What Is A Typical Lump Sum For Relocation

What Is A Typical Lump Sum For Relocation

So, an employee has been offered a great new job in another part of the country? Fantastic, but before signing on the dotted line, ask what the relocation package is.

Some analysts say how generous the relocation package is indicative of how well the company treats and values its employees. That may be stating it a little cut and dried, but it’s certainly one indicator.

Of course, the relocation package is also related to how serious the company is about obtaining the services of the potential hire. For example, total compensation for a new college graduate may be capped at a lump sums for relocation of perhaps $2500 to $3,000, on the theory the company can ultimately attract college grads from everywhere and doesn’t need to pay so much in a relocation bonus.

On the other hand, if a company is hiring an IT manager or a senior executive, the compensation package should be considerably higher. After all, counting relocation scouting trips for a new place, transporting an automobile, hotels, temporary homestays, closing costs, agent commissions, cleaning costs, and temporary storage, the average middle-income employee spends nearly $71,000 to make a move, of which perhaps only $13,000 to $25,000 are direct moving costs of household goods. ion

Different ways of handling relocation reimbursement

There are a few ways that a company can offer a relocation bonus. One method is to

offer a straight cash lump sum. This seems to be eminently practical as the company needs to do little other than write a check for the move. And it does give the employee the freedom to handle the move as they see fit.

The problem with direct cash payments is that the IRS considers direct payment as income, so the employee winds up paying taxes far in excess of what they garner from the company in relocation assistance

A second factor is that more senior employees get seriously bogged down in not only finding a new place to live but in selling their old home. So if the company seriously wants their new employee to hit the ground running, they will make every effort to assist the employee with relocation.

Which bears factor in another form of relocation payment, direct compensation. Here someone in the company deals directly with the moving companies and everything associated with moving. The employee simply forwards the bills directly to the company and they pay them.

Finally, there is reimbursement. Some companies put the onus on the employee to take care of all moving expenses, but then submit receipts for reimbursement.

Most organizations offer some form of partial, lump-sum payment for every employee, and then reimbursement as a whole for employees upon the showing of receipts.

In the short run, these, like cash payments, are easy for companies to administer, but the onus of stress is left to the employee, and performance sometimes suffers.

For example, studies have shown that only 2 percent of relocation packages pay attention to spousal employment during the move. And slightly over a third of companies even offer valuable information about schools and the local community.

Only 16 percent offered any form of relocation compensation for those with underwater mortgages.

Employees in high-value fields demand generous relocation packages

Employers actively seeing to recruit high, in-demand employees like IT workers, need to be willing to pay the price. Studies have shown that not only are prospective employees turning down jobs from new employers if they aren’t offered a generous relocation program but up to 20 percent of employees actually quit their current jobs if they weren’t offered a perceived fair relocation package as part of a mobility move upwards.

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