Cost of Living Housing Exceptions - Policy Flaw or Necessity? By Arvind Gupta-Lawrence Of all the elements of a mobility package, housing is usually the biggest controllable cost item for companies, as well as one of the most important to assignees. The Cost-of-Living Allowance (COLA) may at first seem just as contentious, but the pushback there is of a very different nature and intensity. While you may get a lot of questions about the COLA, they will rarely result in the refusal or failure of an assignment; the housing benefit, on the other hand, can make or break an assignment. So it is not surprising that three out of four companies responding to our Worldwide International Assignment Policies and Practices survey in 2012 reported receiving requests for exceptions in housing. What is more intriguing is that 70% of companies reported granting such exceptions, at a time where more than 40% indicate that their policies underwent a review during the last two years. Is this a sign that companies are failing to define the housing benefit efficiently? Or are exceptions simply an unavoidable by-product of this highly emotional element of the assignment package? Designing Your Communication to Manage Expectations and Reduce Exceptions Defining the underlying criteria of the housing allowances can be a complicated exercise, combining heterogeneous elements such as job grade, income level, family size, housing type, and bedroom size. The purpose of the policy is to ensure fair, consistent treatment while controlling costs and avoiding the administrative burden of addressing each case individually. Guidelines must be specific and consistent enough to apply easily, yet broad enough to cover a large (and growing) variety of family situations and housing markets. In all cases, however, the amounts will have to translate into an actual home, adapted to the circumstances of each assignee. Your communication strategy can play a key role in making these interests converge without friction. But it is important not to confuse the motivations of the company with the expectations of assignees. Many employers, out of a well-intentioned effort to be transparent, will openly communicate the policy and criteria used to calculate the allowance amounts (for example, a specific number of bedrooms for a specific family size). This may have the unintended effect of limiting employees’ flexibility while providing them with material to challenge their allowances. A more nuanced approach may be to speak directly to the assignee’s point of view, by translating the final amount into various rental options available to them in the host location, rather than the criteria used to estimate it. In other words, you may present options at a given budget level that will allow the expat to choose, for example, between a larger home in a desirable suburb or a smaller home (with fewer bedrooms) in a prime downtown location. This will keep you on target for the cost, while hinting to the assignee to consider a trade-off rather than request an exception. Using Exceptions to Your Advantage Despite all the precautions and the best communication strategy, exceptions may be unavoidable in certain situations – for example, unusual rental markets, lack of availability, or non-traditional or exceptional family situations. Housing is also one of the few core benefits directly visible to the assignee’s family, and it could be a critical error to neglect it at a time where dual-career and family-related issues come out at the top of obstacles to successful expatriations. So you may choose to be flexible to exceptions in housing, as a way to win over candidates by adding personalised value to their package, rather than seeing them all as aberrations. Of all the components of expatriates’ packages, housing is the most personal, emotional, and idiosyncratic. So, while mobility managers can seek to minimize housing exceptions by providing clear, rule-based choices that fit a company’s housing policies, it may not be reasonable to try to reduce exceptions to zero. With this objective in mind, incorporating a thorough tracking of exceptions in your processes will provide you with useful metrics and feedback on your mobility program, help you identify recurring exceptions, and allow you to streamline their resolution on an ongoing basis while providing new tested criteria feed into your next policy review. Conclusion With the economic downturn, many policy reviews in recent years have focused primarily on standardization and cost-cutting. While this approach may have worked with other benefits, the high level of exceptions suggests that it may not be adapted in the case of housing. Recent trends show that more and more assignees are turning their focus towards qualitative value added to their package over pure cash components. If your housing policy is prompting a high volume of exceptions, tracking and analysing them may prove instrumental in finding out for your next policy review how to arrive at cost-efficient allowances without cutting perceived value. Arvind Gupta-Lawrence is a Global Mobility consultant based in Mercer's London office.