Lump-sum relocation packages make administration and budgeting more accessible for employers. However, there are several disadvantages employers are beginning to see in their organizations. First among these disadvantages is that many lump sum payments do not adequately cover all of an employee’s relocation costs. GMS’ 2019 Lump Sum Survey shows that employees spend more, sometimes significantly more, on their relocation than their lump sum payment. This includes:

• 61 % of homeowners reported spending more
• 50% of renters reported spending more

Employee Dissatisfaction

Ultimately, more than half of relocating employees need more lump sum cash to cover expenses. Naturally, this results in a higher level of dissatisfaction with the organization’s lump-sum relocation packages. Overall, dissatisfaction with lump sum payments follows these patterns:

• 58% of homeowners reporting dissatisfaction
• 53% of renters reporting dissatisfaction

Loss of Control

A significant disadvantage is the employer’s loss of control over spending budget dollars. Lump sum relocation packages disbursed directly to employees may result in company funds being spent on non-relocation expenses, including cars, televisions, vacations, or other items. Funds spent on non-relocation costs do not support the successful relocation of the employee. As a result, the relocation may be at a higher risk of failure. 

Additionally, this lack of oversight can lead to inconsistencies in how employees utilize their relocation funds. Some may prioritize essential moving expenses, such as hiring professional movers or securing temporary housing, while others might allocate their budgets toward personal indulgences. This disparity can create a sense of inequity among employees, as those who spend wisely may still face challenges in their relocation process. In contrast, others may find themselves financially comfortable but unprepared for the logistical aspects of moving.

Moreover, the unpredictability of lump-sum payments can complicate the relocation experience. Employees may underestimate the true costs associated with moving, leading to financial strain when unexpected expenses arise. For instance, last-minute repairs on a home, increased transportation costs, or the need for additional storage can quickly deplete the funds, leaving employees feeling stressed and unsupported.

To address these issues, organizations might consider offering more structured relocation packages that balance flexibility and support. For example, a tiered approach could allow employees to access funds based on specific needs, prioritizing essential relocation expenses while giving them autonomy over their choices. This way, companies can maintain better control over their budgets while enhancing employee satisfaction and reducing the risk of relocation failure.
Ultimately, a thoughtful approach to relocation packages can foster a more positive employee experience, leading to smoother transitions and greater overall satisfaction with the organization’s support. By recognizing the complexities of relocation and adapting their strategies accordingly, employers can create a win-win situation that benefits both the company and its employees.

Inefficiencies

Many GMS clients achieve significant spending reductions with relocation programs that follow industry best practices. A major GMS client recently conducted an in-depth study of their relocation program expenses. This client learned that if their organization moved to a lump sum program, they might increase their relocation program expenses by 40%. In other words, by following industry best practices, this client keeps relocation budget dollars that otherwise would have been spent on inefficient lump-sum relocation packages. Any GMS client can achieve the same reduction in relocation costs through:

1. Benchmarking their relocation policy to industry best practices
2. Efficient relocation program operation
3. Providing support to transferees that they need
4. Using business intelligence and data analytics to understand the actual costs of their relocation program
5. Utilizing a competitive vendor network of relocation service providers