Do lump sum relocation payments work?

A lump-sum relocation payment seems like a simple solution to get an offshore candidate to New Zealand and onto the job. But can it cost employers more in the long run?

Why are these policies popular?

Seems like a no-brainer. Admin is minimal - just pay across the money, leaving the person to organise and fund their move.  Employee choice is maximised. It shows goodwill, recognising the cost/stress of relocating internationally and can be an inducement to accept a New Zealand-based role.  Stretched HR budgets love the predictability and cost containment!

But these are short term gains – focussed on attracting and getting the person to New Zealand.

The average relocating employee loses 15-20 days of work productivity. The logistics of moving and setting up in a new place, adapting to the new environment (finding housing, schools, amenities etc) and dealing with family issues all take time.

People relocating for a job have a different employee experience to local hires – not only is the work environment new, their home life is in a state of massive change also.

High performance at work can’t occur if newcomers and their families don’t settle successfully outside the office.

So anything an employer can do to spend up the home-front adjustment will get the employee up and running in their job more quickly – the reason you hired them in the first place.

Coming back to the spend, relocation costs can be categorised according to how they benefit the employer and/or employee:

  • Essential spend (visas, airfares). Without these the employee would not be able to start work.
  • High-return spend from employee perspective (shipping personal effects, temporary accommodation on arrival, rental car). Very little value for employer in terms of increasing productivity.
  • High-return spend from employer perspective (resettlement services). Any spend which accelerates the newcomer’s integration (in terms of finding housing, schooling, local community) increases their productivity on the job.

Does it make sense for HR to delegate full responsibility for the relocation spend?

Understandably, decision-making is often driven by point-of-departure issues.  Many families chew up relocation dollars shipping everything they own to New Zealand. But has money been reserved for the challenges they will face on arrival?

Few people are familiar with immigration process? DIY applications are cheaper than paying for an immigration advisor but can take longer and delay arrival.

Do newcomers understand the value of resettlement services? Having expert help with a property search, for example, can get them out of costly short term accommodation and into their own home more quickly.

Some employees will use the relocation lump sum as a salary top-up, spending the minimum on relocation and pocketing the cash. Nothing wrong with this in policy terms.  But the employer then faces resettlement risk which may undermine the newcomer’s workplace performance.

It’s not fair to expect employees to be relocation experts.

There are many options to support relocating employees, which may not necessarily cost more than a lump sum relocation payment.

What the money is spent on, and how that impacts the new offshore employee’s productivity, should drive the design of your policy.

Bridget is Principal at Mobile Relocation Ltd.  Working in partnership with HR and executive teams, Mobile helps bring expat staff to fill key roles in companies and organisations throughout New Zealand.