Many companies are moving away from lump-sum relocation and choosing corporate relocation management with a defined policy. Some companies are simply outgrowing lump-sum relocation programs. For others, the HR departments are overwhelmed by the tasks of managing relocation and its associated costs. Others see the need to offer more structured support in competitive job markets.
No matter what’s making you rethink how you help employees move, this guide will help you decide if it’s time to move away from lump sum relocation to full-service corporate relocation management.
What Is Lump Sum Relocation?
A lump sum relocation program gives the employee a set amount of money to pay for all their moving expenses. The employee receives the funds and must plan, book, and coordinate every part of the relocation. It’s up to the employee to hire movers, book travel, find temporary housing, manage receipts and expenses, and follow policies and timelines.
Lump sum programs are easy for employers to manage, but they put all the responsibility on the employee, often during a stressful time. This lack of structure is a major reason many companies switch to managed relocation support.
What Is Managed Relocation?
Managed relocation services give employees direct support from a relocation management provider. Instead of getting a cash payment, employees work with a relocation consultant who helps them through the whole moving process. The corporate relocation management company books and coordinates all the employee moving services through trusted vendors.
For the employers, the consultants define the relocation policy and manage cost tracking, reporting, and program optimization.
This approach gives employers more control over spending, compliance, and employee experience, while employees get expert help at every stage.
Cons of Lump Sum Relocation
Lump sum programs are simple for employers to run. They are a good choice for small employee relocations, entry-level employees, and employers who only manage a handful of relocations per year. However, lump sum relocation also has major downsides.
Poor Employee Experience
Employees are left to figure out everything on their own. This can lead to overwhelm, poor vendor choices, delays, and higher stress for both the employee and their family. This is one of the most common triggers for companies to adopt corporate relocation management and managed relocation programs.
Loss in Employee Productivity
When the employee is tasked with planning their own move, it distracts them from their job responsibilities. There may be delays in the employee arriving at their new location. An employee is usually selected for a relocation because their skills are critical. Distractions detract from the productivity of the entire project.
Less Incentive to Accept the Relocation
An employee who is offered a relocation opportunity may turn down a relocation because planning a move is daunting. Lump sum relocation is also a deterrent in a competitive job market. A lump sum relocation offer may not demonstrate to a sought-after candidate or executive that their talent is valued by the employer.
Inequitable Relocation Benefits
Lump sum relocation programs are inequitable because they use a one-size-fits-all approach that rarely matches what employees actually need. Some transferees may get more money than their move costs and pocket the rest. Other transferees may not get enough funds to pay for their relocation and have to use their own savings to cover the difference.
Every employee has different moving needs, based on factors like family size, housing markets, distance, timing, and personal situations. It is impossible for employers to guess the correct relocation lump sum payment amount for each employee. As a result, some employees are overpaid, others are under-supported. In the meantime, companies have little control or insight into how the lump sum relocation amount is spent.
No Cost Control or Visibility
Employers have less control over how the money is spent and which vendors are chosen. This leads to waste in the corporate relocation budget. Employees also might not manage the lump sum relocation correctly, and not have enough funds for the services they need toward the end of the relocation.
Risk of Poor Moving Vendors
Since suppliers are not vetted, employees might hire a vendor with poor service or get scammed. This causes problems for the employer, additional relocation expenses, and delays in the employee’s relocation.
Benefits of Corporate Relocation Management
Managed relocation services with a defined relocation policy offer significant advantages for both employers and employees.
Improved Employee Experience & Productivity
Employees get expert help, useful resources, and a single point of contact. Employees can focus on their new role instead of spending hours researching movers or managing logistics
After communicating their priorities for the move, employees can sit back and let someone else book and manage the move. When challenges arise during the relocation, the corporate relocation management company will solve them.
This high-quality relocation management reduces employees’ stress and increases their satisfaction with the relocation process.
Vendor Quality & Accountability
A relocation management provider works with trusted, high-quality suppliers. Because they have long-term relationships with the vendor, the employer receives better prices and less risk. The employee receives better service, especially since the vendor has a high level of accountability to the corporate relocation management company, so the business relationship can continue.
Cost Predictability
Relocation management providers help employers establish clear relocation policies according to best practices. With spending caps, approved services, and a consultant that ensures the managed relocation adheres to the rules, relocation program costs are controlled, and the managed relocations are consistent and fair for all employees.
Consistent and Fair Relocation Benefits
A defined relocation policy is more fair than lump sum relocation. Instead of giving everyone the same amount to spend, it lets all employees use the same set of high-quality, approved relocation services.
Think of it like how companies offer medical insurance: everyone gets the same coverage, even if the cost to the company is different for each person. The goal is to make sure everyone has fair access, not to spend the same amount on each person.
Corporate relocation management should follow this idea. With a defined policy, every transferee can get the support they actually need. The employer can keep relocation benefits consistent, controlled, and fair.
Competitive Advantage
Managed relocation is an attractive benefit. This could be the difference in winning A-list talent or convincing a manager to take a critical role in another location.
Data & Reporting
With managed relocation and a defined relocation policy, employees can easily see how money is spent, track timelines, and measure employee satisfaction. This information helps HR teams make decisions, improve policies, and strengthen their relocation and mobility program over time.
Signs It’s Time to Move From Lump Sum to Managed Relocation
These are the most common signs that it is time to define a relocation policy and move to managed relocation with a professional provider:
Increasing Volume of Employee Relocations
Lump sum relocation might have made sense when the employer only managed a couple of relocations a year. However, as the number of employee relocations grows, the number of tasks to juggle increases, costs inflate, and the compliance risks increase.
Possibility of International Employee Relocations
It is possible to use lump sum relocation for domestic relocations, but corporate relocation management is necessary for global mobility. International employee relocations require many more services, like immigration, cultural training, and tax and compensation management. There are also many compliance issues that need to be managed in both the home and destination countries.
If you are even considering international employee relocations, it is time to consult a managed relocation provider.
Overwhelmed Human Resources Department
If the human resources department is becoming overwhelmed, then it’s a sign that it’s time to outsource corporate relocation services and allow your internal team to focus on your employees.
In addition, if employees are coming to human resources with many questions and concerns about their relocation, it’s a sign that your lump sum program doesn’t have the structure that your employees require.
Inconsistent Relocation Costs
If relocation costs are inflating, employees are pocketing the relocation lump sum, or you notice major inconsistencies in relocation costs, it’s time to switch to a more predictable model with a defined policy, like corporate relocation management.
Subpar Employee Experience
If relocation is causing employee frustration, that signals that the DIY nature of lump sum is no longer working. If an employee has a major problem with an unapproved vendor, or you receive complaints that relocation benefits are inconsistent, those are also signs that your company needs to define your relocation policy and provide managed relocation services.
How to Switch From Lump Sum to Managed Relocation Services
These are the steps to transition from lump sum to managed relocation:
1. Assess Your Current Relocation Program
Determine what your needs are for employee relocation. Assess the volume and types of relocation you will need over the next few years, and identify the biggest relocation challenges your company is facing. This will guide you as you choose a managed relocation provider.
2. Put Out an RFP For a Managed Relocation Provider
Research corporate relocation management companies to participate in an RFP to assess and select the right provider for your company.
3. Select a Relocation Management Company
Choose the corporate relocation management company from the RFP process that best fits your specific needs. They should have good supplier networks, clear fees, flexible policies, and strong employee support.
4. Define Your Relocation Policy
Your managed relocation provider will guide you in drawing up detailed relocation policies. Decide which services you want to include, such as moving household goods, temporary housing, help with selling or renting a home, travel, and destination services. Determine how the services and relocation cost allowances will differ by scenario, location, employee role, and family structure. Finalize relocation budgets.
5. Launch Your Managed Relocation Program
Communicate to employees and hiring managers the changes in your relocation program and what they can expect from managed relocation.
Launch your new managed relocation program with your first employee move.
6. Monitor and Improve Your Corporate Relocation Management
Check in regularly with your corporate relocation management company. They will be able to provide data, reporting, and collected feedback to make adjustments and changes to the program so it works best for both the company and employees.
Ready to Define Your Policy With a Corporate Relocation Management Company? Let’s Talk.
Is it time to move from lump sum to managed relocation? If your company wants to improve its relocation program, lower risk, and make the employee experience better, NRI Relocation can help. Our team specializes in transitioning companies into their first corporate relocation management program. We offer structured, cost-effective managed relocation that will alleviate the burden on your human resources and hiring departments.
Contact us today to begin your move to a more strategic, employee-focused relocation program.