What are the Different Types of Relocation Packages?

According to the U.S. Census Bureau, the percentage of the population that moved within the same country decreased from 13.6% in 1948 to 6.9% in 2016. Why is this? One theory is that the perceived added value an employee gains when they relocate, is falling. This makes it less likely they will move. As a result, for companies to attract the best talent, they need to get creative with what they offer in their relocation plans.

Read our blog, “Why Talent Is Relocating At Record Lows, And How To Fix It.”

There is no one-size fits all policy, but the best option for your company will be one that satisfies and engages employees while keeping costs down. There are many types of relocation policies, but for the sake of this blog, we will focus on the three that are making waves in the relocation industry: lump sum, core-flex, and tiered.

Lump Sum

The lump sum model is the most popular relocation package. The employer gives a set amount of money to the employee to cover costs, and the employee uses it how he or she sees fit.  The company typically decides the amount of the lump sum based on previous relocation expenditure within the company. This type of benefit has become slightly less common in recent years — dropping from 32% of companies in 2014 to 28% of companies in 2018. One possible reason for this is the Tax Cuts and Jobs Act of 2017. Under this law, money allocated for moving expenses is now taxable.

Read our Blog, “Adjusting Relocation Policies for the Tax Cuts and Job Acts of 2017”

Employees like lump sum relocation plans because they can pocket whatever they don’t spend.  This incentivizes employees to spend the least amount possible. As a result, this relocation package can be fiscally inefficient for the employer.

Core-Flex Model:

The Core-Flex Model is an up and coming model that continues to get traction. To put it simply, employees are given core benefits in their relocation packages with a group of optional benefits.

The flexibility this plan offers prioritizes the needs of both the business and employees which ensures a mutually beneficial relationship. For example, as a core benefit, the company might choose to buy an employee out of their current living situation. Additional flex benefits could be helping the employee’s spouse find a job — a benefit that would only apply to some.

Before going all in on the core-flex model, it’s important to remember that it can be more complicated than a tiered policy. For this reason, it’s important to involve multiple stakeholders to ensure all things are considered.

This includes members of HR, finance, recruiting, and executive input. When everyone has visibility, you are more likely to achieve a good result. Of course, having many people involved will lengthen the implementation process but it will be well worth it when you have a policy that benefits everyone.

Tiered

A tiered policy is similar to a core-flex model in that not all benefits apply to everyone, but there is more structure which helps to control relocation costs. Typically, high and low tiered packages are based on the position level of an employee. For example, an executive would receive a more comprehensive package than a new college grad.

This type of relocation package makes employees feel like their skills and education are being valued while allowing the company to effectively allocate resources. This type of policy can also help reduce turnover since the exclusive high-value incentives attract talented candidates in more senior-level positions.

Overview

Each of these relocation packages has advantages. However, by deciding what your priorities are, you can choose the one that works best for you.

Deciding on the right relocation package takes planning and an understanding of the needs of your company and employees. Want to discover other factors that companies consider when structuring their relocation policies? Download our report, “The State of Employee Relocation.”