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How to build a Relocation Lump Sum Policy… that Actually works.

We are now a year into the tax reform and seeing the results of companies analyzing the data of their newly utilized lump sum policies. For those looking enhance or build a new lump sum program, these experiences are proving very useful.

Why did they switch and what are the benefits?

Predictable spend is something that all companies seek in their mobility programs. Forecasting is made far simpler and more accurate when the mobility costs are a constant, per individual. Instead of factoring the varying ranges (up to 4x) and leaving your business units woefully under-budgeted, they can focus on talent planning and operations.

Ease of administration reduces the need for large mobility teams or relocation management fees. Once the payment is made, the team’s role is to provide guidance and resources. Additional time can be given to helping the individual versus managing the service.

Consistent offerings allow for transparency across the company. The model is to support but not cover 100% of all expenses. so defining an exception-free process is much easier when an employee is provided the full benefit at once. The amounts can vary on distance, family size, or location but everyone in those buckets get the same support.

What should we look out for?

Compliance and exception tracking are very significant considerations. After receiving the lump sum, employees often will request any needed exceptions from their hiring manager. If the hiring manager pays this as a business expense, you lose the report-ability for your true spend and do not apply it to their W-2, as required by law. Disparate treatment claims are not uncommon when larger companies lose the ability to manage relocation benefits consistently.

Consistency of experience can vary wildly. Since the employee is sourcing their own service providers, they are at the mercy of a speedy google search. One company that we spoke with had a situation where the employee paid a moving company, had the movers pack the entire house, and disappear with both the household goods and the money. The employee does not know who to hire so they often side with the lowest cost provider just to be disappointed later.

Employee engagement can be a challenge while they are managing their own relocation. Starting a new role is stressful within itself and self-management of a relocation adds in a litany of other stressors. Emotions and their to-do list can often pull them away from onboarding quickly. In contrast, jumping straight into the role can delay the relocation tasks and cause the need for exceptions down the line. It is a challenge to find the balance that works for both the employee’s and the business’ timelines.

How do we build this proper program?

First, the resources that are provided can make all the difference.

We are seeing several resources that can help:

· Area information packets

· Lists of preferred service providers and discounts

· Rental finding tools

· Checklists

· Informational videos or web-based trainings

· Chat bots

· Web-based relocation management tools

Using some or all of these will allow for a robust self-help model.

Second, education is key. As mobility professionals, we often take for granted how overwhelming a relocation can be. Frequently, the family is moving from a dual to single income household, the children are leaving their friends, and the relocating employee is trying to perform in a new role all while orchestrating their move. By using your policy to not just discuss benefit administration, but also advise on the items that the employee may overlook, you will reduce their stress and ease the transition. Inform of proper timelines, checklists, and personal arrangements that they will need to make.

Involve of your relocation management company and/or internal mobility team in acting as your employee’s Sherpa through the mountain range of relocation tasks. Regardless of whether your relocation program is internal or outsourced, the same rules apply. The team’s expertise and bench-strength offer a low to no cost value-add for efficient planning and execution of relocation related tasks.

Having a methodology around your lump sum calculation will provide a basis in the event of an exception request and ensure your business leaders understand the impact to their budgets. Most often, this is done by taking cost estimates of typical relocation expenses and providing those in the lump sum. A tax gross up should be applied to this amount so factor that in the calculation. This calculation is strictly for internal use as the employees skilled in negotiation may take it as a chance to request higher levels of support.

What are similar alternatives to a strict lump sum?

We also see companies using managed lump sums, core-flex, and point based packages. Managed lump sums can have the benefits of a strict lump sum but often leave the employee feeling like the relocation management company is overcharging when they see their remaining funds going down. Core-Flex is a great program but has non-controllable spend and is more difficult to administer than a strict lump sum. Similar to core-flex, administration and unpredictable spend are the primary cons of a point-based policy.

Each of these have their place and can be great tools but it is important to understand your talent strategy, budget flexibility, and operational capacity before pursuing them.

In conclusion…

Strict lump sum packages do not need to be the compliance and employee experience nightmare of yesteryear. Proper support, training of business partners, and resources can make this a very effective tool in your greater mobility program. It is the wholistic approach that makes all the difference.

We eagerly await to see how technology will continue to enhance these types of programs in the years to come.

Published: January 19, 2019

Andrew Bruzzi


Vendium Global, LLC

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