The Popularity of Lump Sums

Quickly becoming one of the most popular relocation policies, the lump sum option is a one-time, fixed payment provided by the employer to an employee to cover all relocation costs. While these programs became popular with U.S. domestic relocations over the past decade, companies are increasingly using lump sums for international relocations, which can be more complex. A large part of this recent growth is due to its popularity among younger employees, who are the rising majority of the globally mobile.

What are the benefits of a lump sum relocation program?

​​​1. Save money – Lump sum programs can save a company money in the short-term.  This can make it easier for businesses to control the costs. Lump sums also offer fewer fixed benefits, keeping costs down. However, this could also mean that destination services, home-finding, settling-in services, cultural training, and school-search may not be company-required support, risking a failed assignment and poor ROI for the business unit.

2. Easy administration – Global mobility teams have less of a strain handling the relocation in-house since they would not be managing the entire process.  It also reduces the record-keeping and expense tracking burden on the employer.  Compared to a supported relocation, where the global mobility team guides the employee through every step of the process, lump sum relocations also save the company time.

3. Employee flexibility – Employees may choose how they spend their relocation money in ways that best suit their situation. The catch is that employers don’t mandate additional support, leaving employees with little relocation experience making the wrong choices, and who may find themselves short on cash. Leaving the employee to handle multiple aspects of their own relocation can mean they divert time they could be applying to their job. The result could be another reason for an unhappy transferring employee or boss.

4. Cost transparency – The lump sum payment makes it easy to keep track of relocation costs. However, unless you keep track of how the employee spends their money, you won’t have the opportunity to fine-tune your lump sums program or offer the employee some additional support. The more successful relocation programs track how employees spend their lump sum through digital tools.

Other factors to consider:  Is this the first time the employee has moved?  Even if the employee has moved before, what are the challenges associated with the new host location?  Ultimately, the business units should always consider the balance between the time and stress incurred by the employee during a self-managed move versus a corporate-managed relocation.

How can Living Abroad help support your lump sum employees?  Through an unlimited company subscription to the International Relocation Center, all employees have access to over 235+ destinations, all curated and vettedfrom a business perspectiveHundreds of resources are available giving relocating employees the support they need for success.  Subscribing to the destinations that best fit your relocation program and budget is simple and easy.

Please contact us to see how!