Cash Doesn't Cut It: Five Reasons Why Lump Sum Relocation Policies Aren't Fit for Purpose

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For companies that relocate employees, providing a cash lump sum has grown to be a popular choice, particularly when it comes to new, junior hires like graduates.

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A cash lump sum will cover the basic elements of a move, and is a satisfactory benefit for junior staff for whom traditional relocation support is not in budget. HR teams may opt for this to save on costs and cut down on admin and paperwork.

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But are lump sums alone a truly suitable solution? Here we dig into how a lack of proper relocation support can actually make things more difficult - and expensive!

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Five reasons why lump sums aren’t enough

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1 - Lump sum assignees often need support the most

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While young graduates are most likely to receive a cash lump sum, they’re often the ones who really need support! It’s usually their first time moving, and their lack of knowledge around processes and pitfalls, such as avoiding scams, can make it a much more arduous process. The support needed for processes like submitting an offer for a home and reviewing a lease is fairly basic, but extremely vital!

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2 - Lump sums can create more work for HR, not less

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Without any relocation support, HR is the obvious port of call for all questions. And young, inexperienced assignees will have many questions - our data shows HR teams can spend half a day’s work per move on this! The same goes when issues arise, for instance when employees are struggling and ask to extend their temporary housing multiple times - many HR teams have turned to PerchPeek in desperation!

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3 - Lump sums easily lead to additional costs

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Inexperience with tricky housing markets can lead to temporary accommodation extension requests as assignees struggle to secure a home. An extension of one week in TA can dwarf the cost of providing support in the first place! Plus, they may undervalue important services like shipping, or miss others out altogether. This can result in delays and escalations that can be very costly to rectify.

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4 - Lack of support means a bad onboarding experience

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Lump sum recipients are often new hires, and foregoing proper relocation support makes for an unfair onboarding experience as it doesn’t set them up for success. While young, tech-savvy assignees won’t expect to be spoon-fed, the massive amount of time and effort needed just to carry out research is very stressful, and means their focus won’t be on getting to grips with their new role.

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5 - Low employee retention and business goals being missed

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Lack of relocation support often means a bad experience, which leads to low staff satisfaction and morale. As a result, projects may be delayed and business targets missed. Assignments may even fail altogether, increasing employee churn, wasting budget already invested in obtaining visas, and proving far more costly in the long run to replace and onboard new hires.

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So what’s the alternative?

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How do you provide solid relocation support to junior employees at a low cost?

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There’s an easy answer - and it doesn’t involve spending any more than you were before!

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By adopting a hybrid model and re-allocating a small portion of a cash lump sum to tech-based, self-driven relocation support, you can arm transferees with the tools, tips and templates needed to gain success in competitive markets, and support in completing other necessary processes like local registration and banking. They’ll also benefit from local experts to offer advice and answer all questions, big or small.

What are the benefits?

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●     Saving time and admin headaches - and improving cost efficiency - for HR teams

●     Keeping costs flat, or even reducing them - plus, avoiding additional unexpected costs

●     A massively improved assignee experience, leading to better employee retention

●     Speeding up the relocation process, improving business productivity and results

Putting it into practice

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Using a PerchPeek example, let’s take a typical lump sum package of $5,000 (USD).

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By re-allocating $735 to PerchPeek’s Pioneer Perchy core support package:

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●     The transferee receives unlimited relocation support from local experts, app access for one year, home-finding guidance and full support services

●     The transferee still receives $4,201 to spend as they choose

●     The company saves at least four HR hours, and avoids delays in productivity

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Total expenditure remains the same!

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Summary

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If you need to relocate employees, a cash lump sum is fine. It’ll get the job done.

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However, no one really wins in this scenario. Assignees have a poor relocation experience, and employers end up spending extra time and money to help fix things.

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A much better solution - and one that benefits both transferees and employers - is a hybrid package of core relocation support and cash that can be spent however transferees choose. And it doesn’t have to cost any more than a cash lump sum!

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Benefits include:

●     No more HR time and resource wasted answering questions

●     Preventing additional costs mounting up

●     Better employee onboarding experience, reducing risk of churn

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Case study

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To find out how Framestore, an Oscar-winning creative studio, transformed their relocation scheme through PerchPeek, providing end-to-end support to all staff while keeping costs down at under <$5k per move, check out our case study here!