Lump Sum Relocation

Is Lump Sum Right for You? Understanding the Benefits of Lump Sum Relocation Programs

Many organizations use a “lump sum relocation program” when it comes to managing the transferee relocation process. There are multiple benefits to using a lump sum program; however, it’s important to understand that there are three different types of lump sum relocation programs. A summary of these programs and the benefits associated with each are as follows:

Lump Sum Only Relocation Program
A lump sum only policy provides the transferee with a one-time lump sum payment to compensate for all relocation costs. The word “all” is key. The transferee is expected to manage their relocation process and to pay all expenses that are not covered by this lump sum payment.

Benefits:

  • Can be financially and market-place competitive at any level.
  • Budgeting for relocation costs is upfront, easier, and costs are known and contained.
  • Minimal administrative time and cost for the company.
  • Tax withholding or “gross up” is easy to calculate and administer.
  • Transferee retains control over expenses as well as any unspent portion.

Lump Sum Plus Relocation Program
The lump sum plus approach usually has two components: (1) A one-time, upfront payment issued by the company to the transferee; and (2) a direct payment by the employer to one or more service providers (also known as a direct bill) for certain relocation expenses.

Benefits:

  • Higher transferee satisfaction with convenience of direct payment to endorsed household goods moving service providers.
  • Direct company payment of household goods moving excludes this relocation benefit from being taxable income to the transferee.

Lump Sum Relocation Program Provisions within a Traditional Policy Tier
In this scenario, the company has in place a traditional relocation assistance policy in place that outlines provisions for each relocation expenditure, such as household goods, home sale, home buying expenses, and trips back and forth.

Benefits:

    • Administration of certain expense reimbursement is reduced for both company and transferee.
    • Costs are capped for the company.
    • Transferee is in control of coordinating, making decisions and managing these expenses, and retains any unused amount.
    • Exceptions to policy in these lump sum areas are eliminated.

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A lump sum relocation program might be the right choice for your organization; and understanding the differences and benefits of each type of lump sum program is important to know for sure. If you’re looking for more information about lump sum program assistance, download our free e-book: 13 Questions to Ask a Potential Rental Finding Partner

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