Understanding the options afforded by lump sum programs is a good first step in crafting a competitive program. Optimizing your program with industry best practices, however, can take lump sums to another level, yielding tremendous benefits for you and your relocating employees.
A carefully tailored lump sum policy combined with the support of knowledgeable relocation consultants may result in major savings, giving you the most bang for your buck. At the same time, optimization can improve program efficiencies and enhance overall employee satisfaction. To achieve this three-fold benefit, we recommend:
- Engaging a consultant who can help your employee navigate their options
- Tracking allowances and expenses to ensure caps are not exceeded
- Connecting your employee with vetted, expert suppliers in specific locations who offer the best rates
- Giving employees online access to basic destination information, including school searches, area tours, and local statistics
This approach blends the best aspects of traditional relocation packages with the flexibility offered by lump sums. If you choose to outsource your program, a relocation company can calculate an appropriate allowance for relocating employees, based a variety of factors including services involved, family size, departure and destination, and homeowner or renter status.
The Optimal Process
The first step is deciding—based on your needs—which type of lump sum program to use, including:
- Flat (fixed) lump sum
- Variable lump sum
- Alternative (partial) lump sum
- Managed lump sum
Optimized lump sum programs offer employees the option to work with a relocation consultant who helps administer the lump sum based on each policy. Some employees may still prefer to manage their own relocation, but companies and employees will realize benefits and cost savings with a consultant to provide guidance, direction, and advice—essentially, a full-service experience—instead of leaving the burden on the employee.
Employers should also consider right-sizing allowances, as opposed to employing a “one-size-fits-all” approach. If possible, analyze how much employees actually spend on relocation services and adjust allowances to ensure packages do not leave money on the table. Also make sure to clearly outline allowances in employee offer letters to set expectations and document this important benefit.
Next, companies should plan for ongoing support rather than leaving relocating employees to fend for themselves. Even if employees prefer a self-service option, a limited amount of support (e.g., providing employees with a comprehensive list of vetted providers) can go a long way in reducing their frustration and saving them money.
Once you have determined the right amounts and the right support you will offer, carefully consider the tax implications. CapRelo recommends that companies gross up their lump sum amount, to protect the employees against the erosion of their lump sum. You will also need to determine how you will disburse funds, whether via an up-front check or through expense reimbursement.
Finally, try to connect employees with vetted providers. Left on their own, employees may encounter providers who overcharge and underprovide. By making introductions to trustworthy partners who will meet your employees’ needs, you will save them time, money, and frustration. The goal of relocation, after all, is to get your valuable talent up and running in their destination location as seamlessly as possible. Take the worry out of moving by connecting them to a robust, qualified supplier network.
Core/flex programs have gained popularity as a creative alternative to lump sums. With a core/flex relocation, policies utilize a mix of traditional and non-traditional benefits with a “pick and choose” approach to building packages. These programs appeal to a broad range of employees with different needs. For example, a recent college grad who does not yet own a home would not need home sale or home purchase assistance and might select more non-traditional benefits while a tenured employee with established community roots may benefit from a complete home sale and purchase package.
Core/flex programs offer a hybrid strategy with core benefits as well as a range of customizable benefits. Components typically include the following:
- Component One – A core package of benefits all relocating employees will require, regardless of job level or homeowner status. This includes basic considerations such as the transportation of household goods, temporary housing, and travel costs.
- Component Two – Services that may vary depending on the individual, but still provide flexibility to cater to the dynamic needs in your workforce. This commonly includes spousal support, home scouting trips, child-care, pet services, elderly caregiver services and the home sale and purchase assistance.
Core-flex policies do require more work to manage than one-size-fits-all programs. Extra manpower and time may be needed to keep service offerings up to date to ensure cost effectiveness. Recruitment and retention workloads may also increase as you negotiate relocation benefits for each individual.
But if you aim to recruit and retain the best talent in your industry, offering flexible relocation terms will enable you to cater a package better aligned to individual needs. Core-flex policies can also provide significant costs savings by eliminating of unnecessary benefits.
There are numerous factors to consider as you optimize your lump sum program but choosing the right relocation partner can simplify this process.
If you need assistance optimizing your lump sum program, CapRelo is here to help. With more than 25 years of mobility expertise, our relocation professionals know how to best manage lump sum programs to maximize both satisfaction and savings. Click here to speak to one of our professionals.