Do you have a policy for lump-sum employee relocation?

With the job market becoming increasingly competitive, a lump sum relocation policy can make your company’s offer stand out and attract the best talent.

At Relocation Coordinates International, we deal with every type of relocation policy available, so we know a lot about these programs. Here are a few important aspects of lump sum relocation programs every business needs to know:

Lump sum payments are funds provided by employers to help employees manage the costs of relocation when they are hired or transferred to a job in a new location. Lump sums are often given in lieu of reimbursement agreements or more complex relocation package benefits that are the traditional means of compensating employees for their moving expenses.

Market research has revealed that these lump sums are quickly gaining popularity, with nearly double the amount of companies offering real estate assistance in 2015 compared to the year before. Further surveys indicate around 61 percent of employee relocation initiatives were compensated through lump sums rather than per-item reimbursement or other alternative programs. Companies who move to lump sums often reduce administrative costs and reduce overall direct costs of the relocation.

As more companies across the globe have started offering lump sum relocations, different approaches and policies have emerged. Here are the three most popular lump sum programs companies have adopted to decide how lump sums will be distributed:

Lump Sum for Certain Benefits

Referred to by many other names including “specific components lump sum,” these lump sum payments are intended to compensate for only select portions of the employees’ moving expenses. Some of the most common lump sum specified components include coverage for temporary housing, such as property rentals or brief hotel stays, and home-finding expenses, such as compensating employees for time spent viewing new homes or their final closing costs. Other frequently-seen lump sums for certain benefits are payments for needed return trips and general moving expenses.

These payments differ from miscellaneous expense allowances, which are only intended to cover the minimum amount of various non-specific items.

Many companies determine the amount allocated in a certain benefits lump sum by using a table with relevant factors plugged in such as the cost of living in the new city, family size, etc. Other organizations apply a set calculation to determine costs or grant a flat amount to employees regardless of their specific needs. To better serve transferring employees, many companies determine relocation benefits on a case-by-case basis.

Total Expenses Lump Sum

This type of payment is intended to completely replace all or the vast majority of typical relocation benefits. The occurrence of this practice has grown, with more companies adding total assistance lump sums and few decreasing them. More often than not, this type of provision is given to inexperienced and lower level employees with more robust relocation benefits granted to top-level employees.

Companies that prefer these types of payments cite cost management as the prime reason for adopting their use. Employees also tend to appreciate the flexibility of having funds at their disposal, although they face the challenge of finding reputable businesses and appropriately budgeting the funds to meet all of their needs on their own.

Managed Lump Sums

Managed lump sums are a relatively new approach to relocation assistance that seeks to pinpoint the exact level of funds needed by the employee according to calculated cost estimations and stated company policies. These allowances also seek to rationalize expense coverage by outlining the exact level of funds for each specific employee use, which has the added benefit of allowing them to budget the money more precisely.

Company policies can also help determine payment amounts, such as placing caps based on industry standards or accounting limitations. Managed lump sum payments are becoming more and more common, because they help precisely determine the funds an employee will need in an effort to reduce costs while at the same time reducing exception requests. They also provide an objective, unbiased suggestion for lump sum payments that can eliminate the need for negotiation and reduce the risk of unintentional or intentional discriminatory practices.

No matter whether an organization chooses to use lump sum payments for only a select category of expenses or if they implement company-wide relocation policies using managed lump sums, the practice can reduce the administrative headache of tracking costs and auditing reimbursements during relocations.

At Relocation Coordinates International, we have more than 30 years of experience working with all types of relocation programs. To learn more about our relocation services or setting up your own standard company relocation policy, please see our Policy Consulting and Benchmarking Services or contact us directly at (866) 915 8631. We would love to hear from you!