Corporate relocation plans have come a long way. Today, employers have more plan design options than ever, including two popular options: managed budget plans and fully-covered relocation benefits.
Admittedly, there’s no single “right” or “wrong” relocation plan; each employer has its own priorities. However, for most companies, the objective is to balance program costs with employee satisfaction—i.e., to deliver a great relocation experience as cost-effectively as possible.
Both managed budget and fully-covered plans are structured to deliver a positive relocation experience. However, cost—and cost-effectiveness—is a different story. For employers who want to conserve costs, it’s essential to understand the difference.
From Soup to Nuts: Fully-covered Relocation Benefits
As the name implies, fully-recovered relocation benefits cover 100% of an employee’s relocation costs. Also known as “traditional” or “white glove” relocation policies, this is the most generous, most expensive relocation plan option.
Obviously, fully-covered relocation plans pay for the standard services most plans address—moving costs, travel expenses, a house-hunting trip or two, perhaps short-term housing. In addition, they generally cover services more modest plans often exclude, including:
- Packing and unpacking services
- Above-and-beyond home-selling assistance
- Destination services, to help the relocating employee’s family acclimate to its new location
- Job search assistance for spouses and partners
In addition, fully-covered relocation benefits include the services of a relocation consultant, who helps employees make arrangements and guides them through the process—often at a granular level.
At one time, fully-covered plans were the industry standard—back when relocation plans were reserved primarily for senior management. However, once talent-strapped employers realized that offering relocation benefits was an effective way to attract much-needed but not-so-senior level employees, the relocation industry began introducing more limited, cost-effective plans, now the industry norm.
The Tax Cuts and Jobs Act of 2017 further contributed to the waning popular of fully-covered relocation benefits by inflating costs. Up until then, relocation expenses were tax-deductible to employers; nor were benefits taxable to employees. Now, the reverse is true. Employers can no longer deduct relocation costs, and may in fact elect to pay their employees’ taxes for them, a benefit known as a relocation tax gross-up.
Today, employers still offer fully-covered relocation benefits, but to select employees, such as C-suiters and senior management. And in some ultra-competitive markets, including healthcare and technology, fully-covered relocation plans are offered as a way to attract specialized, in-demand talent such as physicians and software engineers.
Customizing Relocations: Managed Benefit Plans
For employees, the next best thing to generous relocation benefits are flexible ones—because then they can shape them to meet their needs. That’s the guiding principle behind managed benefit plans, also known as managed budget or capped allowance plans.
With managed budget plans, the employer sets a maximum amount the employee can spend—so costs are predictable, unlike fully-covered benefits. Employers also limit what services they’ll cover beyond the basics.
Employees then get to choose how they’ll spend their benefits, ensuring that the services they need most are paid for by the plan. Most managed benefit plans include the services of relocation specialists, who help employees spend their benefits wisely.
In addition, some relocation companies take additional steps to employees get the most from their benefits—and help employers save. For example, at UrbanBound, we:
- Provide employees with easy-to-use relocation software to help them manage their move. For example, expenses are tallied in real time, so employees always know exactly what they have to spend. We also give them access to checklists, timelines and moving tips to help them stay on track.
- Refer employees to our network of pre-screened vendors, with which we’ve negotiated discounted fees. Not only do their funds go further, but the vendors must maintain high performance standards to stay in the network, ensuring positive experiences.
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Employees like managed benefit plans because, although their relocation expenses aren’t guaranteed “fully covered,” plan flexibility allows them to potentially achieve this anyway.
And employers like them, too, because they’re more cost-effective and easier to budget than fully-covered relocation plans. Bonus: if employees don’t spend all their benefits, the employer keeps the savings—and that can really add up. At UrbanBound, 94% of employees’ relocations come in under budget—by an average savings of 24%!
The Best of Both Worlds
Now, here’s the best part about the various relocation plans available to employers today: you don’t need to pick just one. Many employers develop tiered relocation policies that offer, say, fully-covered benefits to senior management, managed benefit plans to middle management and individual contributors, and modest managed lump sum plans to interns. The possibilities are only limited by your imagination—and, of course, that of your relocation provider.
