When it comes to structuring relocation management programs, employers have multiple plan design options—including managed caps and cash disbursements. Both are popular plan designs. But while lump sum plans are having a moment, relocation experts know that managed cap plans offer greater advantages, both to employers and employees.
That’s because employers want two key things from their relocation programs. They want to:
That’s the gold standard everyone wants to meet. Now, let’s consider these two relocation plan types and see how they measure up.
A cash disbursement plan, also called a lump sum plan, is exactly like it sounds. The employer gives the employee a pre-set amount of cash, much like a signing bonus, and then…
Well, that’s it. From then on, employees are on their own. It’s up to them to:
…all while tracking their expenses and trying to get the most from their cash disbursement!
Now, some people are naturally good at this stuff. But some are pretty awful at it. Which means relocating employees are at risk of screwing up their moving arrangements. Or spending too much and then asking their employer for additional funds—an awkward, unwelcome problem for everyone.
Compounding the issue: because employees get to keep any unspent cash, there’s an all-too-human tendency for some people to skimp on their relocation and pocket the change. The problem with that is, they may end up bungling their relocation and having a stressful experience—the opposite of what employers are trying to achieve.
So, why do employers even like cash disbursements? Well, for one thing, there’s not a ton of administrative work on their end. For another, program costs are predictable and budgetable. And while some employers use relocation companies to manage their cash disbursements, others can and do handle it directly.
On the other hand, there’s no opportunity for the employer to save money with cash disbursement—and that’s a big deal. Which takes us to the managed cap plan.