HR professionals are often tempted to make quick decisions on housing, despite it being the second most expensive element of expat compensation. We offer some strategic advice.

Housing is the second most costly element in expat compensation

Click here to read the second part of expatriate housing strategy.

Topics covered in this feature: Is the price right?, Everyone demands a seat at the table, Housing in a mobile world, Housing: a strategic choice, Towards an optimised policy

Introduction

HR professionals are often tempted to make quick decisions on housing, with an eye toward recruitment and getting the assignee and family to accept an assignment. In many instances, local management alone bears responsibility for determining an employee's housing guideline and, by extension, the type of accommodation delivered.

However, housing is routinely the second most expensive element of expatriate compensation after tax. It impacts directly on the family's satisfaction and the perceived status of an employee within the local organisation. Host Location Housing speaks volumes, in a very public way, about the philosophy which drives a company's international transfer policy.

For all these reasons companies are increasingly taking more time to construct housing policies that are more closely aligned with their expatriation goals and overall HR strategy.

Is the price right?

In this world of competing interests, dissimilar housing markets, and high stakes recruiting, what are the costs of a flawed decision?

Looking at prevailing rents, the impact of housing decisions to the organisation's bottom line can be enormous. Imagine confronting the choice between offering a married assignee either a one- or a two-bedroom apartment. The price difference between the two apartments is only EUR 500 per month. Why not just say yes, give the family a guest bedroom and get the assignee on board?

Assuming a marginal rate of 45 percent, that small decision brings additional costs of more than EUR 10,000 per year. If the same decision is made for the company's 50 expatriates, the consequence of saying "yes" to an extra room balloons to over half a million euros per year.

On the other hand, pitching the housing standard too low can mean trouble in the recruiting phase. Assignees may balk at the idea of being assigned to a location where they cannot live near the international school, where they cannot have the swimming pool and attached garage they were used to at home or where the commute seems unreasonable. The mission of getting the right person to the right place at the right time has failed.

However, there is a worst-case scenario. An assignee could accept an assignment without a realistic assessment of the housing provided. After a year, the spouse is unhappy, the children are worn out from the long bus rides to school, and the expatriate is more concerned about maintaining peace at home than success in the workplace. The result: assignment failure or possible loss of a highly skilled employee to the competition.

Trapped between costs of that magnitude and assignment failure, how does one navigate to a successful compromise?

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