If you relocate employees, you are familiar with the term policy – a generic term for the document or documents that detail the types of services and expenses offered to relocating employees. There is no shortage of combinations of services and expenses that may be included in policies. When those benefits differ by eligible employees, they are often referred to as policy tiers.
There are different configurations by which policy tiers are structured. In this document, we will feature each of those configurations, the advantages and disadvantages of each, and tips on how to determine which may best suit your mobility program.
Let’s start with the basics. Below you will find a summary of the policy structures in use today.
- Managed Relocation – standard set of professional services and reimbursed expenses
- Lump Sum – one-time cash payment
- Lump Sum Plus – one-time cash payment accompanied by a professional service or additional expense, most often a household goods shipment
- Core/Flex – standard set of professional services and/or reimbursed expenses that are offered to all individuals combined with additional flexible & variable professional services/reimbursed expenses offered as a result of need, budget, and/or some pre-determined criteria
- A la Carte – no standard set of professional services or reimbursed expenses; each relocation package is customized
- Capped Relocation (aka Managed Cap or Managed Lump Sum) – employee has the choice of various professional services and reimbursed expenses, but the total amount of their selected support cannot exceed a pre-determined dollar amount
- Point System – employee has the choice of various professional services and reimbursed expenses which are each assigned point values and the total number of spent points cannot exceed a pre-determined maximum number of points
- Hybrid – combination of any of the possible options (e.g., Core plus additional capped amount or core plus points). Lump Sum Plus is technically a hybrid policy, but its use in so many mobility programs (often as a lower to mid-level tier) has led to it being considered a mainstream policy structure.
What policy structure is best?
All of these options can be the right choice – in the right organization and for the right reasons – but it often comes down to the goals and objectives for the mobility program.
Companies have a lot to consider when it comes to their employee mobility goals and objectives – recruiting and talent needs, organizational culture, budget/costs, the employee experience, and overall desired level of administration – to name just a few. All of these factors impact what policy structure (or structures) can best serve a company’s mobility program.
It is important to understand that a generous lump sum can be very lucrative for an employee, and a managed relocation could leave an employee paying 50% of their relocation costs out of pocket. The knowledge and professional opinions about each of these types of policies is not intended to sway a reader in one particular direction; rather, it is a dissection of the common characteristics of and considerations for each policy type.
Effective policies balance three components that drive their mobility programs – administration, cost, and experience.
- Administration – everything and everyone that is involved with managing the policy (developing relocation offers, determining eligibility for services/expenses, delivery of services, approving exceptions, etc.)
- Cost – everything involved with the bottom line (total overall costs, exceptions, budget, projections, etc.)
- Experience – all about the employee (the level of support they receive, the amount of out-of-pocket expenses they have, clarity of the processes, etc.)
Each organization has its own perceived values placed on each of these three components. Some organizations place more emphasis on cost, while others may place more emphasis on experience.
To assist with determining the best program design for your company, Aires has created a detailed guide covering the advantages/disadvantages of each policy structure. For a copy of this white paper or to further review your program structure, please contact your Aires representative.