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Lump Sums… A Moving Target

So, you just hired two great candidates for two new assistant manager positions in headquarters.  New Hire 1, we’ll call him Jim, is married with 2 kids.  New Hire 2, we’ll call her Mary, is single.  They both have about 800 miles to travel to their new location.  Your relocation policy for their job level allows for a lump sum of $6,000.

 

How’s that working for you? How does that make the transferee feel about their new job?

 

In reality, a lump sum can be a windfall for some, and a genuine out-of-pocket drain for others. While many employers continue to use the lump-sum approach due to ease of administration, we are starting to see “hybrid” solutions in the industry. Traditionally, the lump sum was set by policy, or often, by the hiring manager. Unfortunately, neither of these sources setting the dollar amount can be tailored to each transferee’s specific needs. The only way a traditional approach would work well is if every transferee had the exact same family makeup, and is moving the same amount of miles to their new job.

 

Hybrid lump sums still utilize the “one check” concept, but do so by setting parameters for use of lump sum, as well as developing a means of improved accuracy to the dollar amount specific to the transferring family. Typical parameters for use of lump-sum dollars would be for home finding, temporary living, and final move. In many instances they may include the household goods shipment as well. Improving accuracy, which is critical, is done by determining the actual cost of the items in the parameters, specific to the transferring family so that you end up with an accurate dollar amount to be used for specific benefits as dictated by policy. Now, I know what you’re thinking and the answer is no, this certainly does not mean that the actual lump sum amount released to the transferee must be the dollar amount determined to cover all costs within the parameters. However, at the very least, the employer will know what this transfer will cost, and to what extent there may be out-of-pocket expenses.

 

Unquestionably, for many employers this would require somewhat changing current policies. But the true “win-win” stems from understanding that using flexible lump sum dollar amounts, based on need, will make for a happier employee beginning within a new position.

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MIKE CANNING
VP, Client Services

RICK CALANNI
VP of Business Development Northeast Region

 

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