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When it comes to moving for a job, some companies offer relocation packages for prospective employees in certain roles. The four most common relocation packages are: Lump sum, reimbursement, direct payment, or temporary housing. Each relocation has its own pros and cons.
This Moving Help® guide also will explain when an employer might choose a specific type of package, and what might be the best type of package for your situation.
1. Lump Sum
A lump sum is a single, one-time payment for the entire job relocation process. The company will provide the cash payment upfront to you, which will be used for all moving-related costs. You manage your own budget, coordinate your move, and meet any other requirements.
The employee needs to make sure they don’t go over their lump sum limit. Typically, prospective employees get to keep any unused funds.
Lump Sum Pros
The first pro to a lump sum is your employer pays you upfront. The second pro is you don’t have to keep track of all receipts to ensure you’re reimbursed. The third pro is immediate cash availability, and you (typically) keep what you save.
Lump Sum Cons
While a lump sum is great, it does have some cons to it. The first con is no extra reimbursement. If your move is more expensive than the lump sum amount, you’re responsible for paying the remaining difference yourself.
The second lump sum con is lump sum payments are likely considered taxable income. You’ll want to figure out whether your company offers “gross-up” or not, so you can be ready during tax time. The third lump sum con is clawback clauses. Basically, you have to repay the lump sum if you resign from your position within a specific timeframe — every company is different, but it’s usually within one to two years.
2. Reimbursement
A reimbursement job relocation package is where the employees pay for everything first themselves, and after the move, the employers will reimburse the employees for any moving-related expenses. Employees will submit their receipts for the preapproved, written limit that employers set for employees.
Of course, everything will vary, but typically, moving services, travel expenses, temporary housing, house-hunting trips, and home sale/buying assistance can be included in your expenses. If you hire labor-only movers to help with packing or unpacking, or loading or unloading, gas or flights, staying at a hotel or short-term rentals, costs for travel, food, and lodging to search for a new home, breaking your current lease or help buying a new home could be counted.
Reimbursement Pros
The first reimbursement pro is you’re reimbursed for actual, vetted moving expenses only. The second reimbursement pro is you don’t have any out-of-pocket burdens or debts. Meaning, you’ll get paid back for any expenses you incur, so you shouldn’t have any additional debt afterward.
The final pro for a reimbursement package is its tax compliant, so it should make it easier for you to manage during tax season.
Reimbursement Cons
Reimbursement packages certainly have some positive appeals, but they do have some drawbacks.
The first reimbursement package con is you have to keep strict receipt tracking. If you don’t get a receipt, or you lose your receipts, you’re going to be out of luck for reimbursement.
The second con for a reimbursement package is uncovered and/or hidden expenses. You’ll want to read the fine print to determine what exactly qualifies for reimbursement. The third reimbursement con is tax implications and payback clauses. Like a lump sum, you’ll need to be prepared for tax season and make sure you work there long enough to not pay back anything you got reimbursed for your move.
3. Direct Payment
Direct payment packages are where the employers pay the vendors/different moving companies directly themselves. Rather than giving you cash or having you pay out-of-pocket expenses, they cover the costs directly with those companies.
Employees will work with these specific vendors to coordinate the moving details themselves.
Direct Payment Pros
The first direct payment packages pro is you have zero out-of-pocket expenses. The second pro for direct payment packages is you don’t have any tax penalties yourself because the money was passed from your employer to another business. The final direct payment package pro is the employer uses vetted, preapproved moving companies, which should create smoother logistics.
Direct Payment Cons
Direct payment can simplify your moving experience, but direct payment isn’t perfect either and has its own cons. The first direct payment packages con is you don’t get to choose your own moving companies. You’ll typically have to go with a preapproved list from your future employer.
The direct payment packages second con is they’re not as flexible compared to lump sum packages. The third and final con for direct payment packages is you don’t get to keep any unused funds for non-moving expenses.
4. Temporary Housing
Temporary housing packages are where the employers pay for the employee’s housing on a temporary basis. Typically, temporary housing comes fully furnished, but you should always read the fine print.
The purpose of temporary housing is to provide a short-term rental to bridge the gap between leaving your previous home before settling into your new home. You can work and explore neighborhoods immediately before finding the right long-term housing for you.
Temporary Housing Pros
The first temporary housing packages pro is they’re move-in ready. You only need your clothes, kitchenware, and basic necessities because everything else should be set up for you.
The second pro for temporary housing packages is they’re cost-effective because it’s less expensive for you to move in there vs. staying at a hotel for weeks or months.
The third temporary housing packages pro is the short-term commitment, which allows you to find the right neighborhood for you without being on the rope for a long-term lease.
Temporary Housing Cons
Temporary housing does sound great, and it is great for many employees. At the same time, it does have some cons to go with it. The first temporary housing packages con is you have to move twice. You move into your temporary housing first, and then into your permanent home afterward.
The second temporary housing packages con is you could face family and pet restrictions along with more out-of-pocket expenses. The third con for temporary housing packages is it disrupts your daily routines because this truly isn’t your home, so it can lack your own personalization.
When Employers Might Use a Specific Relocation Package?
Employers will most likely use one of these four common relocation packages. Of course, sometimes an employer will make an exception for an employee.
Companies have policies and procedures in place for these types of situations. While one company may prefer a lump sum for a job relocation, another company might prefer direct payment instead for a job relocation.
At the end of the day, you’ll want to ask about all the details needed for a job relocation.
What Relocation Package Is Best for You?
The best relocation package will depend on your own circumstances and your future employer. You might prefer reimbursement or temporary housing. Therefore, you should find out whether that’s an option with your future employer.
All four options have their own pros and cons. If you can choose or the company has several options for you to choose from yourself, you’ll want to make sure you make the right choice in the short-term and long-term future.
The Type of Relocation Package Matters
The four most common types of relocation packages are lump sum, reimbursement, direct payment, and temporary housing. Thanks to this Moving Help guide, you can figure out which one is best for you.
If you do need help moving now or in the future, consider hiring expert, labor-only movers to assist with all your labor-only moving services and needs.
