US companies label employee transfers 'handle with care'

By , Staff correspondent of The Christian Science Monitor

Take it as a compliment if your company asks you to transfer to a new city. But also take a very close look at the costs involved. This advice comes from one of America's newest and fastest-growing industries , the relocation firms which currently help some 75,000 employees of major corporations sell their homes and buy new ones every year.

Being reassigned is a compliment because the steeply rising cost of moving each employee has forced companies coast to coast to cut back on relocations. Corporation spokesmen explain that only necessary moves of top employees are being authorized today, cutting into the annual rate of some 3000,000 job-related moves.

Relocation industry leader Homequity of Wilton, Conn., estimated that in April 1979 an employer paid an average of $20,400 to move a typical family owning a $76,400 home to a new location 900 miles away. Homequity vice-president for marketing Richard Wirth told the Monitor that the same move now costs $30,300. This higher figure includes more than $7,000 for a mortgage interest differential payment to offset the 7 to 10 percent higher mortgage interest rate the transferee is faced with in today's market.

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Any employee whose firm is not willing to pick up the difference between a 6 or 8 percent mortgage and a 16 or 17 percent new mortgage is likely to be badly out of pocket on his or her move.

Accordingly, major corporations are moving rapidly on two fronts, says Chris Colie, executive director of the non-profit Employee Relocation Council in Washington, D.C. On the one hand, Mr. Colie reports, "The transfers that a company can cut back on, they will cut back on." On the other hand, more and more of the council's 650 members have introduced new programs to compensate employees for transfer expenses.

In the six months since Federal Reserve Board action resuled in sharp interest rate increases last October, more than 65 percent of council member firms have begun to compensate employees for mortgage rate increases, compared with only 25 percent offering such payment before October 1979.

Typical of the change is General Electric, which moves some 3,000 employees each year and introduced a mortgage interest differential payment last December, retroactive to October.

Homequity makes its money from relocations, earning $140 million in gross revenues for 1979 on turning over properties valued at more than $1 billion. But, says vice-president Wirth, "our official recommendation to our clients is to tell them that relocations should be reduced or stopped, if possible, and that consideration should be given to whether it is necessary to move an employee or whether a replacement can be found in the area."

Industries are listening to this advice that relocation should be curbed until mortgage rates drop to 14 percent, which could come late this year, according to relocation experts.

A spokesman for International Harvester said that, "With costs beginning to outweigh the benefits, we are going to take a harder look at the people we are moving to make sure it is for a valid business reason."

Alyce McCue, personel policy development officer at the New Jersey offices of Ciba-Geigy Company, a chemical firm based in Switzerland, oversees some 100 transfers annually. She said that "The divisions are not being told, 'Do not transfer employees.' They are just told to look at each transfer and see that it is absolutely necessary."

Dr. Jack Carlson, vice-president and chief economist of the National Association of Realtors, says that the cutback on transfers he has seen may affect productivity at a time when companies are facing economic problems on all sides. High relocation costs, he explains, could influence a firm "to hire a new employee with less specific knowledge about the particular business, and therefore production will be diminished."

But most immediately affected by the economic squeeze are the men and women asked to transfer.

Pat Matteson of Merrill Lynch Relocation Management in White Plains, N.Y., says she finds more and more employees who "would love to take the job transfer, but can't afford to."

Chicago-area real estate appraiser Eugene Kavanaugh, who specializes in reolocation work, says that the worst shock comes when a transferee learns that the house he is selling has lost rather than gained in value. He says that with the exceptions of the Dallas, Houston, and southern California areas, "in many cases home values have dropped 1 percent a month since August 1978."

Declining house values have combined with high mortgage rates and the increasing number of two-career families to make job transferring a difficult and expensive business for all.

One partial answer has come from the Chicago Association of Commerce and Industry. Its new, one-stop information service does not lower interest rates, but it may provide a model for other cities: It offers an introduction to the area, which has smoothed transfer problems for newcomers whose employers decided they were important enough to be moved despite today's high costs.

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