Mobility and Lump Sums

The tax change that took effect in 2018 essentially made all relocation expenses provided to employees a taxable expense. This has caused many companies to revisit their relocation programs, and specifically look at the efficacy of lump sums. 

Pros and Cons

An obvious pro, of course, is administration- you give a check to the employee and all done! Additionally, your employee is going to have lots of flexibility and can spend their funds any way they choose. Costs are controlled from the company standpoint, and budgets are kept. 

Now for the cons…employees may feel somewhat abandoned by their employer and this does not make for a positive experience. There is also an equity question- some employees may experience a windfall, and others may feel they had to reach into their own pockets for much of their move. There is also a potential loss of productivity as the employee’s focus is on moving themselves and their family vs. their job. The company may lose talent to their competition due to an employee’s perceived lack of support. Additionally, the company may be brought in to resolve an issue with the employee’s choice of supplier, as well as they fact they can’t leverage costs with a few vetted suppliers. 

Considerations

1) Benefits- be sure to think about what services you want to cover for the employee. Is it a limited benefits move where your intent is to just to provide movement of household goods and perhaps a little extra money? Is this a critical hire where you want to make sure the employee perception is they were truly taken care of in every aspect of their move? When assessing benefit levels you really need to consider the individual culture of your company and industry. 

2) Accurate estimate- if available, you may have access to historical data so you can see what your average costs of a move have been and this can help you calculate the lump sum amounts. If you are working with a relocation management company, they are usually able to assist in this process. Don’t forget to consider the tax impact! Of course, tax assistance is an optional benefit,  but your employees may not feel the same way. 

3) Level of support- different demographic groups in your organization may have different levels of need when it comes to support of the process. Are they comfortable with ordering services online, or do they need more help and guidance from you (or a consultant from your relocation management company)?

A Hybrid Approach

Everyone wants a happy and productive workforce! Lump sums may accomplish this for a portion of your population. A step up from this level would be what’s referred to as a limited benefits move. As an example, temporary housing and movement of household goods services are provided, and a small allowance payment made to the employee. For those employees with more complex moves, a managed cap move may be a better solution. This is where the company provides the services based on their policy and can set a maximum spend either by individual benefit, or a maximum spend for the total move. And then there’s the traditional full service approach where benefits are typically coordinated by a single point of contact and services delivered. 

Mobility Empowered is ready to assist with defining, implementing, and delivering all your relocation services. We are no longer in a “one size fits all” environment when it comes to these benefits. We are the relocation industry's first open, online marketplace and can support lump sums, managed cap moves, and full concierge executive services- both domestically in the United States or globally.