What is a lump sum move?
Lump sums cover the costs, or a portion of, a corporate relocation. They might cover items such as the cost of renting or purchasing a new home, moving expenses (hiring a moving company, for example) and some legal expenses. This is separate from salary and might be a sign on bonus or paid to an employee asked to transfer to another location.
Who gets the money?
The money is either paid directly to you (the employee) by check, direct deposit, on your paycheck or on a credit card. Sometimes it will be paid directly to the mover. The employer might have preferred moving partners and may limit your choice of moving companies.
When is the money paid?
There is no firm policy but obviously it could be a huge issue. A complete moving package can easily be in the multiple of thousands. Some companies will give the employee the lump sum early, it makes decisions and scheduling far easier. Some like to reimburse the employee after the relocation is finished. Sometimes the reimbursement is in pre-tax dollars.
Companies and employees like it for
- Ease : A straightforward transaction in which the company simply pays the employee a standard amount.
- It’s less work for the organization, as the employees generally handle the details of their moves.
- Employees can put the money toward the specific expenses. The moving costs or storage costs for example
But there are some issues
- It’s difficult for the company to know how much the employee is spending on moving. They may have over compensated or under compensated the employee.
- It’s a lot of work for employees. They will have to organize all the moving details themselves. It’s particularly complicated if it’s a cross-country or overseas move.
- If it’s a lump sum, the employees are under no obligation to return money they didn’t spend on moving expenses.
Comparison to other relocation packages
- Lump sum is a fixed one-time payment provided by the company for moving-related expenses.
- Reimbursement is a maximum amount that the company will reimburse for moving-related expenses. You will have to save all your receipts.
- Direct billing is when the company pays all or some expenses directly to the moving company, most often when the company coordinates the move.
- Third party relocation is when the hiring company outsources their involvement. A relocation broker provides coordination for all the services you need.
The 3 major areas that determine a lump sum
- Distance, local, interstate or international all have different cost associated with them.
- Packing, are you or the movers doing the household packing, If money is tight adjust what you pack vs the moving company
- Storage, There are many levels of storage. Movers warehouse, self storage, containers like PODS. Climate controlled vs non-climate controlled. Do you need access to it?
Other considerations often negotiated
- Do you need to transport cars or boats
- Do you need swing sets, pool tables, or exercise equipment dismantled
- Is there a need for crating items like art work?
- Firearms or wine collections need a special handling.
- Insurance or liability coverage
What might also be covered?
A pre-move visit (to check out housing, schools and neighborhoods), a travel allowance, spousal assistance in finding new employment, and rental assistance if you need to break a lease or loose a security deposit. Temporary housing assistance, and financial protection if there is a loss on the sale of your home.
The fine print
Your new company is making a sizable investment in hiring and moving you, so it’s understandable that they’re going to want some reassurance that after the move you’re not just going quit and go work for someone else. The majority of companies will require a new hire to sign a payback agreement. If they leave the company within a year or more of their start date they are responsible for paying back all or part of their relocation costs
The IRS may want to tax this
Check with your accountant. Tax rules covering moving and how you are compensated vary, not all expenses are tax-deductible.
How Old Grey Tiger fits in
- We work with individuals that need help determining what they can afford and what to spend their moving dollars on.
- We work with businesses and HR departments that do not have a preferred mover, yet still want to help their employees control their moving costs and find a licensed reputable mover.
- And we work with corporate relocations that need a detailed survey and household inventory when they do not have a representative in the area.