How to maximize your Lump Sum Relocation Package
Usually, when working with a Lump Sum Relocation Package, the money that isn't used for the assignee moving process remains in the mover's pocket. On the other hand, if all the moving expenses don't fit into that lump sum, the relocating employee may need to put in their own capital.
So whether you're the employee moving as an expat, a human resources professional facilitating the move, or working with a relocation management company that helps a client, it's always smart to use certain strategies to maximize your Lump Sum budget. Here are some ways to stretch a lump sum relocation package so you can cover the whole moving process.
1. Anticipate for taxes
Depending on the regulations of each country (in Mexico for example the Income Tax Law - ISR), the relocation funds provided by an employer are usually not tax-deductible, that is, the Lump Sum will be taxed at the tax rate on the employee's regular income.
Therefore, assigned employees should consider that capital reduction in advance and plan to finance their move with the remaining percentage. Companies or employers must be aware of this aspect also and take it into account when offering relocation packages that support and compensate the tax liability and fiscal responsibility of the employee.
2. Understand what a Lump Sum relocation package is and what it includes
Before anyone makes choices about any moving expense, everyone involved should be on the same page. Employees, HR representatives, and the relocation management hired company should discuss the details and agree on every aspect. It's important to research exactly which expenses the relocation package is supposed to cover and what other coverage is available, to avoid unnecessary planning mishaps or any costs due to budget restrictions.
For example, an employer may have an additional budget available to cover travel expenses for the assignee to visit the new location before the move. That way, the relocation allowance budget can be set aside to pay for moving expenses only, resulting in happier employees after the move.
3. Design a Lump Sum budget
Once everyone involved learns the details of the relocation package, it's time to build the budget and plan the expenses throughout the process. Instead of guessing, request a quote from the relocation services hired by your company to know the exact rates. Be certain to find out if and when those quotes expire, and if prices change based on move-in dates.
Don't overlook the little details. Do some thorough research on the prices of the boxes, materials, and other basic elements about the move that will be added. Include as much detail as you can in your Lump Sum budget so that it covers all the expenses you need for the relocation move.
4. Reduce the numer of belongings to move
It will cost less, the fewer belongings to move. Before packing, the employee should take the time to clean out cabinets, drawers, the garage, attic, and other storage spaces in their home. They can divide their stuff into piles to keep, donate, sell or throw away. Then the assignee will only need to use the relocation service to transport the items really wanted.
After ordering your home, a viable option is to hold a moving or garage sale, sell items online, or donate some unwanted belongings. The rest can be thrown away or recycled. Many moving companies charge based on the weight of your belongings, so the less you carry, the greater the potential savings.
5. Expand the search for your new home
If the employee moves to a popular destination in terms of relocation for expats, they are likely to face high competition for houses and apartments. A competitive real estate environment generally means higher prices; however, being a little more flexible could help save a lot of money. For example, if commuting is manageable, it may be useful to search for more affordable housing options on the outskirts of town.
In addition to affordable housing, less populated areas may have lower rates for all types of relocation expenses. This includes the personnel for the move, installing utilities (electricity, water, internet, among others), and even, if moving with family, the expenses of a new daycare. Remember that each savings can help you maximize the funds in a relocation package.
6. Stay Flexible
It's possible that a significant amount of moving expenses can be reduced by being flexible. Moving companies frequently offer discounts for moves that don't require a strict deadline or are performed during certain seasons. Therefore, employees may consider packing a suitcase of essentials to spend a week or two at the new place while they wait for their other items to arrive. In return, the employer may adjust their employee's start date to provide lower moving rates and seasons.
Flexibility allows a moving company to transport your items on less busy days or between other jobs when the company has a ready-to-go driver. By being more open to options, the transport company may help save money.
7. Use portable shipping containers
A Lump Sum Relocation Package can be maximized by packing belongings in a portable storage container and then transporting it, when the time is right, to the new location. Some companies may even deliver the container to the expat's home for him/her or a moving company to help pack or unpack when desired.
The use of portable containers during a move not only reduces costs, but can also offer more flexibility, as relocations are not always resolved so smoothly: Sometimes there can be a lag time between leaving the current home and being able to enter the new one. In this way, employees can obtain the assistance they need in their relocation by storing their personal items in portable containers.
Remember that these strategies can benefit both the company and its expatriate employees, always keeping in mind the most economical and satisfactory solutions for all those involved.