Is a lump-sum relocation plan still the best way to support your employees and their families during a move? If you’ve had issues with cost overages and dissatisfied employees with a lump-sum plan, there may be a better way to go.
A managed-cap relocation program offers an alternative to the traditional lump-sum plan. By setting a firm spending ceiling while giving employees access to approved relocation services, the company is better protected against going over budget and poor employee decisions.
Here’s how a managed-cap program can provide a more convenient solution for mobility managers and relocating employees alike.
What Is a Managed-Cap Relocation Program?
A managed-cap program — also known as a capped-cost relocation program — gives an employee a defined relocation budget and a set of eligible benefits. The employee uses that budget for approved costs, such as moving and storage, a home-finding trip, temporary housing, final travel, or other benefits included in the employer's policy.
By contrast, a lump-sum program provides the employee with a fixed amount of money with very few restrictions. While this allows a great deal of flexibility and requires little effort from HR on the front end, it can also lead to overspending and more complaints on the back end.
A capped-cost moving program helps employers keep things flexible, while the spending limit prevents employees from going overboard.
How Managed-Cap Relocation Programs Work
A managed-cap program can provide a more effective relocation cost management strategy for employers. Here’s how it works:
Open-ended relocation benefits can lead to overruns if employees manage their funds poorly. With a managed cap, every relocation has a maximum cost from the outset. This makes budgeting easier when planning multiple relocations.
Pay Actual Moving Costs Up to the Established Cap
A sub-benefit of a managed-cap relocation program is that the total cap doesn’t necessarily equal the total expense.
For example, a relocation with a $20,000 cap may only cost $16,000 in approved services. With a managed cap, the employer only funds the actual costs rather than giving the employee a lump sum of $20,000.
With a lump-sum program, the employee keeps all of the cash up front, regardless of how much they actually spend. This can result in the employer losing a significant portion of the allocated funds as unintended “bonuses.”
With a managed-cap plan, the RMC audits and pays vendors directly, allowing the employer to keep any leftover budget. Since unused funds never leave the company account, mobility managers can keep a tighter grasp on the overall budget.
Additionally, managed-cap programs can eliminate “gross-up” payments. Since direct lump-sum payouts are treated as 100% taxable income in many jurisdictions, companies often have to gross up the payment to ensure the employee actually has enough money to move. Managed cap plans can help companies avoid this expense.
A lump sum may be simple to issue, but employees can still come back with questions or complaints when their costs exceed their funds. A program managed by an RMC can reduce the HR workload by offering centralized quotes and pre-approved services.
Managing Costs That Exceed the Relocation Cap
Typically, any moving or housing expenses above the lump sum are the employee’s responsibility. However, that doesn’t mean employees won’t ask for an exception. With a lump-sum program, HR teams might find themselves inundated with requests for additional funding or reimbursement for money the employee has already spent.
Setting clear, well-managed caps upfront can reduce disputes and help employees make better spending choices from the start.
With a capped cost relocation program, instead of issuing the full lump sum before the move, the company may pay for each service as it occurs. This offers mobility managers a way to minimize outgoing funds while keeping more cash on hand for use as needed.
A major issue with lump-sum moving plans is that the money can become invisible after payment. While mobility managers know what the company paid, they may not know what the move actually cost.
Since managed-cap programs use pre-priced, approved services and have spending managed by the RMC, the company can keep a closer eye on how each relocation dollar is spent. Better visibility allows companies to compare budget with actual spend, track common services, review exceptions, and spot differences between policy tiers. Over time, that data can help managers implement more targeted and cost-efficient policies.
Managed-Cap vs. Lump-Sum Relocation Programs
Lump sums offer simplicity and the freedom for employees to plan their own relocations. Managed caps offer more structure, visibility, and guidance to help employees spend wisely.
Feature | Managed-Cap Relocation Program | Lump-Sum Relocation Program |
Budget | Employer sets a maximum relocation spend | Employer provides a cash payment |
Payment | Eligible costs are paid as they occur, up to the cap | Employee receives the full amount upfront |
Unused Funds | Typically remain with the employer | Typically remain with the employee |
Employee Support | Guidance and service coordination provided by RMC | Employee manages the move independently |
Spending Visibility | Employer can track actual relocation costs | Employer has less visibility into how funds are spent |
Cost Control | Greater control over actual relocation spend | Costs are fixed at the amount of the lump sum |
Is a Managed-Cap Relocation Program Right for Your Company?
A managed-cap relocation program is worth considering if your company has experienced overspending, inefficiencies, or employee dissatisfaction from lump-sum plans. By setting firm budget limits while still offering flexibility and guidance for employees, your company may be able to reduce costs and improve the overall relocation experience.
Some businesses that could benefit from managed-cap programs include:
Companies Focused on Predictable Relocation Costs
A spending limit and pre-approved services can make forecasting easier and protect your budget from surprise cost overruns.
Employers Looking to Reduce Administrative Burden
An RMC can handle the entire process, from choosing the provided services to answering employee questions, helping HR minimize escalations after the move.
Organizations Seeking Greater Spending Visibility
Tracking eligible expenses allows your organization to avoid overspending now and plan for more efficient relocation processes in the future.
Businesses That Want More Flexible Employee Relocation Benefits
Employees can prioritize the eligible services that matter to them while the employer keeps the relocation budget in check.
Allied Van Lines can support your employee relocation strategy with corporate moving services tailored to your business. Allied has supported employee relocations since 1928 with more than 880 service locations and partners in over 130 countries.
