Defining Benchmark

The word benchmark has been around for a long time but its meaning has changed over the years.  Although it originated as a surveyors term, a more recent Webster’s definition, “something that serves as a standard by which others may be measured or judged,” more closely resembles the term’s use in the corporate context.  A definition offered by the American Heritage Dictionary, “to measure (a rival's product) according to specified standards in order to compare it with and improve one's own product,” even more closely describes the way the verb is used in business today.

An Evolving Practice

The practice of benchmarking has expanded beyond comparing products to comparing processes and now even policies.  Benchmarking has progressed through several stages*:

Benchmarking originated with Reverse Engineering, when manufacturers compared the characteristics and functionality of their products with those of competing products.  Rank Xerox took the process a bit further by analyzing their manufacturing costs and comparing them to competitors' in a practice that became known as Competitive Benchmarking.  Then the emphasis moved beyond comparing products and costs to process efficiencies, as managers started comparing their processes with similar processes in totally different industries. 

The scopes of Strategic and Global Benchmarking are larger and more detailed than Process Benchmarking. Global Benchmarking analyzes cultural differences between companies at a world-wide level.  It also takes into account the conditions (legal, administrative, education, social, and environment) which affect the localization of companies. Strategic benchmarking employs a systematic evaluation of different scenarios, putting different strategies into practice in order to improve performance.  Results are achieved when companies gain a thorough understanding of other companies’ strategies and adapt those that make sense for their organization. 

Benchmarking Resources

Just as benchmarking definitions and scopes have evolved over the years, so have benchmarking resources; different resources provide different benchmarking potential.  Several nonprofit organizations perform and disseminate research on selected topics.  The research tends to be broad in nature and produce general overviews.  Other companies provide a forum to collect and exchange data between members. 

The downside of many of these resources is that they fall short of enabling benchmarking on specific items, such as policy details and costs.  While several benchmarking resources are available, few enable reports to be customized, or for content and data to be sorted and filtered.  In addition, they often lag current industry trends, leaving professionals in the dark on “hot topics” while they wait for reports to be published.

A Benchmarking Resource Breakthrough

These benchmarking challenges are precisely the reason that Runzheimer International developed the Runzheimer Benchmarking Service (RBS), an online benchmarking portal.  RBS puts human resource and relocation professionals in touch with the experts—their peers—through a range of filterable web-based surveys.  Survey participants represent a variety of industries, company sizes, and workforce composition.

The goal of RBS is to provide specific and useful benchmarking information to meet human resource and relocation professionals’ range of information needs.  The advantage of such a benchmarking resource is that it can quickly respond to market changes and new informational needs that emerge as a result of those changes.  For example, recent interest in how companies address the challenge of relocating employees to high-cost locations and how companies use intern programs prompted the launch of two new surveys on RBS.

The benchmarking information available through RBS is also unique in that it allows members access to specific policy items and cost information rather than a high-level summary of report findings. Results are more detailed and can be filtered according to a number of different criteria.  Filtering allows companies to easily benchmark themselves against others in similar or different industries, of similar or different sizes and in a variety of locations.

For more information on the Runzheimer Benchmarking Service, visit http://www.runzheimer.com/web/gms/rbs.aspx or call (800)558-1702 to speak to a consultant.

* Bullivant, J.R.N. Benchmarking for Continuous Improvement in the Government Sector. Essex: Longman Group Limited, 1994.

Temporary assignments are infrequent challenges for some organizations, while for many others they have long been the norm.  To help address this evolving business need companies are implementing new policies and tools.

Temporary assignment policies are dependent on the assignment duration, which in turn depend on the reason for the assignment:  training, career development, mergers, joint ventures, project work, etc.  Training and career development assignments typically have clear start and end dates, and can be managed with reasonable assumptions.  However, employees working to meld the cultures of two distinct organizations in merger and joint venture situations may have estimated completion dates that depend on intangible successes.  Similarly, project work may encounter unforeseen delays or lead to add-on projects, which also cause assignment completion dates to be only estimates.  Indefinite assignment timeframes can impact the policy benefits as well as their tax ramifications; therefore, it is necessary to have policies in place to make the assignments most cost-effective.

Policies

Companies may wish to establish a three-tiered policy for temporary assignments based on timeframes of up to six months, six months to one year, and greater than one year. 

Assignments lasting up to six months often are for the employee only.  Stays beyond six months may include the option for the family to accompany the employee.  The length of the assignment determines not only who but what goes to the new location.  Combined, these factors help determine the type of lodging to be reimbursed in the assignment location.

Lodging Options and Expenses

Depending on the locations, temporary assignment lodging options vary from hotels to hotel suites, to corporate apartments, to unfurnished apartments with furniture rental.  Hotel and hotel suites are readily available in small to large cities across the United States.  Hotel suites offer various bedroom counts, and accommodations typically consist of simple furnishings, utilities, phone and housekeeping, and in some facilities, microwaves and small refrigerators.

Corporate apartments are similar in that they offer a range of apartment sizes with regard to bedroom count, and include utilities, telephone service, and housekeeping packages.  “Corporatized” furnished apartments are located in normal apartment complexes or complexes owned by the lessor.  These apartments cater to the corporate traveler, are typically of high quality, and pride themselves in allowing any traveler to move in, bringing along only a suitcase. 

Corporate apartments are becoming increasingly popular in mid-sized cities and have become readily available throughout all major metropolitan areas.  Apartment managers may charge two or more times the normal rent for a “corporatized” apartment, but for many organizations the convenience of moving into an apartment that has already been set up, paying only one monthly bill, and the benefit of a short-term lease easily justify the higher price. 

Unfurnished apartments with short-term (six months) leases are typical in some areas, while they are exceptions in others.  In some areas 6-month leases are offered only when availability is high.  In other areas apartment complexes write only 12-month leases but allow a tenant to buy out of the lease after six months.

Unfurnished apartments with long-term (12 months) leases are readily available in most locations across the United States.  Employees living in unfurnished apartments may either ship their own furnishings or rent them.

Assignments requiring stays up to six months will often utilize corporate apartments, whereas stays exceeding six months may opt for a standard apartment with furniture rental.  Companies need to assess which accommodations fit their culture and what makes financial sense.  As an example, the table below illustrates the nightly lodging costs for Chicago based on some of the options cited.  The federal government per diem rate is also included for comparison.

Clearly it is always advantageous to know the facts prior to placing employees on temporary assignments.  Companies have always considered federal and state tax laws when establishing policies, but have given less consideration to the quality of the reimbursements.  As temporary assignments evolve within organizations, many seek to manage them "hands-on” by establishing reimbursements based on cost surveys that are customized to their assignment needs, particularly with regard to lodging.  The goal in managing temporary assignments is to quickly make employees fully productive in a cost-efficient manner, while also complying with IRS regulations and keeping the program competitive.

Lodging expenses, as well as some other temporary assignment related expenses, may be reported as business expenses if they meet IRS requirements.  At a minimum, the IRS requires the employee to keep their residence in the original location, substantiate the time, place, and business purpose of expenses, substantiate expenses with receipts (unless they are less than or equal to the GSA per diems), and return to their home location within 12 months.  Temporary assignments that extend beyond 12 months are deemed permanent, and all expenses, from the point the extension became known, are considered to be taxable income to the employee.

Companies that place employees on “temporary” assignments that last more than 12 months should be aware of IRS Publication 463, which states:

“If an assignment is indefinite, the location of the assignment becomes the new tax home to the employee and the employee may not deduct travel expenses while there.  An assignment in a single job location is considered indefinite if it is realistically expected to last for more than one year, whether or not it actually lasts for more than one year.

“If the assignment is indefinite, the employee must include in his income any amounts he receives from his employer for living expenses, even if they are called travel allowances and the employee accounts to the employer for them. 

"If a company realistically knows that the assignment will not be finished within one year, the 'temporary' assignment location becomes the employee’s new 'tax home'."

Employees on temporary assignments also face income tax ramifications of dual-state employment.  State income tax withholding and income reporting is quite simple for individuals who are employed in the same state that they are residents and never leave that state to perform services.  Unfortunately, this is not the case when a company sends employees to other states to perform services on its behalf. 

Some states have reciprocal personal income tax agreements with one or more states, including the District of Columbia.  These agreements allow income to be taxed in the state of residence even though it is earned in the other state.  If no reciprocal agreement exists, the employee usually files tax returns in both states, filing a Resident Tax Return in the state in which he or she maintains a residence, and a Nonresident Tax Return in the state in which he or she worked.  When dual returns are required, a credit is typically allowed on the Resident Tax Return for taxes paid to the other state. 

Although Runzheimer believes the tax discussion above to be substantively correct, we do not consider our tax expertise to be definitive.  We strongly advise you to seek your own tax counsel regarding the tax treatment of temporary assignment related expenses.

Line-item reimbursements for temporary assignment related travel expenses vary among metropolitan areas.  Reimbursements also vary between assignments lasting from one to six months and six to twelve months due to the fact that more lodging options are available for longer-term stays.

The cost data below illustrates two scenarios for a temporary assignment to Oak Park Heights, Minnesota.  The first table reflects reasonable reimbursements for an assignment lasting between one and six months, and the second table reflects reimbursements for a longer temporary assignment.

What you will pay for a day out and a ball game is quite different from city to city.  The table below illustrates what a couple might pay in selected cities for an afternoon getaway at a major league baseball game, including four hours of babysitting, lunch washed down with a glass of beer, and a roll of film to preserve the memories.

Runzheimer collects goods and services cost information for more than 300 locations across the United States and Canada for incorporation into comprehensive cost of living equations.

Babysitter--four hours of babysitting for one four-year-old child before midnight

Lunch--two meals, including tax and gratuity

Beer--two glasses of light beer

Game--two lower-level box seats for a major league baseball game

Film--one single pack of 35 millimeter, 24 exposures, 400 ASA camera film