The Zero (Lump)
Sum Game
It is often a challenge for a company to square
off the needs of the employee with those of the
business. This is especially true in the relocation
business.
Many companies and organisations are now
considering “a lump sum” policy approach for at
least some of their relocating employees. That
is to say that an employer would set aside a
budget or even pay a fixed amount in cash to the
employee for relocation expenses, leaving them
free to decide for themselves on what the money
is spent.
On paper this has its advantages.
Such a policy is theoretically less administratively
cumbersome than a directed relocation
programme and on a rough and ready basis it
can be applied to all levels of staff, if required.
The idea of “cash for relocating” can also be a
powerful message to a new employee, since it
offers them the freedom to decide on what and
where their relocation allowance will be spent.
In reality lump sum programs are much more
of an attraction to the employer than the
employee. This is especially true when UK
companies chose as an upper limit the tax free
£8,000 relocation expenses maximum set by the
HMRC. The £8,000 limit has not been revised by
the HMRC since..1992 and 23 years later this
amount simply doesn’t reflect the current cost of
relocating.
....broad brush lump sum programmes...
over compensate individuals who do not
need assistance and under compensate
those that do.....
In our professional opinion, broad brush lump
sum programmes do not target the needs of
employees and recruits effectively. They usually
over compensate individuals who do not need
assistance and under compensate those that do,
particularly those employees with families. They
do not address the fundamental yardstick of
relocation that the employee should neither gain
nor lose financially through the physical act of
relocation
Understandably readers may think that since
professional relocation companies like HCR
are unlikely to gain from lump sum relocation
programmes they are always going to criticise
their introduction.
However, as professionals we often have to
pick up the pieces or provide advice on failed
assignments. We would also like to high-light
instances in recent history which expose some
of the stresses and strains placed on the DIY
relocator.
Many employees have little experience of the
costs they encounter when moving house and
can be surprised how little a lump sum will cover.
Coupled with this is the requirement for the
employee to find and vet suppliers of services
such as removals companies and letting agents.
......... a removals company in the South
of England suddenly went into liquidation.
More than 30 customers found their goods
impounded...
As an individual, rather than a company, the
employee has much less leverage over fees and
payment terms.
For example, removals companies regard
individuals as a much higher payment risk and
will therefore insist that any charges are paid
in advance of any items being collected and
transhipped.
In recent months, just such a removals company
in the South of England suddenly went into
liquidation. More than 30 customers found their
goods impounded by creditors of the company.
Not only did they lose the fees paid in advance
to the company but they were also forced pay
further charges to have their goods released.
The other major expense that relocating
employees are likely to incur is fees paid to letting
agents.
....(Letting Agent)...fees can amount to
hundreds of pounds for what are often
regarded as relatively simple tasks...
Prospective tenants can find themselves having
to pay significant sums for administration fees
associated with beginning a property tenancy.
Fees charged by Letting Agents, which are often
opaque have now become very unpopular not
only with prospective tenants but sometimes
even with landlords.
www.hcr.co.uk
© 2015
Fees can amount to hundreds of pounds for what
are often regarded as relatively simple tasks such
as reference checking and the drawing up of a
property lease itself a fairly standard document.
It is often very difficult for prospective tenants
to work out in advance what fees are likely to be
payable so that comparisons between competing
letting agents are at best difficult and, at worst,
often impossible.
There are undoubted risks when dealing with
letting and estate agents who stand to gain as
much, if not more, from the landlord as they
do from the potential tenant when renting a
property. Individual clients often recognise this
too late. HCR have experienced specific examples
of employees being encouraged by agents to rent
in residential areas they later found to be insecure
and even dangerous.
These are just two examples of why HCR would
suggest caution in using simple lump sum
relocation programmes. They definitely have
their place but it is by no means clear that they
do actually enhance the employee experience
on every occasion. It can be the case that
employees believe they are being fobbed off with
a policy that is administratively convenient for
the employer but leaves them with a substantial
and unsupported burden in moving themselves
and possibly their family to a new and unknown
location.
HCR maintains that there is still a clear argument
for targeted relocation assistance that can pay
significant dividends in terms of the crucial
aspects of employee engagement and well-being.
It is possible to combine the two approaches with
a “Managed Lump Sum” policy. Briefly a budget
is allocated to each relocating employee but this
is managed by a relocation provider on behalf of
the company which can then ensure the targeting
of a tailored relocation benefits package. This is
coupled with some set services paid for by the
company which ensure the support is taken and
provided.
Relocation is a significant investment for all
businesses, whatever their size, and keeping a
tight rein on budgets is vital to maintain business
advantage; at the same time, organisations have
to manage their talent creatively. The question
organisations need to pose is: does a lump sum,
DIY relocation help retain talent, entice new
talent, provide value for money and add to the
organisation’s brand?
About Us
HCR is an award winning global Relocation Management Company with an enviable reputation for
delivering on our promises, being innovative in our thinking and for having a wide knowledge base
and vast relocation experience. For over 30 years, we have been providing our expertise in Employee
Relocation Services to our clients.
Our World Connect Network is made up of 44 offices across the globe, enabling us to deliver
seamless relocation services across 149 countries. Through this unique network, HCR has the
capability to supply you and your employees with comprehensive local knowledge and host country
support, whilst retaining one central point of management - reporting and invoicing in the UK. Each of
our World Connect Partners are hand picked to ensure they share our ethos, culture and dedication to
delivering an outstanding service provision.
We have vast experience across all industries; our clients range from the government sector and
foreign embassies to industries such as automotive, pharmaceutical, consumer products, oil & gas,
aerospace, telecommunication, health sector, finance and many more.
Every client receives a professional, one-to-one service regardless of the size of the contract. Whether
they relocate one or two employees a year, or hundreds, each relocation we manage is treated as
personal and individual because we look after our client’s key resource – their people, and we will be
there for them as long as they need us.
For more information or assistance with your global mobility requirements, please contact
Louise Hardy, Business Development Executive on: +44 (0)1256 313887 or via email on
[email protected].
www.hcr.co.uk
© 2015