If you work with corporate transferees and relocation administrators you know “lump sums” are employer-provided funds meant to assist with one or more relocation expense items. Although a common element in many relocation packages, employers can intend them for very different purposes.
Lump Sum Features
Lump sum assistance has inherent advantages and challenges for employees and employers. A key advantage is flexibility. Transferees aren’t required to provide an accounting of their lump sum expenditures and may keep any unused portions. Because transferees control funds they may be customized according to individual needs, thereby reducing requests for – and employers’ management of – policy exceptions. Unnecessary employee record-keeping also eliminates employers’ expense report administration with regard to lump sum components. The entire lump sum is considered taxable income. If tax-deductible relocation expenses are paid from it, transferees must retain receipts for tax purposes.
But lump sums, especially if offered as total relocation assistance, are often provided with less counseling or other support needed for its effective use. Growing reliance on lump sums for entry-level moves may present relocation department opportunities to guide and offer resources to these populations. Awareness of lump sum type and context as related to other employer assistance may bolster affinity partnerships, enhance your counsel and potentially fortify future relationships with customers.
According to Worldwide ERC’s 2014 U.S. Transfer Volume & Cost Survey, 72 percent of member companies offers some type of lump sum to some or all relocating employees.
Lump Sum Types
Corporate policies often include multiple lump sum assistance types; here are a few typical ones:
1. Specific Component(s) lump sum is intended for one or more specific relocation-related expenses. Temporary housing and home-finding expenses are two provisions commonly combined in a lump sum; others are return trips home during temporary housing stays and final move-day expenses.
Atlas Van Lines’ 2015 Corporate Relocation Survey reports that lump sums for real estate assistance are gaining popularity with about twice as much corporate usage compared to last year. Rental Assistance lump sums, usually intended for finders’ fees and lease-break expenses, have doubled from last year to 32 percent. Higher numbers of transferee renters may cause employers to increase use of lump-sum provisions, but they may also place increased value on fee-paid orientation and home-finding assistance.
Employers’ use of Home Sale Assistance lump sums has more than doubled from 11 percent to 28 percent. Home-sale assistance lump sums provided without a BVO/GBO home-purchase program would cover selling transaction costs, but if it’s in addition, sellers can use it to complete repairs, improvements or home staging to maximize sale opportunities. Depending on corporate population size, employers’ lump sum amounts ranged from $2,500 – $4,999 for “rental assistance/transactions,” and $5,000 – $14,999 for “real estate assistance/transactions.” Your experience and counsel in preparing homes for market could help improve sales opportunities as would references to trades-people and staging partners.
2. Miscellaneous Expense Allowance or MEA [aka “Incidental” or “Disturbance” Allowance] is for relocation expenses not specifically addressed in the policy that arise during a residence change. Examples include window treatments, washer/dryer hook-ups, obtaining new location drivers’ or other licenses and registrations.
Not all transferees are eligible for MEAs, but WERC’s research reports that $6,479 is the average amount for those receiving it. Employers often use a tiered eligibility policy structure, often based on job levels, to determine the dollar amounts. Some provide an equal amount to all transferees and only differentiate value according to homeowner or renter status.
3. Total Relocation Assistance is a one-time payment and sole financial provision, typically intended to cover basic moving needs (i.e., household goods transportation, travel expenses). WERC’s research states nearly half of its corporate members provide relocation support to at least some transferees via a “Total Relocation Assistance” lump sum. It’s often the only assistance for entry level or inexperienced new hires, (i.e., recent college grads; temporary assignments; rotational development programs). Atlas’ survey reports a range of $10,000 – $19,999 for those receiving a “Total Assistance” lump sum.
Total lump sum recipients may be most in need of counsel and support services, but often aren’t eligible for the concierge-type services given to higher level moves. In other cases, support services may be available but unrealized. Your affinity partner referrals (i.e., household goods transport, temporary housing, lenders, etc.) may be much appreciated for those not accessing employers’ program services.
Relocation department agents are one of few professionals in direct contact with transferees at early relocation stages. Your guidance and resources may be critical to a positive and productive experience and may forge foundations for longer-term relationships with transferees.
Peg Guinta, CRP, is Projects Director for RIS Consulting Group. For questions, please email firstname.lastname@example.org.