Why Lump Sum Relocation May Not Be The Best Choice

The reality of being a growing corporation in a growing economy populated by only 30 some million potential workers, is that not all the expertise you require for your business is available locally or even nationally. This means that relocating an employee is imperative to your company.  While your HR department can be in control of the skills that the employee that you are relocating possesses, you can’t always be in control of their personalities, temperaments, and behaviours.

Relocating an employee can cost a substantial amount of money. Unfortunately if you decide to relocate an employee and provide them with their relocation funds in a lump sum, you don’t always know what they will do with the money. Will they spend it on what they need to, or will they spend recklessly?

Here’s some ways that employees have misused their lump sum relocation funds.

  1. A man who was relocating to New York from Toronto received a lump sum amount of $30,000. He decided that instead of hiring a proper moving company that he was going to do-it-himself and pocket the rest of the money. However, the rental truck had mechanical troubles causing damage to his belongings with no insurance coverage. At the time of his start date at his new job, he was still replacing his furniture and household items and going through the stresses of moving into a new home. This impaired his ability to take on his new jobs responsibilities properly, for which he was hired.
  2. We’ve also had an employee use their lump sum relocation funds for the purposes of fixing their vehicle instead of home find trip. This led to a sad realization when they had to pay for this part of their relocation out of pocket.

The employee being relocated may become overwhelmed in all the steps required to successfully relocate. This lack of knowledge about relocation can easily result in panic and poor spending choices.

There is no way to determine if your relocating employee will use the money correctly, as there are too many unknown variables. This is why using an Expense Management Program is the best way to handle a lump sum situation. Relocation experts are able to divide the money and allot the right amount, with buffer, for all the necessary purchases during a relocation.

Relocating an employee is an investment in the employee from the company, but also an investment in the company from the employee. It can require a substantial amount of capital – capital you want to contribute to making easier the life of your relocating employee so they can hit the ground running at your company. You generously award your employee a hefty lump sum, trusting that they will use the money wisely.

Companies should hire an experienced relocation company to implement an Expense Management Program rather than give out a lump sum amount to prevent misuse of funds!

If you are relocating and searching for some advice on how to handle your relocation money, TransferEASE can help. At TransferEASE our knowledgeable relocation experts can help guide your relocation from start to finish, with care and attention. Call us today to speak to a representative.