As the debate within the moving community about lump-sum payments rumbles on, Andrew Bennett explores this hot topic with the help of industry professionals.
Funding international relocations via a ‘lump sum’ to employees is nothing new, and the method shows few signs of disappearing.
Corporate HR teams welcome the reduced administrative workload of making a direct, fixed payment to the assignee. It removes the need to manage multiple payments from the employer to various companies in the relocation supply chain, including international movers.
This funding model became prominent in the late 1990s and has been in use ever since. Lump sum is still popular and may particularly appeal to younger business professionals, who want the maximum flexibility to manage their moves.
However, some RMCs and FIDI Affiliates question the viability of the model. They fear, in some circumstances, that it can lead to disastrous moves, which can mean failed – and costly – relocations.
FIDI’s own white paper on the topic points out that much has changed in the workplace in recent years. This may mean that lump sum is not always the best fit for international assignees.
A policy shift
As well as the shift in corporate workforce demographics, with Generation Z and Generation Y employees (those born between 1980 and the 2000s) now joining the global talent pool, use of lump-sum payments has evolved significantly.
Companies are increasingly adopting a blend of traditional policies and more flexible, employee-centric approaches, according to Ruth Lyons, Sales Director at Gerson Relocation, in the UK.
“This shift is largely driven by the need for cost-effectiveness and the desire to accommodate employee preference,” she says.
There is a growing trend towards managed lump-sum policies, which – unlike traditional fixed lump sums – “explicitly define the benefits covered within the policy guidelines,” adds Lyons.
“These benefits are often presented as menu items, enabling employees to choose options that best align with their individual needs. This tailored approach allows for greater personalisation.”
An important distinction from traditional fixed lump sums is that any unused funds in a managed lump-sum policy may be returned to the company.
Lyons generally supports the use of lump-sum policies, with some caveats, including ensuring the lump sum provided is enough to cover the full costs of a relocation.
“These policies offer significant advantages, particularly in terms of flexibility and cost control,” she says. “They empower employees to manage their relocation according to their personal preferences, which can enhance satisfaction and reduce administrative costs for the company.
“For organisations, lump-sum policies provide predictable budgeting and can be more cost-efficient, especially when compared with fully managed relocation packages.”
Peter Sewell, Managing Director of Sterling Lexicon, says the rise in popularity of lump sum has been driven by increasing pressure to manage costs. However, he adds: “Today’s employees are much more focused on seeking meaningful work and recognition with organisations aligned with their own values – a trend that’s likely to continue.”
“Employers who prioritise holistic employee wellbeing and duty of care will probably shift towards using lump sums more sparingly and providing additional support to maximise their effectiveness,” Sewell says.
Better cash flow
Steve Jordan, editor of The Mover magazine, believes lump-sum customers are a “mixed blessing” for movers.
“They convert a corporate client into a private one. This helps, because private customers pay in advance, so cash flow is great,” he says.
“It also means that the movers are a step or two away from the demands of the corporations and the RMCs. That said, I believe the corporations still have a duty of care, so they should be providing guidance to their assignees and helping them make sensible decisions.”
However, the use of lump sum means moving and relocation companies need to employ consumer sales and marketing skills, instead of taking traditional B2B routes to win business.
“Although many corporations will provide direction to assignees, movers must now rely on attracting private customers directly, through more traditional marketing and SEO [search engine optimisation], and from lead-generation companies. Each sale is separate and every time they must compete, usually on price, with lower-end suppliers.”
Industry consultant and experienced moving company executive Mark Oakeshott offers a different perspective. “While the lump-sum model has a negative effect on companies that act as bookers for relocation management companies and the RMCs themselves, I believe the trend is positive for many more professional international moving and DSP companies that now have the opportunity to quote (for), and book, these shipments,” he says.
“Provided the corporate account gives clear guidelines to relocating employees on accredited suppliers – such as FIDI – to avoid rogue movers, I see lump sum as good news for the wider industry.”
Managing the risk
The need for greater compliance has grown significantly since lump sum emerged in the 1990s, and the requirement to tick regulatory and taxation boxes has never been greater.
In its white paper, FIDI points out that employers benefit from lump sum because the administrative responsibility is shifted to the employee. However, it continues, the employee also inherits “the challenge of compliance. Many assignees are either ignorant of the regulations or, at the very least, ill-equipped to deal with them.”
The assignee, the white paper adds, “is unlikely to have the knowledge required and thus is at risk of errors that could lead to legal penalties, financial risk or even deportation.”
Andreas Eibel, Vice President and Sales Director at Sobolak International in Austria, believes using lump sum can make it harder for clients to manage quality control of a relocation.
Of the inherent risks of lump-sum payments, Eibel says: ‘From an unhappy transferee to lawsuits, everything is possible. Especially with cheap companies’ liability and transport insurance, issues may arise. In addition, low-budget movers are not explaining the process correctly, which leads to false assumptions regarding the service level.’
Larger corporations are experiencing harder times, which has led to them downsizing their relocation budgets. Eibel worries that if transferees are allowed to choose any moving company ‘due diligence responsibilities do not apply at all’.
‘Only qualified companies – like FIDI companies – incorporate all aspects of our corporate world to service our corporate clients’ needs,’ he says. ‘Using suppliers down the food chain spoils these opportunities, which makes multinational companies or organisations look bad for the transferee.
The relocation Wild West
Kay Kutt, CEO of Silk Relo, is another industry professional with strong doubts about the potential risks of lump-sum payments.
From an HR team’s point of view, lump sum can be “an easy solution to get folks from one place to another,” she says, and “probably works well” if companies are recruiting a young mobile talent pool. However, “if you’re recruiting senior leaders, there is little benefit to them.”
“I believe the pendulum has swung far too far to the ‘no’ service model,” says Kutt, who adds: “Lump sum is like putting a band-aid on a deep wound. People like to have a choice, they are always going to pick the cheapest, and service isn’t guaranteed. With no contractual engagements or service level agreements, it becomes the wild Wild West of relocation.”
When the economy isn’t robust, lump sums look attractive as a solution, according to Kutt: ‘As you dig in to the solution, it meets some needs, (but) it is not a one-size-fits-all solution.
‘In a scenario of a lump-sum policy, there isn’t any due diligence, because it is up to the transferee to choose the solutions they want to spend their money on. With no supplier vetting or oversight, (it is a) “buyer beware” solution.’
A sustainable choice?
With the sustainability of international moves well and truly in the spotlight, corporations are looking for a range of low- (or no-) carbon solutions they can apply.
“Compared with a decade ago, the world’s largest employers are more openly and formally committed to reducing their carbon footprints: most have publicly stated a date by which time their operations will be net zero,” says FIDI’s white paper.
As part of the solution, some may view lump sum as a more sustainable action because it isn’t providing air or sea freight or temporary housing for every transferee. Assignees are given the choice of how they spend their relocation money, so – in theory – they are free to choose the greenest relocation solutions.
However, Silk Relo’s Kutt, says: “Others would argue it is less efficient because it is a random spend, not qualifying partners that are best-fit sustainable providers. It isn’t addressing a company-led sustainable model; it is left to the individual.”
‘Most times, an individual with cash in their pocket spends their money on the cheapest option, not the most sustainable. The company is washing their hands of sustainability in the case of lump sums.’
Another FIDI Affiliate that believes lump sum may not work so well in promoting sustainability and compliance is Sterling Lexicon. Managing Director Sewell says this is because ‘they transfer responsibility to employees, limiting a company’s control over partner selection, standards, and compliance tracking’.
Lyons, at Gerson Relocation, believes lump sum needs to be carefully planned and managed, as poorly executed use of this tool can, she believes, lead to dissatisfied employees.
‘Assignees face several risks when relocating under a lump-sum policy. One of the primary risks is that, if the lump sum is not accurately calculated or does not account for local costs, the assignee may find themselves without enough funds to cover essential expenses,’ says Lyons.
‘This risk is particularly high in regions with volatile housing markets or high inflation, where employees might need to rely on their own financial resources to make up for any shortfalls.’
Relocation can also be complex, particularly when assignees move to a new country.
‘Without adequate support from a relocation company, assignees may face challenges such as finding housing, enrolling children in schools, adapting to cultural differences, or settling in. The absence of corporate relocation support can lead to stress, delays and dissatisfaction with the relocation experience,’ Lyons adds.
‘Additionally, when the lump sum is insufficient, assignees may be forced to cover relocation costs from their own personal funds, which can strain their finances, especially if they were not prepared for these additional expenses.
‘Over time, this financial burden can negatively impact on the employee’s morale and performance during their assignment.’
In the worst-case scenario, this can lead to a failed relocation, forcing the employee to abandon their assignment altogether.
Another factor to consider for HR managers – or others looking to use lump sum as a tool for assignees – is how to ensure the actual payment is fair and equitable for all employees.
Calculating lump-sum allowances is challenging because of varying individual and family priorities, fluctuating costs, and differences in origin and destination logistics, such as home and/or family size and moving dates,’ says Sewell, at Sterling Lexicon. ‘Analysing historical data can certainly help, but ensuring fairness is difficult if the lump sum proves insufficient, leading to case-by-case exception requests.’
The lump sum as a policy certainly isn’t all negative, with some industry executives believing this relocation approach has, in some ways, moved forward with the times.
In terms of recent trends, Sterling Lexicon’s Sewell says: ‘The good news is that closer scrutiny and increased awareness of the possible limitations help drive better, more innovative tools and resources to optimise its use, and lead employees to work with experienced relocation partners. We are also seeing companies that were early adopters now maturing and rationalising their approach.
Increased volatility
FIDI believes corporations need to consider carefully how lump sum fits with global mobility in 2025.
“Many employers still prefer it for its flexibility, cost control, and administrative simplicity. Many assignees still prefer it because they can allocate funds how they want – and even keep what’s left over,” it states in its white paper.
“Employers will continue to use lump sum, supported by technology and a workforce that is increasingly likely to seek independence over corporate control.
“But there is increased volatility in the world today, coupled with the need for stricter financial, legal and environmental compliance,” says the FIDI white paper.
“The need to support an increasingly diverse workforce makes a ‘one size fits all’ approach difficult to support. For many employers, this makes the lump sum problematic. In short, it is not for everyone.”
The FIDI white paper on lump sums can be downloaded on www.fidi.org/publications
