While the term “lump sum” implies a company relocation policy that is standard and fixed for all employees across the board, that's not always the case. A number of options and variations exist within the classification of “lump sum.” Let's look at a few of the options.
Fixed lump sum:A fixed lump sum company relocation package works under the premise that all employee moving costs are about the same, regardless of the employee's salary, time with the company or a number of other factors, including whether they rent or own their own home.
Variable lump sum:
A variable lump sum is different for each employee and may be negotiated individually or determined based on a number of factors. Some factors used to determine the amount of a variable lump sum company relocation package include:
- Historical costs
- Renter or homeowner
- Distance to destination
- Size and needs of family
- Position within company
- Employee salary
Partial lump sum:
A partial lump sum company relocation policy pays (as the term states) for part of moving expenses in a lump sum, while reimbursing the rest. The partial lump sum, according to this article in Mobility magazine, typically pays for expenses incurred during the move and temporary living costs while the employee is “between homes.” All other expenses, including costs related to home sale and purchase, may be reimbursed.
One option is to take advantage of Household Goods, Final Move and relevant home sale benefits as tax-excluded reimbursements, while other benefits can be put in a lump sum and grossed-up to minimize tax liabilities for the relocating employee. As you can see, knowledge of relocation tax law is necessary to create an effective partial lump sum company relocation policy.
A lump sum company relocation package may reduce administrative costs and time, but if your company relocation policy includes variable or partial lump sums, it may not be as simple as it seems. That's where a company relocation management company can help. Give CapRelo a call if you need a hand evaluating your company relocation policy.