Flexibility is a crucial component of modern Mobility programs. In fact, AIRINC’s 2024 Mobility Outlook survey found that 75% of respondents consider flexibility to be extremely, very, or moderately important. This statistic underlines a simple truth: Mobility teams must be adaptable to effectively meet diverse client requirements.
From addressing the constraints of a low-budget business unit to, catering to an employee’s demand for cash outs, or managing a complex group relocation, an agile Mobility strategy is essential. This need for adaptability is a driving force behind the expanding toolkit required for effective Mobility management, including versatile policy instruments like lump sum and managed cap policies.
Let’s start with a definition: A lump sum is a fixed amount of money given to an employee for a relocation to cover associated costs, such as shipping personal belongings, securing housing, and other moving expenses. This payment method empowers the employee to manage and allocate funds according to their specific needs during the relocation process; offering flexibility and autonomy in making arrangements and purchasing the services they need.
Advantages and Challenges of Lump Sum Policies
Strategic Applications of Lump Sums
Lump Sum Uses:
- Domestic Moves: Frequently used, especially for junior staff.
- International Relocations: Less common due to higher support needs but still used in sectors such as technology.
- Specific Allowances: Often applied to cover expenses like home leave or furniture allowances.
Lump Sum Delivery:
- Cash Payments: Provides maximum flexibility but requires grossing up for taxes, to ensure full benefit transfer.
- Managed Caps: Ensures funds are used appropriately, aided by tracking technologies.
Remember - regardless of your delivery approach, it’s important to gross up payments for taxes so employees receive the intended benefit.
Determining Allowance Amounts:
- Flat Rate – Many clients pay a flat rate for lump sum, say $10,000. Some tier the value by job level or other, by criteria. This is easy to communicate and deliver. But employees can lose or receive a windfall depending on the actual cost of the move, and businesses can overpay or provide a poor employee experience.
- Matrix Approach – Often clients will matrix their lump sums to create a grid which considers distance, family size, job level, or other criteria. This makes administration more complicated but reduces the risk of over/underpayment.
- Calculated Method – Many clients run individual lump sum calculations accounting for local cost levels, mode of travel, distance, family size, and more. While this requires more admin, it ensures employees get the right amount for their relocation.
Data-Driven Policy Design
Regardless of your approach, data is necessary to set the right lump sum amount and policy. Typically, companies look to two types of data when building a lump sum program:
- Cost data – to set the right lump sum amount, companies need insight into costs for local needs like hotels, corporate apartments, meals, etc. They also need relocation-related costs for shipping, airfare, or driving.
- Policy data – to ensure a competitive policy, companies need benchmarking data. They also must consider what services the lump sum is intended to cover to apply the cost data efficiently.
How AIRINC Can Help
AIRINC offers tailored solutions to enhance your lump sum strategies:
- Lump Sum Calculator – our innovative technology solution leverages millions of prices to accurately forecast the true cost of any lump sum. The tool is flexible and can be configured to your policy, so we account for only your intended benefits, caps, or other policy nuances.
- Matrixed Cost Data – We can use our data and technology to populate your lump sum matrix. You tell us what benefits, what distances, and any other criteria to cover, and we’ll build your grid using up-to-date costs which can be easily refreshed over time.
- Furnishing Rental & Allowance – Consult AIRINC’s Furnishing Rental Report, with data sourced by CORT Global Network. Rental furnishings allows companies to add flexibility and more sustainable practices to their mobility policies and are easy to manage alongside or incorporate into a lump sum.
- Policy Creation & Benchmarking – AIRINC’s advisory services team helps clients define their lump sum philosophy and policy through use of our proprietary benchmark data and deep industry expertise.
At AIRINC, we're committed to helping you navigate the complexities of lump sum policies to meet your mobility needs. Contact us today to explore how our innovative solutions can streamline your mobility strategy and help you build the right lump sum program.
