Relocation lump sums
Are they a good fit for your business?
Any business with a global mobility strategy will want their prized assets to settle into their new role as quickly as possible. To achieve this, employers often offer employees a lump-sum package – an allowance given to the assignee to cover the cost of relocating overseas. According to a recent survey by the Society for Human Resource Management, lump-sum payments are the single most popular relocation benefit offered by companies.
Before negotiating a package with the assignee, however, employers should understand the advantages and disadvantages of paying a lump-sum. Failure to offer the necessary support to assignees throughout the relocation process could result in a loss of talent.
Advantages of relocation lump sums
- They ensure employees are in post as quickly as possible by providing greater flexibility during the relocation process.
- Relocation costs are contained by fixing them from the outset, allowing for accurate budgeting.
- The administration of a lump-sum package is relatively straightforward, compared to a relocation that’s managed in-house.
- This hands-off approach to relocations reduces the workload for internal functions such as HR.
- They cover a wide range of expenses – from shipping costs to paying rent on temporary accommodation.
- Assignees feel empowered, as they take control of their big move.
- Your business won’t be taking on the risk of buying and eventually selling the assignee’s new home.
Disadvantages of relocation lump sums
- Dubbed the “new car allowance”, assignees are often tempted to spend as little as possible on their move, so that they can pocket some of the lump-sum. Some employers provide capped packages to prevent this.
- Assignees can feel they lack support from the business during the move. Some individuals respond better to a more traditional handholding approach to the relocation process.
- Failure to negotiate a lump-sum package might result in the assignee receiving insufficient funds. An open dialogue should be established between the employer and the assignee, to ensure both parties expectations are understood and met.
- Assignees will be responsible for managing the sale of their home. The protracted nature of this process can increase stress levels and reduce productivity.
Payment of lump-sum relocation packages
Lump-sum relocation packages are typically paid in one of three ways:
- Cash paid directly to the assignee.
- Direct payment to a relocation specialist.
- Refunded to the assignee as an expense – instructing the assignee to submit relocation expenses for reimbursement avoids taxation.
Whatever payment method you choose, the third-party support offered by a relocation specialist can prove invaluable to your business and the assignee.
Relocation specialists like Simply London have a wealth of experience helping assignees to manage lump-sum packages. They can use their extensive knowledge of the local environment – rental market, utilities, school system – to help your assignee implement a relocation strategy that maximises their budget, allowing them to focus on settling into their new role and surroundings.
Would you like to discuss your employee's move to London with us? Send us a message, or schedule a call with Sylvie.