One of the great things about today’s relocation management landscape is that employers have so many choices. Choices in administration—in-house or outsourced. Choices in administrators—traditional or software-based. And, of course, choices in plan design—including lump sum and core/flex, two of the most popular options out there.
Today, we’re going to discuss these two plan types and why they make sense for employers (or not). But in order to do that meaningfully, we need to establish what relocation benefits are supposed to achieve in the first place.
For employees, a great relocation plan will:
- Cover most if not all costs associated with their move
- Simplify the relocation process, so it’s easier and lower-stress
- Help them and their families acclimate quickly
…which all add up to a positive relocation experience.
For employers, a great relocation plan will accomplish all of the above—and also be:
- Cost effective
- Easy to administer
- Easy to monitor, manage and improve
…which all add up to a valuable recruiting/retention tool.
Now, let’s see how lump sum and core/flex measure up!
Lump Sum: How It Works, How It Stacks Up
Lump sum benefits are a snap to explain, which is one reason employers like them. The employer gives the employee a fixed amount of funds to spend on relocation, with no rules on how to spend them.
But that means no support or guidance, either. Employees are on their own. What does this mean in terms of achieving our major objectives?
For employees, lump sum plans:
- May or may not cover most or all relocation costs. It depends on the sum and the employee’s planning skills. Some have funds leftover to keep; some drop the ball and wind up in trouble.
- Do not simplify the relocation process. Because employees don’t receive help, planning is typically time-consuming and stressful.
- May or may not help employees and families acclimate quickly, due to the factors described above.
For employers, lump sum plans:
- May or may deliver the intended results for employees. Because so much is up to each individual, there’s no way to ensure a consistent experience.
- Aren’t really cost effective. Yes, they’re easy to budget for, but there’s no opportunity for savings. If employees have money left over, they get to keep it.
- Are easy to administer. So easy, many employers manage their programs in-house.
- Are not easy to monitor, manage or improve. Because employees are handling things privately, employers have little transparency into their activities. All employers can track is their expenses and whatever employees share with them.
So, with lump sum plans, some employees have a positive relocation experience, but others don’t. And while they’re easy for employers to administer, they aren’t particularly cost-effective or easy to oversee.
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Core/Flex: What It Is, What It Does
Core/flex plans offer greater control for employers than lump sum, while still allowing employees a personalized move. As the name implies, core/flex benefits are split into two buckets:
- Core Benefits – This includes most essential services—typically housing arrangements and moving household goods, at the least—which are covered entirely by the employer.
- Flex Benefits – A menu of less-essential benefits that employees pick and choose from, such as household goods storage (if closings are delayed) pet transportation, etc.
For employees, core/flex plans:
- Do cover most or all relocation costs.
- Do simplify the relocation process. Typically, vendors are provided and paid directly by the employer, simplifying things for employees.
- Are likely to help employees and families acclimate faster, because everything goes more smoothly.
For employers, core/flex plans:
- Are likely to deliver positive results for employees, because the plan helps ensure a consistently well-managed experience.
- Are cost effective, because employers—generally through their relocation provider—can leverage group discounts with trusted, go-to vendors.
- Are not as easy to administer as lump sum. For this reason, most employers outsource these programs to relocation providers.
- Are easier to monitor, manage and improve, because the relocation provider handling each transaction is (or should be) tracking expenses, exceptions, etc. In fact, software-based providers can share this data with employers in real-time.
So, with core/flex plans, employees are significantly more likely to have a positive relocation experience—while employers get a cost-effective program they can monitor and improve. That said, they’re likely to require the services of a relocation provider to handle the admin—and that, of course, is another set of choices!
Takeaways for Employers
Given the current labor shortage, a competitive relocation program is more important than ever. And given your bottom line, cost-effectiveness is very important, too.
The reality is, what was a great relocation program five years ago may no longer be your best option.
That’s why now is a great time to learn what’s out there, talk to multiple experts and pick their brains for ideas and insights.
And if you’d like to pick ours, we’re here for it. Just ask.
