For employers looking for a simplified way to relocate employees, Lump Sum relocation programs are a popular choice because they provide great flexibility for employees to use the funds to suit their unique needs.
Generally, the lump sum payment is meant to cover relocation costs and could be applied toward expenses that include temporary living, home sale/home purchase closing costs, rental assistance, household goods shipment, and final move.
This approach has been utilized mainly for domestic relocation, though some organizations have also applied this strategy to international transfers. Recent graduates and other new hires can benefit from this policy type, but it can also be offered by policy tier. Job level, distance to the new location, family size, and homeowner status are all factors to consider.
Here we’ll examine the advantages and disadvantages of using Lump Sum payments and ways to set your employees up for a successful move.
Having the autonomy to spend a Lump Sum in a manner specific to their needs gives employees a greater sense of satisfaction, but it is important to help them understand how to invest a lump sum of money wisely.
Employees do not always understand the cost of certain services and could end up making suboptimal decisions that result in a feeling of dissatisfaction with the company’s support and even affecting productivity.1 However, companies can set their employees up for success by providing moving checklists and other resources to help them understand the complexities involved with their move.
Though there are exceptions to the rule, this type of program normally requires less effort from the HR or Global Mobility team because the employee is managing the process. But employees who need more guidance from corporate resources can get frustrated with the relocation experience if the in-house team isn’t equipped to help them easily.
Lump Sum programs typically exhibit short-term cost savings for employers. However, looking at just total spend alone can be misleading. These contained costs typically come from covering fewer benefits than fully managed programs.
Some critical services for a successful relocation or speedy path to productivity in the new role, such as Destination Services, may be unavailable to the employee procuring their own move services ad hoc – or they may not fit within the lump sum budget. Employees may not consider other services, such as professional packing and loading, valuable until they’ve experienced them.
Being able to predict costs is an essential component of a successful relocation program. Lump Sum packages offer a streamlined way to determine the total costs of the mobility program. The highly predictable costs make planning easier as the cost is a simple function of the number of employees moved.
However, these programs provide no insight into how employees utilize their relocation benefits. Without transparency to what’s being used and what’s going well (or not), it can be difficult to make adjustments that improve program effectiveness or efficiency.
These programs can also mean a less efficient spend. Lump Sum transferees can end up paying a premium price for services as individual buyers because they do not have access to top-notch vendors sourced by the company or a relocation management company.
The supply chain crisis has led to significant cost increases for materials and services over the past couple years. It’s growing increasingly difficult for employees with a set amount of funds to cover relocation expenses in comparison to a few years ago.
Some employees are impacted more than others, depending on job-level. A recent college graduate moving solo with personal belongings is far less affected than a mid-career employee who needs a professional mover for a family home.
Temporary living, rental finding assistance, household goods moving and destination services have all seen rising costs in recent years as well. These are all factors to consider when budgeting as a negative move experience could put employee loyalty and retention at risk.
To alleviate the pain of increased costs, Suddath recommends reviewing your Lump Sum packages to ensure they reflect current market costs. Start with quantitative measurement of program spend, move volume, and categories of associated costs to the extent they are known. Balance the analysis with corresponding feedback from relocated employees to determine how their moving experience relates to their level of engagement and satisfaction with the company.
Looking forward, consider combining lump sum with a key defined benefit or two to preserve autonomy around the spending choices while ensuring coverage of the most important needs. This can look like full coverage of household goods moving combined with a lump sum for the services that are unique to the employee’s situation. In international moves, the company may also offer immigration support, as this puts the employee on track toward faster productivity in the new location.
And consider: what do the funds your company invests feel like to the employee? Do they feel helped and supported with this move and with their career journey? Or do they start their new role stressed and drained from having to stretch their relocation budget to fit their unique needs?
It’s difficult to know when the supply chain crisis will end, but partnering with an experienced mover with vetted supply chain partners can help you provide a better relocation experience for your employees and retain talent.
Receiving a lump sum of money for a relocation may seem daunting without a little guidance. Regardless of how the Lump Sum package is structured, personalized service and a la carte options can make the difference for an employee’s budget and stress-level.
Suddath can provide your employees with a personal move coordinator to help them choose the best moving services for their needs, help them understand the checklist of things to do before moving day, and keep them up to date on all the details of their move. Moving services, such as packing and storage, can also be arranged through the coordinator.
Want to know more? Talk to one of our experts today.
1: According to a study conducted by an RMC in 2019, on average, homeowners lost 22 days of work productivity and on average, renters lost 15 days.