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What Is A Lump Sum Relocation Bundle?

A lump sum relocation package is a financial allowance that a company offers an employee to help the employee relocate. Lump sum packages can help employees settle in and return to work faster considering they provide more flexibility to motion quickly into their new city and role. These packages too assistance employers retain valued employees while controlling expenses.

What Is Covered By The Lump Sum?

Lump sum packages cover a broad range of moving-related expenses during a relocation. These expenses may include temporary living arrangements, home sale and closing costs, lease breaking, and household goods shipment.

How Are Lump Sum Relocation Packages Negotiated?

Employers should foster an open dialogue with the employee when negotiating a relocation package to fix proper expectations. The employee should present a crude timeline and requirements for their motion (i.e., selling their home, transporting their recreational vehicles, or child care). The employer should enter negotiations knowing which packages they tin can offer their employee, when they will need the employee to start in their new function, and what corporate relocation services they can recommend and offer.

How Are Relocation Package Lump Sums Paid?

Companies should know what payment options are available for their lump sum packages. Typically, companies use three methods of payment for lump sum packages:

Cash

The employer pays a lump sum directly to the employee to employ in any way they demand for their relocation. The employee is and then required to file that corporeality as income.

Directly

This option puts employers in direct contact with service providers. Service providers nib the company for whatsoever moving expenses, eliminating employee involvement and potentially eliminating employee tax liability for moving expenses.

Reimbursement

During this procedure, the employee initially pays all of their relocation expenses and receives reimbursement from their employer once their motion is complete. Though this requires the employee to pay for their movement, this pick removes the tax burden from the employee. It also offers both the company and the employee flexibility during the procedure.

Types Of Lump Sum Relocation Packages

Lump sum relocation packages offer benefits to employees and employers alike. For employers, lump sum packages help control costs and simplify administration. At the same time lump packages give employees more control over their relocation and allow them to shop effectually for the most cost-effective relocation options. There are iv principal types of lump sum relocation packages you may want to consider.

Apartment (Fixed) Lump Sum

Flat lump sum packages recognize that moving expenses may be similar for employees with all levels of feel inside the system. A fixed package provides the same lump sum payment for entry-level employees and executive-level employees.

Variable Lump Sum

Variable lump sum packages are tailored to different employees based on standards established by the employer. These standards may include:

• Relocation distance.
• Renting vs. buying.
• Family size.
• Level of responsibility within the organization.
• Salary level.
• Typical relocating costs.

Alternative (Partial) Lump Sum

Some employers offer a lump sum payment for certain relocation expenses and then reimburse the remaining expenses upon submission of receipts and supporting documentation. The employer decides which expenses to cover inside lump sum package and which will require receipts for reimbursement. Nosotros typically recommend reimbursing the employee for relocation expenses like their final movement and household goods shipment.

Managed Lump Sum

These programs allocate a capped lump sum amount to the employee. The policy volition delineate the provisions covered and whatsoever individual provision limits and may require the employee to submit expense receipts. Additionally, employers may enhance the policy by authorizing a relocation direction visitor to suggest the employee and help them spend their funds wisely.

How Do Lump Sum Relocation Programs Benefit Businesses?

The most common reason employers cite for offering a lump sum is employee flexibility. The second most mutual reason is cost control.

Traditional relocation packages offer some tax benefits for employers, simply managing expenses at all levels can prove complex and unwieldy. Relocation expenses may include:

• Temporary living.
• Render trips.
• Firm hunting trips.
• Terminal movement.
• Habitation sale and abode purchase closing costs.
• Charter breaking aid.

Lump sum relocation packages allow employees to prioritize their needs co-ordinate to the funds available. This can reduce the burden of record-keeping and expense tracking for the employer.

Employee relocation tin be a large expense for many businesses. Lump sum relocation packages can assistance employers keep this expense in check, while allowing their employees the opportunity to accept control of their relocations and related expenses.

What Standard Procedures are Companies Following?

A Mobility Mag survey uncovered some interesting facts about how companies are managing their lump sum corporate relocation packages.

• Most partial lump sums offering a fixed amount for every employee.
• Well-nigh lump-sum-only payments vary based on a number of factors, including individual needs or the employee's level inside the company.
• Fixed payments are more than common for entry-level employees.
• Executive relocation packages also vary based on a number of factors.
• For variable lump sum relocation packages, a major cistron in calculating the lump sum amount was the employee'due south condition as a renter or homeowner.
• For partial lump sum payments, employers rarely took homeowner or renter status into account.

The Trade-offs of Using Lump Sum Relocation Packages

More employers have begun favoring lump sum relocation packages in contempo years. On the surface, lump sum options announced less expensive than more than traditional options. Unfortunately, similar many other "discount" programs, lump sums can cost more than they relieve in the long run.

Let's accept a look at some of the merchandise-offs and explore how it all adds upwardly (or doesn't).

How a Lump Sum Relocation Policy Saves Coin in the Brusque Run

Typically, when employers favor lump sum relocation packages, they do and then considering:

• They have a lower upfront toll
• They seem like an easy, "hands-off" way to manage employee relocation
• In some cases, they provide greater flexibility to employees
• They ordinarily put less strain on human resources

But while it is true that lump sum packages tin can offering some of these advantages, there are oft hidden costs.

The Hidden Costs of Lump Sum Relocation Packages

The biggest potential trade-off with lump sum packages is a loss in employee satisfaction and loyalty. Moving is always stressful, fifty-fifty when it promises heady opportunities. Small factors tin can have a greater impact on your relocating employee during this time than they normally would.

With a lump sum packet, if your relocating employee is a homeowner, they may exist left to sell their former domicile and buy a new abode on their own. This can greatly increase the stress on your employee, and may pb to a loss in productivity or increased frustration towards the employer. This is especially truthful if the employee has knowledge of or experience with more than robust dwelling sale programs.

The most important factor in determining employee satisfaction and retention is ensuring you have a well-structured and managed relocation policy, no matter the blazon of relocation package(s) you offer. Consider relocation an investment in your employee'due south loyalty and productivity, also as an investment in your business's future.

If yous are structuring (or re-structuring) your corporate relocation policy with lump sum packages, benchmarking can assist you set payment amounts and a full-service corporate relocation business firm tin help.

Relocations and their financial implications tin can be complex and disruptive. Our global mobility services can help your squad to navigate this procedure with ease! Contact us today!

Sources

Worldwide ERC: https://www.worldwideerc.org/

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Source: https://www.caprelo.com/insights-resources/policy-development/lump-sum-relocation-packages-everything-you-need-to-know/