Managed Lump Sum Allowance Programs

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Herbert Blake
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1 Managed Lump Sum Allowance Programs The Solution for a Cost-Effective and Competitive Lump Sum Allowance Program We Work Where You Work

2 INTRODUCTION Shrinking budgets and smaller staffs have led many organizations to review their employee relocation assistance programs. As a result, many organizations today support their relocation employees with lump sum allowances. Lump sum allowance programs are efficient and cost-effective solutions for employee relocation, combining cost control with fair, equitable assistance that supports employee satisfaction. This whitepaper provides a deeper understanding of managed lump sum allowance programs while answering many of the common questions about this type of program. ADVANTAGES In any lump sum program, a single, upfront payment is provided to the employee to cover relocation related expenses. A managed lump sum program balances the specific needs of the organization and the employee, providing the best possible cost control while supporting employee satisfaction with fair and equitable assistance. This is possible because a managed lump sum program tailors assistance to reflect the true costs for each specific relocation. While costs remain under control, the organization is able to maintain a competitive position for talent recruitment and retention. COMMON QUESTIONS To provide a deeper understanding of how a managed lump sum allowance program can provide these advantages, this document will answer common questions about the managed lump sum approach. What makes managed lump sum programs cost effective? A lump sum program is cost effective because it eliminates the labor intensive and difficult-to-control expense reimbursement process by providing a single upfront payment. A managed lump sum program delivers that core advantage, but also provides exceptional flexibility to support specific business objectives. This flexibility is possible because a managed lump sum program is driven by the organization s policies, based on program parameters determined by the organization. PAGE 2

3 Will the allowance be adequate without being too much? Rather than provide a generic, fixed lump sum amount which, by definition, will likely over- or underpay the employee a managed lump sum program uses the employee s individual profile to determine an allowance that truly reflects that employee s relocation costs. In simple terms, an employee s profile includes applicable policies, her/ his relocation city pair, plus family size and configuration (number of adults and children). Because it is flexible, a managed lump sum program can also allow caps or reductions on all individual allowances. Caps permit calculated rates to be limited based on industry standards, government rates or specific company limitations. Reductions applied to the total allowance or to specific expense categories provide additional flexibility for the company to retain full control. LUMP SUM ALLOWANCE programs are efficient and cost effective solutions for employee relocation, combining cost control with fair, equitable assistance. Can expenditures be reported and tracked? Reporting capabilities of a lump sum program depend upon the type of program implemented. Managed lump sum allowances are built up using the policies and parameters established by the administrator. Costs for each component (lodging, meals, airfare, car rental, etc.) are clearly identified and tracked through management reports. Fixed amount lump sum allowances do not reference specific costs for a specific relocation. Fixedamount lump sum allowances lack detail, which prevents administrators from accounting for those expenses and reasonably managing them. The fixed-amount approach also reduces the employee s ability to adequately budget for anticipated expenses. Will employees successfully manage the allowance? Communication and information are the keys to helping the employee manage the lump sum allowance. Administrators should communicate the relocation policy, clearly identifying the benefits for which the allowance is intended and the reasons for those benefits. Managed lump sum program providers can contribute expert guidance on how to help employees understand the allowance and how critical the benefit is to making their relocation a success. PAGE 3

4 How will exceptions be managed? Exceptions are dependent on multiple factors: relocation policy, the administrator, and the organization. If an organization s relocation policy provides limited benefits, if an administrator functions more as a relocation concierge than a manager, or if the company culture encourages negotiation over compliance, exceptions may be commonplace. Lump sum programs enable employees to use allowances according to their discretion and forego time consuming administrator approvals, resulting in decrease exceptions. However, by providing the most accurate allowances and detailed, defensible information, the managed lump sum program can virtually eliminate exceptions. Can existing policies be used? The organization s existing policies serve as the basis for a managed lump sum program. Industry experts review the existing policy to determine the most appropriate parameters within the managed lump sum program that will support the organization s objectives. Many organizations simply augment their policy with an explanation of the lump sum payment option. Managed lump sum program experts can assist organizations with policy language. How will the organization s negotiated rates be leveraged? A robust managed lump sum program incorporates into the allowance those rates the organization has negotiated with service providers (car rental, lodging, etc. most often these special rates will apply to locations where employees frequently visit). Fixed amount lump sum allowances typically do not allow the organization to gain full advantage of the rates it has negotiated. Successful managed lump sum programs are structured to be fair to the employee, reasonable to the company, and defensible to both. But no single approach is best for all organizations. As leaders in employee relocation, Runzheimer can provide answers to these and other questions, and help you determine which relocation assistance approach will best support your unique business objectives. PAGE 4

INSIGHT AND GUIDANCE Founded in 1933, Runzheimer connects people, companies and their vehicles in ways that drive superior productivity and impactful business intelligence.

5 INSIGHT AND GUIDANCE Founded in 1933, Runzheimer connects people, companies and their vehicles in ways that drive superior productivity and impactful business intelligence. We provide expertise, technology and world class customer service that empowers companies to move their businesses forward with confidence. As a result, our customers are able to better manage cost, reduce business risk and increase employee satisfaction in the mobile workplace. Runzheimer is the leader in workforce mobility programs, designing and delivering business vehicle programs, relocation information services and business expense solutions. We are highly renowned and recognized for our market leading service delivery focus, an integral part of our corporate culture. PAGE 5 info@runzheimer.com runzheimer.com

POWERED BY LUMP SUM ALLOWANCE: ONE SIZE DOES NOT FIT ALL. Relocation and Living Cost Intelligence

POWERED BY LUMP SUM ALLOWANCE: ONE SIZE DOES NOT FIT ALL Relocation and Living Cost Intelligence Ever purchase clothes labeled one size fits all? Chances are you found them either too big or too small.