Education Example It can be one of the most expensive aspects of an international assignment, and also the one that sparks the greatest emotional chord with parents. Few things have the ability to stop a potential assignment in its tracks with more certainty than a family’s belief that their son or daughter will be placed in a school that does not provide the appropriate academic, cultural, or emotional support. While mobility expenses were being slashed, some HR professionals felt that education allowances could not be tampered with because of the resulting uproar. Many employers that wanted to avoid the controversy simply reduced the number of relocating families with 58 MOBILITY/FEBRUARY 2011
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Whether or not the recession has ended, the business climate has changed in some substantial and long-term ways. According to Dwyer, it will be a long time before we are likely to see corporate spending at its pre-recession levels. While the number of international assignments finally is starting to increase after substantial reductions during the last two years, those moves often are either on local terms or are expatriate moves with substantially reduced benefits. Dwyer explores the range of options with regard to assignment policy cost-savings, often using education as an example how such options could be implemented.
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On the Web Please visit www.WorldwideERC.org for further information concerning fiscally responsible global mobility policies: Benchmarking Relocation Policies: The Results are in—Now What? www.WorldwideERC.org/Resources/MOBILITYarticles/Pages/0510Olkowski.aspx Managing Mobility Decisions in a Globally Volatile Situation www.WorldwideERC.org/Resources/MOBILITYarticles/Pages/0309 bar-pereg.aspx From a Leak to a River: How the Cumulative Causes of the Economic Downturn Are Affecting Relocation www.WorldwideERC.org/Resources/MOBILITYarticles/Pages/0809huddleston.aspx school-aged children—after all, moving smaller-sized families means not only saving on education costs, but cost-of-living allowances, housing reimbursements, and home leave expenses, too. Other employers cut most other expatriate allowances but kept schooling benefits intact when employees were going on “local-tolocal” assignment, even when it may not have been necessary or consistent with the employee’s status—an employee cannot truly be considered a “local employee” if he or she is receiving a benefit or allowance that his or her local peers do not receive. Despite trepidation about changing education policies precipitously and concomitant implications, education benefits for assignees’ children have been popular targets for cost-cutters long before the current economic malaise—and it is easy to understand why. The costs for even one child can be eye-popping—independent school tuition in Manhattan easily can hit $35,000 per child—and when that amount is reimbursed by an employer, the entire payment is considered taxable income to the employee. Under most expatriate tax policies, the employer pays that tax, and then the tax on that tax reimbursement, and so on, making the $35,000 reimbursement into a $55,000 or greater 60 MOBILITY/FEBRUARY 2011
cost when all is settled. Adding just one more child to the mix quickly puts the total cost in excess of $100,000 per year.
Option 1: Eliminating Benefits Entirely It is not unusual for HR and line managers in the host location to question the need for expatriate benefits and allowances such as a housing or tuition reimbursement for the children of incoming transferees, especially when the host location is a major city such as London or New York. “If the local schools are good enough for my kids, they are good enough for the expat’s” is how the thinking often goes. Or, “our local employees live in the suburbs and commute; why does the expat get to have an apartment in the city all paid?” While there is a certain logic to that reasoning, there also are some key flaws. For example, with regard to housing, expat-friendly neighborhoods often have unique elements— foreign goods, cultural attractions, and the opportunity to socialize with other non-natives—that many local neighborhoods do not offer. Such neighborhoods also might be lacking appropriate rental housing, and because for tax and other reasons,
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property purchase by expatriates is almost always a bad idea; expatriates need to be near where the rental housing stock is available. When it comes to the use of free, public education, it is true that use of English is increasingly widespread, especially among the young, and in many countries instruction in English as a second language begins very early in elementary schools. And, it is quite possible to find state-funded, high-quality schools in many parts of the United States, United Kingdom, Canada, Australia, and other regions in the English-speaking world. However, placement of all transferee children into non-fee paying schools, even when there are “good schools” available, ignores certain key complications. A child may be familiar with spoken English but his or her level of reading and written English might not be sufficient to allow him or her to keep pace with sophisticated and nuanced analysis, particularly when assigned in great quantities. Second, there can be substantial differences in curricula that make the initial integration of the child much more complex than simply assigning levels based on age. These differences often are compounded on the return to the home country, when the child might be expected to take specific examinations, either to regain entry into former schools or to meet legal education requirements. Finally, public or non-fee paying schools frequently are based on housing catchment areas. For local families, housing is a fixed part of the home/school equation and often is decided based on school quality either before children are born or when they are very young. For relocating families who are struggling to find homes as well as schools, the uncertainty involved in purchasing or leasing a home can
leave much to chance on the school front, and where a family must use temporary housing, children may be forced to change schools before they even have a chance to settle in. In such cases, fee-paying schools, which are independent from housing locations, may be preferable. So while certain expatriate benefits may appear at first glance to be exceedingly generous, there often is a good reason behind the provision. Does that mean that local housing or free public schools are never an option? No, but placement must be done with care: curriculum differences need to be understood, the child’s language and learning capabilities assessed, and local schools evaluated for goodness of fit for the child as well as family—both during the assignment and on repatriation. The quality and resources of public schools can vary widely even from neighborhood to neighborhood within the same city. Information creates options. Gaps and overlaps created by differences in schooling systems can be addressed through tutoring, summer programs, or distance learning, but families need to be aware of what to expect and of resources available to meet their children’s immediate and long- term needs. Focusing on the right placement and support at the beginning of the assignment can avoid a great deal of difficulty down the road—and reduce the chances of a failed assignment.
Option 2: Sharing the Expense Another tactic that has been deployed is a “norm” or “hypothetical expense” withholding. It commonly is done with housing: if an expatriate would have paid $2,500 per month in rent, utilities, maintenance, or mortgage interest, that is the amount he or she would conMOBILITY/FEBRUARY 2011 61
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tribute toward the cost of housing abroad. The remainder is covered by the employer. A similar approach could be taken with regard to schooling expense. This technique is administratively burdensome, and some assignees find it to be inappropriately intrusive; however, many argue that it helps an organization to achieve cost savings in a fair and equitable manner, and still provides crucial support in the assignment location. The concept assumes that an employee’s education costs prior to assignment should continue at approximately the same level or rate when that employee takes an assignment. If, for example, an employee already was paying $35,000 per year for private school in Manhattan prior to assignment, that employee should expect to continue to pay that amount while on assignment abroad. To the extent that the schooling costs are higher in the host location, the difference would be paid to the individual as an allowance. Certainly, such an approach would be unpopular to implement for certain populations—namely, those who have chosen private schools for their children prior to assignment—and might generate considerable internal resistance. But when faced with the direct challenge to reduce costs or risk losing a benefit in its entirety, this cost-sharing approach might prove more attractive.
Option 3: Lump Sums or ‘Flat’ Allowances A variation on this theme is partial reimbursement of host-location costs via some form of flat allowance—for example, the employer pays the first $10,000 in school fees regardless of actual costs. This often is done with 62 MOBILITY/FEBRUARY 2011
regard to miscellaneous relocation costs: the employee receives one month’s salary or perhaps $5,000 or $10,000 toward miscellaneous costs regardless of the actual expenditure. This approach is less equitable— some employees end up paying more, while others pocket the unspent remainder—and would be unpopular to implement in locations where schools are expensive, but certainly easier to administer than the hypothetical norm option above.
Option 4: Thinking Outside the Box—or School Increasingly, technology is presenting expatriates with myriad ways to lessen the distance between them and their home countries. Videoconferencing and web-based telephone solutions offer connections at much less cost—and higher quality— than ever before. Foreign language, new country orientation, and crosscultural training are now widely available via distance learning, which is less expensive and less time consuming than getting people to specific venues for in-person instruction. Online universities already are well-established; now we are seeing similar approaches for younger students. Web-based schools, complementing the growing “home schooling” trend, increasingly are being
viewed by parents as a viable alternative to traditional school environments, especially in those locations where appropriate local schooling options are unavailable. While there are costs associated with this approach, it is often less expensive than local independent schools. As with other distance learning approaches, there also is the loss of social interaction to consider, though some parents might not always view that as a negative.
Challenging Assumptions There is widespread recognition that children, and by association their schooling, are very emotional issues for potential assignees. Therefore, changes in policy should best be considered at a time when pressure to implement a change is relatively low and policy alternatives can be evaluated against the overall objectives of the expatriate or relocation program. While none of the options outlined above are perfect solutions for every situation, economic realities, high demand in key locations, and the ongoing need for employees to be mobile requires that all assumptions be challenged so that HR can respond with continued flexibility and innovation on this front. Getting access to the right expertise to make informed decisions in this area is crucial, because confronting all HR and business managers is one inflexible truth: no employee is going to be willing to move to a location where they feel their child’s education—and by association their happiness, safety, and success—is in peril. Timothy Dwyer is chief operating officer for School Choice International, White Plains, NY. He can be reached at +1 914 328 3000 or e-mail timothy.dwyer@schoolchoiceintl.com.
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BY MATTHEW T. PHILLIPS Enforcing U.S. immigration laws is a key duty of Immigration and Customs Enforcement (ICE). Philips offers an overview of one of the enforcement methods, namely I-9 audits, and outlines several important considerations for U.S. employers to help ensure they have a compliant and effective I-9 program in place.
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F
ollowing the transition from the Bush to the Obama administration in 2008, there have been a number of significant changes in policy and direction with respect to enforcement of immigrationrelated statutes. One of the most pronounced is the dramatic increase in the use of Form I-9 (also referred to as simply “I-9”) audits and investi-
gations not only to ensure I-9 compliance, but also as a tool for effective immigration enforcement. For example, during the summer, New York Times reporter Julia Preston in her article, “Illegal Workers Swept From Jobs in Silent Raid,” reported that Immigration and Customs Enforcement (ICE), the arm of the federal government
specifically charged with the enforcement of immigration laws, had conducted audits during the past year of more than 2,900 companies and thereafter levied a record amount of $3 million in civil fines on businesses that hired unauthorized immigrants. In addition, the government also has pursued criminal charges where it deemed them appropriate. According MOBILITY/FEBRUARY 2011 65
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to the article, the federal government now views I-9 enforcement audits as a much more effective enforcement tool than the work-site raids that were more common under the Bush administration, given that the audits target every unauthorized worker on a company’s payroll, as opposed to
those who simply happen to be physically present when a raid takes place. More recently, according to a September 16 report, “ICE to Serve More Than 500 New Notices of Inspection,” from the American Immigration Lawyers Association, during one week in September alone,
ICE served more than 500 Notices of Inspection on U.S. employers seeking documents regarding the authorized employment of workers, including a review of Forms I-9 and related documentation, such as payroll records and documentation of hiring policies. The pursuit of unauthorized workers through I-9 audits will, of course, not simply snare unauthorized workers, but also will likely result in fines and penalties for employers who may be employing authorized workers but who have failed to adequately document their employment authorization in light of existing I-9 requirements. As a result, it is incumbent on U.S. employers out of recognition of the enhanced enforcement environment to be fully conversant and compliant with existing I-9 regulations. This article, while by no means an exhaustive review of I-9 requirements, outlines several important considerations for U.S. employers to help ensure they have a compliant and effective I-9 program in place.
Get the Right Documents The Form I-9 is periodically updated by the federal government, and the most recent version of the form, which carries a date of August 7, 2009, can be located online at www.uscis.gov. Be certain that your company uses the most current document, as it is a not uncommon practice for an employer to run off copies of the form and place them into a folder for use at a later date without realizing that the document may have been revised in the interim. In addition, U.S. Citizenship and Immigration Services (CIS) publishes a “Handbook for Employers,” containing instructions for the comple66 MOBILITY/FEBRUARY 2011
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tion of the Form I-9. This document contains a wealth of information helpful for the individuals charged with I-9 compliance at a U.S. employer, including several sections of frequently asked questions and examples of the types of documents acceptable for identity and employment authorization. This document also is available on the USCIS website.
Review the Basics The Form I-9 must be completed to verify individuals authorized to work in the United States for every new employee hired after November 6, 1986, the date of enactment of the Immigration Reform and Control Act of 1986. Section 1 of the Form I-9 must be
completed by the employee on the date that the employee begins work. Section 2 of the Form I-9 must be completed within three business days of the first day of work. Exceptions are made for the I-9 requirement for independent contractors, among others, but employers should be cautious when characterizing someone who may well be, in all other respects, an employee as an independent contractor. ICE (like other government agencies) is not bound by the employer’s characterization of the status of a worker in this regard. Once Section 2 is completed by the employer, the employer must review the documentation provided by the employee from a list of accepted documents on the reverse side of the Form I-9. It is important for the
employer to not specifically request particular forms of documentation, as that choice (provided it is from the acceptable list) is solely to be made by the employee. Further, while it is important to note that employers are not required to be experts with respect to the review of immigration documentation, the employer cannot ignore obvious issues with respect to the genuineness and validity of identity or employment authorization documentation. It is not uncommon, particularly for a worker who is not a U.S. citizen or permanent resident, that the employee may hold some form of temporary work authorization, such as a nonimmigrant visa (designated by one of a number of categories, including, but not limited to H-1B,
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Violations of the regulations regarding the Form I-9 can result in claims of and liability for unauthorized employment, document abuse, or discrimination based on citizenship, immigration status, or national origin. L-1B, L-1A, and the like) or an Employment Authorization Document. In such instances, the employer is responsible for reverifying the continued employment authorization of the employee on Section 3 of the form. Given this, it is important for the employer to maintain a tickler or calendar system to prompt the individual’s chart with I-9 compliance to complete Section 3 and re-verify employee’s work authorization if required.
Find Your Mistakes Before Immigration and Customs Enforcement Does An important step in an effective I-9 compliance program is the internal I-9 audit. During such an audit, the employer typically hires someone versed in I-9 compliance regulations, such as an immigration or labor/ employment attorney, to review existing I-9 processes, and also to review either a random sample of completed I-9 documents or (depending on the size of the employer) all existing I-9 records. 68 MOBILITY/FEBRUARY 2011
Any recommended improvements from a process standpoint should be carefully considered, and any errors in existing I-9 documents should be corrected. This latter step typically involves adding or correcting information previously entered in error and noting the date that the change was made (and not back-dating the change). Audit inspectors typically look favorably on attempts by the employer at self-correction, particularly if made prior to the initiation of an ICE audit.
While I-9 enforcement audits typically occur on a three-day written notice from the inspecting officer, it also is possible for an audit to be initiated without warning, and typically with a subpoena for the documentation, particularly if ICE believes that there may have been criminal violations present. Employers should be prepared, prior to the receipt of any such notice, to direct the notice of the audit to a pre-designated individual within the company on receipt. That individual, if desired, then can work with in-house or external legal counsel to comply fully with the requests of the notice. This approach is preferable to waiting until after a notice has been received to determine who within the company will be responsible for responding to the request.
automated link to federal databases to help employers determine the federal authorization of new hires. It is important to note that, if an employer is not required to use EVerify, the employer should carefully consider whether it should use the system. Employers who use the system and receive confirmation of an employee’s employment authorization receive limited legal protection (in the form of a rebuttable presumption) that the employer has knowingly hired an unauthorized worker. However, the federal databases which E-Verify uses, which include Social Security records, do contain errors. Such errors, which can result in a “tentative non-confirmation,” must be “cleared” by the system before the employee can continue employment. Addressing such nonconfirmations may require some amount of effort on the part of the individual charged with E-Verify responsibilities at the company, particularly in the instance of a larger employer with many employees. It also is worth noting that using E-Verify is not a substitute for Form I-9 compliance. In fact, E-Verify is viewed as a complementary program, or as an extension of the I-9 compliance process. As a result, employers that are required or voluntarily choose to use E-Verify still must complete and comply with I-9 regulations.
E-Verify
Agents
Many types of employers, including federal contractors, now are required to use the federal government’s online E-Verify employment verification system. In addition, many employers have chosen voluntarily to use this system. E-Verify, according to DHS/CIS, provides an
Employers may designate agents, particularly in the case of an employee working at a remote location, to serve as the employer representative for the review of original employee documents and to complete the Form I-9. It is important to note that, while the use of an agent is autho-
Be Ready for Site Visits and Audits
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rized by the federal government, employers are held responsible for any mistakes or errors on the part of the agent. As a result, such agents must be carefully chosen, and an employer using their services likely will want to pay close attention to the processes used by them as well as the forms that are completed by them.
The foregoing is intended as a general overview of the I-9 and its related compliance requirements, and is by no means an exhaustive discussion of the form or these requirements, which would be well beyond the scope of this article. Further, this article does not constitute the creation of an attorney-
client relationship, nor does it constitute legal advice, and competent counsel should be consulted regarding any questions regarding the same. Matthew T. Phillips is chairman of the Global Immigration Group at Cohen & Grigsby, Pittsburgh, PA. He can be reached at +1 412 297 4860 or e-mail mphillips@cohenlaw.com.
Retention Employers are required to keep copies of the Form I-9 for three years after the hire of the employee, or one year after the employment relationship is severed with the employee, whichever date is latest. As a result, it is useful for employers to periodically review I-9 files to purge any documents that may be beyond these dates. In addition, employers often ask whether copies of employee identification and employment verification documents should be made and kept with the Form I-9. The best answer here is an “all or none” approach, meaning that employers should make and retain copies for all employees, or for none. In this way, the employer can help to avoid claims that certain groups of employees are being treated differently than others with respect to I-9 completion.
Why It Matters Violations of the regulations regarding the Form I-9 can result in claims of and liability for unauthorized employment, document abuse, or discrimination based on citizenship, immigration status, or national origin. While an effective I-9 compliance program may have costs associated with its maintenance, those costs are far outweighed by the “downside” risks of fines, penalties, and other monetary damages. MOBILITY/FEBRUARY 2011 69
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Internet or Inter- NOT? Technology for Relocating Employees
BY TAMARA BIANCHI, CRP The ability to stay in touch with transferees is a key driver of assignment success, as well as an aid in providing assignees a sense of security. Bianchi uses the results of a transferee technology survey to discover the best way to provide transferring employees with a feeling of stability during their moves.
I
n today’s world, many people feel a lack of security from a variety of angles. There is a lack of job security, a lack of security about the value of our homes, and an overall lack of security about our future, economic and otherwise. In an unpredictable world filled with doubts and concerns, it is part of our job as mobility professionals to provide transferring employees with a feeling of stability during their move. What is the best way to accomplish that? Trippel Survey & Research, Hot Springs Village, AR, in conjunction with CapRelo, Sterling, VA, conducted an Internet survey, “Transferees and Technology,” in
70 MOBILITY/FEBRUARY 2011
September 2010 to discover the answer to that question and more. In what way does technology contribute to providing a sense of security for relocating employees? Do we need to offer more options for transferring employees to reach us? Or, in our pursuit of fresher, better technology designed to “streamline” the mobility process, could we be neglecting the oh-so-important human factor?
Transferees and Technology An old commercial for an insurance agency stated, “we hope you never need at us 2 a.m. on a holiday, but we’re
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there if you do.” This commercial aired long before e-mail, text messaging, and instant messenger chat services became a part of everyday life. Today’s version might offer a list of all the different means by which a customer could reach the company. But would a halfdozen communication methods provide a greater peace of mind? The results of the study, which show that transferring employees use phone and e-mail almost exclusively over other, more high-tech means of communication, seems to say, “probably not.” In “You’ve Got Mail (But Don’t Forget to Call),” an article published in the February 2007 issue of
MOBILITY, I voiced concern over my then-9-year-old son perceiving my job to be “working with computers.” He commented I was always checking e-mail on my laptop or my phone. I explained to him my job is—and always will be— “with people, for people, and about people.” E-mail, and all the other technology we provide to our clients to help keep the lines of communication open, are simply a means to an end. Even so, how much is too much? When does technology threaten the “person-to-person” nature of our jobs— and our overall mission—in the mobility industry? MOBILITY/FEBRUARY 2011 71
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Perspectives Timothy P. Callahan, chief operating officer, Graebel, Aurora, CO, provided another perspective that reinforces the need for further understanding of transferring employees’
least for minor questions and answers.” Why, when we use social media to connect with friends and relatives, and e-mail or text messaging to remind our spouse to pick up milk
Transferees and Technology he findings of the study, “Transferees and Technology,” show an overwhelming number of transferring employees polled prefer to communicate with their relocation management company (RMC) and relocation service providers by e-mail or phone. Other, more high-tech methods of communication, including a website interface or links, instant messaging, social networking sites, and other means of communication (including text messaging) ranked low on the list, with only a handful of respondents for each. E-mail—85 percent Telephone—84 percent Provider website/interface/links—8 percent Instant messaging—4 percent Social networking site—1 percent Other—1 percent Even though 85 percent of transferring employees said they prefer to communicate via e-mail, with 84 percent listing “telephone” as their preferred method of communication, actions speak louder than words. And those actions more often involved picking up a telephone than sending an e-mail. Fifty-nine percent of survey respondents use the telephone as the primary means of communicating with their RMC, while only 39 percent use e-mail. A mere 1 percent use the RMC’s website, while none of the respondents reported using instant messaging services or social networking websites such as Twitter, Facebook, or LinkedIn. Transferring employees do use these other methods to communicate with relocation service providers, including real estate agents and household goods carriers, but only to a small degree.
T
emerging technology needs. “We find that a growing number of the transferees and assignees we serve prefer e-mail communications over talking on the phone. A very small but growing percentage of our customers are texting our consultants to stay in touch. It is quickly becoming an accepted way to communicate, at 72 MOBILITY/FEBRUARY 2011
on their way home, do relocating employees have little interest in using these communication methods during the relocation process? Is it something we—relocation service providers—are doing wrong? Or right? Can we improve the tools we offer transferring employees so the technology gives them more of what
they want, and less of what they do not? Do we need better apps? Are we providing the right information through these channels? Or is the level of customer service so good— are we providing that human touch so effectively—transferring employees do not need other means? These are all questions in which our industry should seek answers, along with what transferees really want when it comes to technology. Is there a difference in who uses the technology based on the position of the transferee or their policy benefits? Why is there so much focus on ensuring service organizations provide 24/7 access to companies transferees? Is there a need for relocation “apps?” Is the need for these tools tied to certain generational or geographical factors? Is it tied to a lack of personal attention in other ways, or do people just want to have it for the sake of having it—is it, essentially, an issue of security and peace-ofmind?
How Important is 24/7 Access to Information? Relocation management companies (RMCs) and the service providers in the supply chain often go above and beyond to offer stateof-the-art technology to stay in touch with their customers, but is it really necessary? These survey respondents say it is, but they are not necessarily using it. Nearly two-thirds of survey respondents ranked the importance of 24/7 access (excluding telephone) to information regarding their move status as 6 or above on a scale of 1 to 10. Twenty-five percent ranked it as “very critical” (score of 10), while only 5 percent ranked it as “not at all critical.”
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The survey revealed even more interesting findings. Although transferees say they want 24/7 access to their relocation service providers, they do not necessarily use it. We believe it comes down to providing a sense of security—like a warm blanket or an insurance policy—being there when the client needs us. When we polled respondents on the time of day they reach out to their RMC by means other than the telephone, only 22 percent did so “late into the evening, or night.” Another 25 percent did so in the “very early morning,” presumably before working hours. The majority of people reach out during office hours, in the time span of late morning (before lunch) until late afternoon (before leaving work). In addition, 75 percent said they are not likely to use technology (other than telephone) to communicate with their RMC during the weekend. Graebel’s Relocation Application, released for the iPhone this past spring, “has seen a surprisingly good adoption rate, especially among clients with younger transferees, in the high tech and web-based business sectors,” said Callahan. “Global assignees are the biggest user group, and the app has been downloaded and used by transferees and assignees in 26 countries so far. Users are still a minority, but their ranks are growing”
What Do Transferees Really Want? The survey represented only a small cross-section of transferring employees: 153 recent CapRelo transferring employees. We definitely need further research and investigation before drawing any conclusions. Right now, with this data in front of us, we could speculate as to why—
Preferred Times for Communication hen queried about the times during the day that survey participants were most likely to use technology (excluding telephone calls) to communicate with a relocation service provider, following were the responses (survey respondents were directed to chack as many as appropriate for their work and lifestyle):
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Very early morning—25 percent Morning before lunch—36 percent Lunch time—19 percent Afternoon—16 percent Late afternoon before leaving work—22 percent Evening—43 percent Late into the evening, or night—22 percent N/A; no difference in time of day—23 percent when instant messenger, social media, smartphone apps, and the like are so prevalent in our society— transferees prefer a good old fashioned phone call or e-mail. But, based on our current findings, it would be only speculation. Here is our best guess: If those involved with employee relocation services provide a sense of security that stems from good customer service and open lines of communication, having access to the latest tech gadgets, tools, and apps may not matter as much to transferees. What do transferees really want? Simple, straightforward answers when a question is on their mind. When an employee is relocating, there is already a lot to think about. Information overload can be overwhelming. Maybe they do not want to see all the data related to their move at a glance; maybe they just want to check a closing date or the status of a reimbursement check. Along the same lines, transferring employees want to know they have 24/7 access to all the details of their move—just in case—but they really only want to access information in
small, bite-sized chunks, usually during working hours. This may be a result of good, proactive customer service; when transferees trust in their relocation service providers, they are not staying awake at night wondering about the status of a mortgage approval, reimbursement checks, or even whether or not the moving truck will arrive on time. Good customer service— combined with the knowledge the information is there when an employee wants it, whenever they want it, whether they actually access it or not—leads to a sense of security. There seems to be a desire on the part of human resource departments and relocation managers to find service providers that employ relocation applications for smart phones, e-mail, and instant messenger access and other technology means to track the status of different aspects of a relocation. Perhaps, employers hope that by providing these tools outside the office, transferring employees will maintain greater productivity in the workplace, saving the administrative details of the relocation process for MOBILITY/FEBRUARY 2011 73
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On the Web For further technology resources, look no further than www.WorldwideERC.org: Technology and Global Mobility: The Future is Today www.WorldwideERC.org/Resources/MOBILITYarticles/Pages/0510-Cadden.aspx Changing the World With Technology—Immigration Innovation www.WorldwideERC.org/Resources/MOBILITYarticles/Pages/0609-king.aspx The Decade in Review: How Technology Has Improved the Mobility Process www.WorldwideERC.org/Resources/MOBILITYarticles/Pages/0510-Dickerson.aspx
their own time. But when it comes to the transferees in the process of a move, they are not using this technology very often—and even less so during non-working hours.
Just the Beginning It is just the beginning of understanding technology’s role in reloca-
74 MOBILITY/FEBRUARY 2011
tion management. This survey, although it is just a start, puts RMCs in a better position to understand transferees’ needs and desires, to provide them information when they need it, in the format they want it. And it hammers home the importance of companies hiring a relocation provider who takes the time to
help them find out the true needs of their relocating employees. Do not assume what transferring employees want—use tools, such as surveys, to find out conclusively, and then modify your policies and processes to reflect these desires. Should the relocation management industry change the way it handles communication during the relocation process? Not yet. And maybe not at all. This survey offered insight into transferees’ needs, however, there are still many questions left unanswered. We are looking forward to exploring the answers together with our Worldwide ERC® colleagues. Tamara Bianchi, CRP, is director, administration and business communications, for CapRelo, Denver, CO. She can be reached at +1 703 996 1286 or e-mail tamara.bianchi@caprelo.com.
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Work-life Balance Essential for the Road to Recovery
BY TOM ZAUNBRECHER Work-life balance is the holy grail of the 21st century worker. Zaunbrecher writes that an ongoing study illustrates how U.S. workers continue to request work-life balance options to aid with their career and home lives, and employers should be taking a closer look at the advantages of meeting the needs of their workforce to improve the health of both their bottom lines and their employee’s lives.
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hat have you done for me lately? That is what most U.S. workers were asking their employers as 2010 drew to a close. And the answer is likely not what it should be. It has been a rough road for most employees during the past two years, and according to several Spherion studies, one that has left indelible marks on the workforce. Two years from the start of the recession, U.S. workers continue to have little optimism about the direction of the economy, feel overworked and underpaid, and are more negative toward their jobs since the start of the recession. And the fact is, 76 MOBILITY/FEBRUARY 2011
workers are taking on more responsibilities than ever before and not necessarily reaping the rewards. Consider these sobering facts, culled from an August 2010 “SFN Snapshot Survey:” • 60 percent of workers say they are not optimistic about the direction of the economy. • 37 percent feel more negative toward their job since the start of the recession. • 56 percent of workers did not take a vacation in the past year. • 57 percent of workers said their company does not help/support their effort to have work-life balance. • Although 53 percent of workers have had to assume additional
responsibilities or workload during the recession because co-workers were laid off, 93 percent did not receive additional compensation for those added responsibilities. The situation has taken a hefty toll on the American workforce. According to Spherion, 57 percent of workers who have taken on additional responsibilities feel burdened and overworked. Another 53 percent say their job or workload affects their health in a negative manner.
The Employer-Employee Disconnect More than 12 years of research and feedback from U.S. workers and their employers support the same conclusion—workers want and need
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work-life balance options but employers are not providing adequate solutions. A greater percentage of companies say they offer a variety of formal or informal work-life balance programs than the percentage of employees who say their employers offer such programs—a finding that has remained consistent since 2005. In addition, employees generally are dissatisfied with their time and flexibility, with only 26 percent saying they are satisfied.
Employees’ View of Work-life Balance Ninety-four percent of employees ranked “an employer who helps employees’ meet their family obligations through the use of flex-time,
job sharing, telecommuting, etc.” as the second most attractive job characteristic—second only to the 97 percent saying that “an employer who promises long-term job security.” Employees at organizations where work-life balance programs are offered are: • more likely to stay with their employer for at least the next five years (54 percent versus 44 percent); and • experiencing higher job satisfaction (48 percent versus 37 percent). Employees who are satisfied with their work-life balance are nearly twice as likely to say their current level of job satisfaction is excellent/
very good/good (96 percent versus 54 percent).
Positive Impact of Work-life Balance Options for Employers Work-life balance programs are no longer a “nice to have,” they are a “must have.” In previous Spherion studies, findings suggested that organizations should embrace the notion that providing work-life balance programs is driven by the need to be competitive in the marketplace for talent, not based on goodwill or altruism. The 2010 “Emerging Workforce Study” offers hard evidence that offering work-life balance programs can dramatically improve things such as worker satisfaction, MOBILITY/FEBRUARY 2011 77
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About the Study
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ore than 12 years ago, Spherion consulted with international polling firm Harris Interactive to launch the “Emerging Workforce Study,” a research initiative designed to provide a comprehensive portrait of changes in the American workforce in the context of ongoing social and economic events. The company has continued to track and study the changing attitudes of the American workforce and the resulting implications for U.S. employers through subsequent studies.
retention, productivity and recruitment of workers. The majority of employers report that work-life balance programs have a positive impact on major workforce measurements, which include: • worker satisfaction (90 percent); • worker productivity (73 percent); • retention of workers (74 percent); and • recruitment of new workers (55 percent).
Employers Risking High Turnover, Dissatisfied Workforce Regardless of the strong evidence that workers are seeking greater balance between their jobs and personal lives, employers remain nonbelievers. This is despite the new findings that demonstrate the positive impact work-life balance programs have had on worker satisfaction, productivity, and retention. In fact, only 12 percent of employers say work-life balance programs are crucial to hiring and retention. Further, employers’ ranked time and flexibility last on their list of retention drivers. Despite the belief of many organizations that a down economy is not the time to invest resources (financial or otherwise) in these programs, now is perhaps the best time to do so to remain well-positioned after an economic recovery. Alarmingly, few employers plan to add work-life balance programs that they are not currently offering during the next few 78 MOBILITY/FEBRUARY 2011
years. In addition, organizations that currently are offering such programs need to actively promote their worklife balance options among employees and candidates, as well as encourage staff to take advantage without fear of a negative impact on their career. High turnover can wreak havoc on even the healthiest of bottom lines. According to the U.S. Department of Labor, it costs a company onethird of a person’s annual salary to replace him or her and some experts estimate it to be even higher. Therefore, companies can save significant costs just by satisfying the needs of workers to have work-life balance options, keeping them on the job. The alternative is high turnover rates, exacerbated by the need to retrain a replacement and the immeasurable loss of company knowledge.
Conclusion For more than a decade of surveying U.S. workers, employees have consistently indicated their desire for, and need for, work-life balance options to help with career and home life. With newfound evidence that supports the positive impact work-life balance programs can have on key workforce measurements, companies no longer can ignore the necessity to provide such options to its workers. Tom Zaunbrecher is franchise owner of Spherion Staffing, with offices in Alexandria, Baton Rouge, Lafayette, and Metro New Orleans, LA. He can be reached at +1 337 442 6203 or e-mail tomzaunbrecher@spherionla.com.
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RAC Report
Regional Market Summary: Northern Virginia
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ocated in the Greater Washington, DC, metro area, Northern Virginia (NOVA) generally comprises the counties of Arlington, Fairfax, Loudon, and Prince William (located within these counties are the independent cities of Alexandria, Fairfax, Falls Church, Manassas, and Manassas Park). NOVA offers five of the 20 highest per capita income localities in the nation, including the first two slots (Loudon and Fairfax, respectively) The current population is just in excess of 2 million, a number that has increased approximately 25 percent during the past decade. NOVA features strong clusters in government contracting, defense electronics, information technology, biotechnology, bioinformatics, and telecommunications. During the last four years, four major corporate relocation decisions resulted in moves to NOVA by Northrop Grumman, Hilton Worldwide, Science Applications International Corporation (SAIC), and Volkswagen Group of America. Fairfax County alone is the second-largest suburban office space market in the nation with more than 112 million square feet. The median price of a home in NOVA at the beginning of year 2000 was $231,273 (the fall of 2009 ended a decade-long realty recession; homeowners in the area finally were able to sell at a profit homes that were purchased in the late 1980s) and the standing inventory was just two months. The next five years saw a constant lack of available inventory and strong demand that resulted in a steady increase in the median sales price. By the time the downturn in the NOVA realty (residential) market began in the spring of 2005 in the outlying suburbs of Loudon and Prince William counties (gradually moving over a period of one year east and north into the remainder of the region), it had recorded a high median sales price in June 2006 at 80 MOBILITY/FEBRUARY 2011
STATISTICAL SNAPSHOT TIME PERIOD
Unemployment Months of supply Annualized sales volume Annualized median sales price Average days on market
TODAY
1 YEAR AGO
CHANGE
4.8% 4.3 160,045 $302,606 81
4.8% 5.0 144,518 $350,939 49
0% +16.3% -9.7% +16% -39.5%
$472,792 (an increase of just over 100 percent in six and one-half years). By January 2009 that figure had fallen to its low of $257,900, a reduction of 45 percent from the market high. Other notable market statistics from the downturn of the past five years include a high inventory of 9.8 months in April 2008 and a days-on-market (DOM) high of 127 in January 2008. From the low point noted above regarding median price, NOVA has seen a steady increase in that amount to the last reported figure of $355,504. 2010 was an interesting year in the NOVA residential market. Strong advances in both the mean and median sold prices were seen during the first half of the year. Commensurate with those increases was a steady decline in both the average number of days required of sold properties and in inventory levels. It is quite apparent both from market statistics collected in the current year, as well as market accounts supplied by local realty agents, that much of the first half market conditions were generated by the tax credits that expired in the spring. Although, the median price has fallen off from its spring high (not an atypical pattern), it remains 12 percent higher than that recorded one year earlier as of October (average DOM and inventory also being up 5.5 percent and 16 percent, respectively). The strongest markets (Loudon and Prince William) in the past year have been those that were hardest hit during the recession, possibly due to the fact that many market watchers now have concluded that prices in those markets were simply driven too low
MARKET AT A GLANCE Economic climate Steady New construction Low REO activity Declining Supply Oversupply Demand Steady Market direction Stable Market mood Wait and see attitude
because of the heavy amount of REO/foreclosure action. In general though, the “closer-in” markets (relative to the nation’s capital) found in Alexandria and Arlington have fared better during the past five years in terms of price declines, a performance due chiefly to superior access to employment centers with regard to both commuting times and options. As for 2011, some are predicting new lows in Prince William County due to higher foreclosure rates. New construction sales are surprisingly strong, possibly due to a short supply, and this situation is expected to continue for the short term as builder site inventories are low and it will be sometime before they can acquire land and begin development (this will impact only Prince William and Loudon counties; the remainder of the region is almost fully developed). Continued low-interest rates, increasing consumer confidence, improved foreclosure procedures, and continued low unemployment will be keys to a good realty market. Craig A. Stebner is with C.A. Stebner Appraisal Services, Herndon, VA. He can be reached at +1 703 860 9060 or e-mail stebner1@juno.com. William (Butch) G. Hicks, Jr., SRA, CRP, is with Hicks Real Estate Services, Inc., Clifton, VA. He can be reached at +1 703 631 5222 or e-mail hicks@bhicks.com.
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We Have a Lock On Data Security Altair offers award-winning, cutting edge technology to meet your global privacy and data security needs. We developed a comprehensive Information Security Program which serves as the cornerstone for many of our internal processes. This program establishes administrative safeguards and controls to ensure the security and privacy of client information around the world. In the 2010 9th Annual Relocation Managers’ Survey - Relocation Management Companies conducted by Trippel Survey & Research, LLC ©, Altair’s technology ranked in the Excellent Category in data security, data integrity, and meeting the needs of program managers and transferees.
+1 972 468 3000 www.altairglobal.com
Aim High
Play It Straight
Make It Fun
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Total costs should be transparent窶馬ot invisible.
Service Fees
97
%
Of Total Relocation Costs are Non-fee Based
See the whole picture. At SIRVA, we want to partner with you to develop transparent relocation solutions based on your total costs. Our unique approach ensures you enjoy the best mobility experience at the lowest total cost, and we can prove it. Try our Total Relocation Assessment Calculator (TRAC)邃｢ at sirva.com/trac, and get a clearer look at how much you can save.
Get on TRAC: Total Relocation Assessment Calculator at sirva.com/trac or call 888.SIRVAnow (888.747.8266)
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