Lump Sum Relocation Plans: What are the Challenges?

SIRVA
Relocation Services
Global Services
Lump Sum Relocation Plans: What are the Challenges?

Whether your employees are heading across the country or crossing continents, Sirva has the on-the-ground international relocation services you need. From Canada to Australia and everywhere in between, we understand the nuances across each region .

We provide offerings to satisfy your unique needs, whether selling a home in the U.S., managing a cross-country household goods move, or helping employees to get settled into their new homes in Europe. Our global experience means that you can count on seamless international relocation, no matter what’s next.

Departure Services

From the initial policy consulting call through the move itself, there are a lot of moving pieces associated with employee relocation. Whether planning a domestic or international relocation, SIRVA is expertly positioned to offer the best departure services available during a relocation in every region around the world.

Destination Services

Setting your employees up for success upon arrival at their new locations will be key to successfully meeting your company’s goals. SIRVA’s global network and expansive resources allow us to you achieve your goals. Our destination services and international movers help employees and their families settle in and prosper in their new homes.

Visa and Immigration

SIRVA’s team of experienced international relocation specialists are expertly equipped to manage inbound and outbound global immigration services. With SIRVA’s Immigration team, the focus is on providing a smooth customer experience that enhances the relocation process, not just achieving a successful application.

Employee Counselling

For your employees, a single relocation professional assists with end-to-end coordination of services: a relocation consultant for domestic/intra-country moves or global assignment consultant for international relocation. These consultants are your employees’ resource for all communication and services relating to their move, and coordinate the delivery of all authorised services. Regardless of the service being delivered (temporary housing, moving services, etc.), the employee can rely on the consultant as their go-to resource to address any concerns.

VIP Services

If you are searching for an enhanced service for your employees, SIRVA offers VIP services such as personal relocation assistants, in-home cleaning services, personalised family assistance, and many other tailored and luxury enhancements.

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Join us for an informative webinar that will offer companies valuable guidance

Lump Sum – defined as a cash payment to a relocating employee that is intended to cover all or a portion of relocation services that would otherwise be delivered directly to the employee – is a popular term used by the relocation industry. According to SIRVA’s 2018 Annual Mobility Report, Talent Mobility for Business Growth – Aligning Practices to Drive Organisational Impact, 64% of companies offer a lump sum component as part of their mobility programmes and 37% offer only lump sum plans to their employees. These plans are intended to be beneficial to all parties, providing financial support to a relocating employee and potentially minimising the administrative needs of a company, all while providing greater predictability of anticipated relocation costs. However, the delivery of relocation support via a lump sum may come with several challenges that should always be taken into consideration. We encourage you to read the information below and invite you to join us at our upcoming webinar for further guidance on this significant topic.

A lump sum delivery approach can be administered in a variety of ways, depending on the nature and level of support a company wants to provide. The lump sum may be intended to cover relocation costs in their entirety or only specific costs designated by the company (with other core services either delivered directly or excluded from the programme). Requirements around accounting for spend of the lump sum may be strongly prescribed or highly flexible. Employees may be expected to research and implement their own relocations via a self-service model or they might be provided with company-approved services, referrals and guidance. Regardless of the delivery approach, there are some common challenges associated with lump sums when evaluating the best “fit” for your organisation.

Taxability

Lump sum payments are taxable for the employee, while relocation expenses paid by a company on the behalf of an employee may not be. This depends on a variety of factors, from move type and destination location to the intent of a relocation or assignments and any treaties associated with it. Companies must also consider that large lump sums provided in lieu of a full programme can affect an employee’s tax bracket, with potential downstream impacts on considerations such as eligibility for financial aid for any school-age dependants.

Allocation of Funds

With any lump sum approach, the intent is that the employee will use the funds provided for the relocation expenses that will be incurred. Additional guidance and education that the employee receives may drive the employee to allocate funds in a manner that will ensure a smooth relocation, transition and integration to the new location – all crucial to a successful relocation.

Employee Experience

A lump sum delivery approach places the burden of sourcing, coordinating, managing and paying for relocation services on the employee. New hires have the added financial burden of waiting until they have been added to their company’s payroll before they will be eligible to receive funds to cover relocation expenses in instances where it is not possible to process the payment prior to the start date. Maximising the opportunity for an employee to successfully navigate through the relocation process is critical to the success of a lump sum approach and for the relocation as a whole.

The Balance Between Employee and Business Productivity

When an employee manages his or her own relocation, the process typically takes longer due a lack of experience; the relocation may be the first and only time he or she ever moves. Even in cases where an employee may have relocated before, it’s important to note that new destinations provide new challenges that may not be anticipated (e.g. compliance, housing availability). Ultimately, company stakeholders should always consider the balance between the time (and stress) that will be incurred by the employee (and accompanying family) during a self-managed move vs the money that may or may not be saved as a result of reduced administration for a corporate-managed relocation.

How Can Companies Meet the Challenges Associated with Lump Sums?

The numerous challenges and choices associated with implementing a lump sum approach for delivering relocation support can seem daunting, but they don’t have to be. SIRVA experts are available to offer guidance on your company’s mobility programme, from its design to implementation. For more information on the current state of lump sums and how to address the many challenges associated with this type of delivery approach, please contact us at SIR-Consulting@sirva.com, and join us on 10 January 2019 for an informative and educational webinar on this topic. We look forward to hearing from you.