June 16, 2022

What is an Average Lump Sum Relocation Package?

If you are negotiating an overseas move with your employer or just wondering what an average lump sum reimbursement looks like, it can help to know the three most common types of relocation packages.

What is an Average Lump Sum Relocation Package?

Type 1: Cash Lump Sum 

While some companies still offer a full suite of relocation services, many employees don’t need all of the services offered in a complete relocation package. The solution? A cash lump sum relocation package.

Cash lump sum policies are defined prior to an employee’s move, allowing an employee to choose how to spend (or save) their relocation allowance. This lump sum may be given directly to the employee ahead of time, or paid as a reimbursement after expenses are incurred. 

The downfall of a cash lump sum is that some employees choose to forgo important services like school search or language training so they can pocket any extra cash. 

You may be tempted to do the same, but this short-term gain can cause some long-term headaches. Be sure to address your most important relocation needs first, before you start planning how to spend your lump sum budget. 

Otherwise, the problems associated with poor planning can derail your overseas assignment: 

“I saved money by not visiting schools ahead of my relocation my children are unhappy → an early end to my overseas assignment” 

Type 2: Managed cap with designated providers

Some employers address this risk with a “managed cap and designated provider” model. 

With managed cap/designated providers, your company may offer target values (either cash values or “points”) to spend on various relocation services from a menu of pre-selected providers. 

In this case, as an employee you may have less choice in your relocation services and providers, but – with access to quality relocation services – you will have a higher likelihood of a successful and stress-free move. 

Type 3: Hybrid lump sum relocation packages

With a hybrid lump sum relocation package, you may receive a cash allowance for certain parts of your move, while your employer directly organises and pays for specific relocation services. 

These services usually address critical issues like immigration law, where a lack of compliance could have serious consequences for both you and your employer.

When you are offered a hybrid relocation package, ask which services your employer will cover directly and which services you will be required to organise yourself and pay out of your lump sum budget.

I’m getting a lump sum relocation package – what questions should I ask my employer?

Whichever type of relocation package you receive, it is important to know what questions to ask. 

Start by making a list of the different expenses you might face during your relocation. (Hint- there are more than you expect.)

Top issues include immigration, taxes, moving expenses, and housing costs at home and abroad. Depending on your situation, you may also want help with school search, pet relocation, goods and services adjustments, and a variety of other issues. Prioritise which items you require and which are negotiable. 

Once you have your list compiled, be clear with your employer about what you need to make your overseas assignment a success. Having clarity up front is good for both you and your employer. 

Many expats are surprised at the cost of an overseas assignment. For a deeper dive into relocation expenses, read our article: How to Negotiate a Great Lump Sum Relocation Package and Spend it Wisely

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