The Lump Sum Relocation – Easy is not always best!

A Lump Sum Case Study

Recruiting

You invest in your people and talent management program to bring in the very best talent for your company because you know that people make the difference! When you find key talent to move your company forward, you want to pull in that talent by offering a competitive compensation and benefits package which might include relocation.

Cost

However, a full employee relocation can cost a company up to $100,000 by the time you pay for home sale assistance, possibly loss on sale costs in some areas, household goods transportation, corporate housing, and other relocation amenities (per ERC Mobility September 2010).

Time

Unfortunately, many companies don’t invest a lot of time in this area for their talent because it is typically a small portion of their job or because they have downsized their HR departments and don’t have the resources. However, when it is time to relocate talent, it takes a large portion of their time.

Administration

Recently we have seen more companies providing the new employee with a lump sum to ease the administration process. This makes it easy for everyone right? Not necessarily. This can be challenging for the employee and the family that does not understand how to get the most value out of their relocation during a stressful time. Let’s take a closer look at a lump sum relocation case study.

Lump Sum Case Study

Mr. EE is excited about taking a new position with XYZ Company and has been told he will receive a lump sum payment to take care of his relocation. Unfortunately, Mr. EE doesn’t have time to coordinate the relocation, so he asks Mrs. EE to take care of finding a realtor and obtaining move bids. Mrs. EE calls some friends and gets a realtor referral from her friend that helped another friend. Unfortunately, she is not sure how many realtors to interview and how the realtor will perform, but likes them and decides to hire them since her friend’s friend used them. While the home is being marketed, Mrs. EE starts trying to find quality companies to help with the household goods moves bids. Mrs. EE finds this is time consuming and a frustrating process since all of the bids are different. If only the new company had preferred providers to help them with the transition. Later, Mr. and Mrs. EE find out the lump sum is taxable income to the employee and the funds are much less than anticipated.

The CHALLENGE

Providing the employee a lump sum isn’t always the best plan if you don’t help them with preferred partnerships… First of all, the lump sum funds will be considered taxable income, which means fewer dollars for the employee. Many don’t consider the other cost of time and frustration for the family if they do not know who to call to help with the move. It takes time to get quality moving bids and estimates can be confusing and risky for the employee if they don’t know what to look for on each estimate.

The SOLUTION

Providing the employee with a partner to help with the relocation gives you and the employee direction and accountability. They can manage the entire relocation process for your employees with personal move coordination and direct bill to the company. More importantly, the relocation partner can help with taxable and non-taxable income reporting. Direct billing for the household goods move renders it non taxable income for the employee. Only the remainder of the lump-sum would be taxable income. Now, Mr. EE can focus on the new job with a happy family moving to the new location.

Conclusion

Easy is not always best. One of the keys when discussing a successful talent strategy plan is to establish key partnerships for relocating your talent – even if you move less than ten employees annually. Once you find the best talent, you will want to make sure you provide them with direction as they make the move to your company with a partner that is reliable, dependable, flexible, and scalable. Many partners have the resources to provide your team with a full comprehensive relocation using the lump sum model if needed, and the reporting will provide lots of critical metrics to help with decisions for continuous program improvement.

Call to Action

Plan and prepare for bringing in your talent. If they don’t accept the offer due to a weak relocation package, then it could cost you more than you think. However, if they decide to move with your company, you will be confident they are going to have a great experience because you have invested in setting up a quality relocation process. After all, the relocation will be your new employee’s family’s first impression of your company.

Congratulations, you are now ready to move your company to the next level with the very best talent.

Bruce Waller, CRP is the VP, Corporate Relocation for Armstrong Relocation Companies. Bruce can be reached at 972-389-5673 or bwaller@goarmstrong.com

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