A managed lump sum policy is similar to a traditional fixed lump sum except the company specifically defines the benefits covered by the lump sum in its policy guidelines. These benefits are sometimes presented as menu items, allowing the employee to choose benefits that best suit his or her needs. Other companies calculate the lump sum based on the benefits they intend to provide. Either way, the company typically provides relocation counseling (either in house or through a third-party provider) to help the employee use the funds most effectively. Unlike the traditional fixed, any unused funds revert back to the company. The company calculates the managed lump sum amount using the same methods as the traditional fixed, sometimes with the assistance of a third-party data provider.

Pros of a Managed Lump Sum Program

This model allows companies to track benefit usage and spend much more reliably than the traditional fixed. This closer control will also help the company to manage costs better with a vetted network of relocation service partners to ensure optimum pricing and quality. From a tax perspective, the employer can make direct vendor payments, allowing it to treat each of the components individually as taxable or non-taxable. 

Cons of a Managed Lump Sum Program

The downside to this model is again the risk of mismanagement of funds and running out of money before the employee relocation is complete. Providing the employee access to a relocation counselor should reduce the possibility of this happening by a great deal, however, the potential is still there if the employee decides to go off on his or her own and not heed the expert advice provided.

Management Tips

If the company implements and manages the managed lump sum carefully, it should provide meaningful and targeted benefits to the relocating employee while imposing effective controls. By offering careful guidance, this option should help reduce lost productivity and stress for the employee while reducing administrative burdens and controlling costs for the employer. For budget-conscious companies, the managed lump sum can be a very good option for all parties involved.

Lump Sum Policies Best Practices

To help you understand the complexities of lump sums, download the white paper, “Lump Sum Policies Best Practices” to learn about the advantages and disadvantages of each type of  policy; how each type of program works; and which type of policy is the best fit for your employee relocation program.


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