Lump Sum payments might seem like the fastest and easiest method of providing employees with the funds they need to move. However, Lump Sum payments come with their own unique set of problems. Some of the challenges include:
- Transferees often left alone in the relocation process
- No cost controls and often budgetary overages
- Limited process or service structure
- Non-taxable benefits are lost
- Frustrated transferees means elevated HR involvement and escalations
In many cases, when transferees are presented with a lump sum, they try to retain as much of the lump sum for themselves. Not being experts in the relocation industry, the transferees seek out the least expensive providers and usually get the proverbial service for which they paid. In their attempt to cut corners – combined with an unfamiliarity with all that is involved with a corporate relocation move, their frustration with the service providers equates to more calls to their HR departments.
Fortunately, a Managed Cap Program can not only alleviate many of the problems associated with a Lump Sum, but it provides more useable funds for the transferee by addressing each line item of the relocation processes and taxing only the applicable services. Let’s see the difference between a $15,000 lump sum payment and the same $15,000 from a Managed Cap Program:
The amount of tax withholding from the Managed Cap Program is only $1,949 versus the $6,300 deducted from the standard Lump Sum scenario. The Managed Cap Program provides the transferee with $4,351 more for relocation services.
On top of wanting the obvious tax savings and happier transferees, there are five characteristics common with companies that elect to move away from standard Lump Sum programs and into Managed Cap Programs:
- High focus on cost containment and savings
- Limited resources for mobility management
- Lack of structured programs and/or policies
- Limited quality-assurance management
- Need to attract and develop talent
If this sounds like your company, it would benefit you and your employees to contact Global Mobility Solutions and learn how we can quickly implement a mobility program custom-tailored for your needs.