Are lump sum allowances the best way to handle employee relocations? Sharon Swift outlines why they may not be the wisest approach.
The costs of relocations can rise steeply and quickly: a key reason for the rise in lump sum allowances. When trying to satisfy the need for efficiencies both financial and of implementation, it’s no wonder it’s an increasingly popular approach.
It is, however, critical to approach with caution and realise that the long-term costs can outweigh the short term benefits.
Here are 5 problems with lump sum allowances
- One size does not fit all
Not all employees have the same circumstances – consider kids, pets, marital status and season of life. What would be considered generous for one would leave others financially short as a result of the move. This can cause undue burden and challenges in an already stressful time of personal upheaval.
- Working out what is fair
Reaching an amount or policy that suits everyone can be near impossible. A young bachelor will have very different considerations compared with a married employee with children. These differences in personal circumstances can arise regardless of seniority, tenure, salary grade and career progression plans for your employee. Determining an equitable amount can be a mammoth task.
Ensuring that all relocating staff members go through a solid on-boarding process can make or break the success of a mobility policy. The difficulties and nuances of adapting to a new culture and lifestyle cannot be underestimated, and it is key to have a consistent approach. Allowance for the settlement component of a move is often forgotten in favour the more urgent logistics.
Good judgement is a large assumption on the part of an employer when handing out a chunk of money. Temptation to skimp on the important aspects of the location in favour of pocketing the funds can be at the expense of a smooth relocation. Without clear guidance on how the money should be spent, investment in the relocation can be more costly in the long run.
- Duty of care
The reality of getting down to business means that the personal stress involved in a relocation gets ignored, or simply forgotten. Quite often it is easy to overlook the duty of care involved in moving staff and their families to another part of the world, and that compassion can go a long way. An ‘off you go’ approach once handing over a lump sum can be considered uncompassionate.
What’s the solution?
Lump sums have their advantages – quick to implement, easy to administer and good for cost control. The fact remains that “Family and spouse issues continue to be the biggest challenges that threaten the success of international assignments”, according to the Ernst & Young Global Mobility Survey. Sixty-five percent of international relocations fail or result in early repatriation.
IT’s therefore crucial for businesses to offer guidance and allowances for the settlement side of the relocation.
When considering alternatives, a flexible allowance plan can work well. Deriving a range of cost and service categories involved in a relocation, and allocating a fair budget for each, can quickly ensure that each aspect of the move has adequate provision.
About the author
Entrepreneur and leading expat commentator, Sharon Swift is author of Amazon #1 best-seller ‘So, you’re moving to Australia?' Sharon is Founder of The Expat Concierge, which helps expat families to successfully transition to life in Australia. www.theexpatconcierge.com