Lump sum relocation programs are nothing new, yet they continue to grow in popularity. If you are unfamiliar with the concept, Lump sum relocation packages generally consist of a lump sum amount that a company provides to its employees to move to a destination.
👉 Read our article to better understand what a relocation allowance or Lump Sum is, what it includes, how it is typically managed, and the types of packages that exist.
Global mobility professionals often see this as an easy way to get employees into their new job quickly; however, this is not always the case. In this article, we'll explain the top reasons why companies choose lump sum programs, according to the results of the 2018 AirINC Lump Sums Pulse Survey, and the truths and misconceptions based on those ideas.
Relocation processes with Lump Sums offer four main advantages
Most of the time, employees are happy to know that they'll have the flexibility to spend their relocation money as they see fit for their particular situation. However, the problem with providing a lump sum with minimal guidance is that the level of employees receiving this type of benefit generally have little or no relocation experience, so they may underestimate the costs of certain services, or even decide to forgo some that may be critical to their long-term success in the new location. This means that employee flexibility can cost the company in failed assignments and the transfer of unhappy workers.
👉 Read our article on 7 ways to maximize a Lump Sum relocation package as an expat!
By combining common services with customized solutions, both the company and the employee will get the flexibility, support and cost control they need to achieve a successful relocation.
Global lump sum programs often put less pressure on the administrative staff, both HR and global mobility, who handle the moving process internally, as it takes much of the work of managing the relocation process away from the employers.
While these programs offer greater flexibility and potential cost savings, many do not address the need for professional assistance and guidance to assignees that protects both the company and the employee. For example, helping with challenges such as final travel, shipping personal items, housing, taxes, and immigration. International assignments are naturally complex and, for the company to remain compliant, it is always recommended at a minimum, that they establish a basic/flexible policy that ensures benefits for a successful relocation.
Lump sum packages can save a company money in the short term, but can be misleading if you only look at those results. Certain 'lump sums' generally offer fewer benefits and therefore cost less than fully managed programs. It's important to consider that pre-decision services and services at the new destination, such as area orientation, finding housing and schools, or assistance with settling, in may be omitted altogether with lump sum relocations.
While these services may not seem worthwhile prior to a relocation, they have real and significant value. Some studies have shown that failed assignments can be a much greater drain on a company's resources. So, adding these services to a relocation can help mitigate failed assignments and even prevent an employee from pursuing a relocation if it really isn't the right thing to do.
It is therefore recommended that before making final decisions on the lump sum program and with the purpose of saving the company money in the long run, you consider what services may be beneficial to your relocating employees.
Lump sum relocation packages help employees make their transition to an unfamiliar location without additional financial stress, while building trust with their employers, giving them a sense that they are an important part of the company.