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| 3 minutes read

Are your lump sums an example of "shrinkflation?"

As we all grapple with inflation, there are a couple of related ideas that are being discussed these days which are "skimpflation" and "shrinkflation." Coined by NPR’s Greg Rosalsky, “skimpflation” is when “instead of simply raising prices, companies skimp on the goods and services they provide.” Examples are things like when hotels drop that free breakfast or airlines provide fewer air stewards per flight. And "shrinkflation", which is very similar, is when there is less toilet paper on that roll or fewer chips in that bag of chips you bought at lunch for the same price. It might also look like less quality materials being used to make a given product. I know I am personally disappointed (maybe annoyed is better word) that my jumbo M&M cookies have fewer M&M's and are now 4ounces smaller!

In our world of talent mobility, there are concerns about "reloflation." Costs for relocation and assignment-related support have escalated. Moving someone's personal belongings costs more today whether they are moving from Dallas to Chicago or Toronto to Singapore. Real estate, rentals, temporary furnished housing accommodations, airfares and travel have all gone up in cost. Not that long ago, we discussed that in a post titled, "Costs for talent mobility will be higher in 2022."

How is that impacting your program? Obviously, the move costs per person goes up. So in order to get the same ROI on that relocation or assignment, you would have to get even higher production from that employee. Seem controllable? Probably not, but it's maybe a good reason to get even better about assessing candidates and making your talent selections? It does leave you with having to educate the stakeholders that costs continue to rise in this current environment and they will need to budget more for employee mobility, unless you offer capped moves or lump sums. Then costs may remain the same but you might want to consider the employee experience on these types of policies.

For those companies with capped relocation policies — or even benefits within a policy — or lump sums, have you started noticing any "noise" yet from employees who describe situations where the amount being provided is not enough or isn't going as far as the last time they moved? This is where the idea of "shrinkflation" comes up in mobility. Employees are getting the same amount of lump sum but getting less support out of it. They are much more likely to have to pay for costs out of their own pockets now to make their relocation happen or they may need to skimp and rent their own U-haul and move themselves, reducing their time and energy and distracting them from work. In effect, "reloflation" is likely to cause that lump sum or cap to go less far and in effect shrink the level of support that the employee is able to purchase to help in their move.

OK, so what do you do? Here are a few ideas to ponder:

  1. Maybe you don't care because your overall philosophy was simply that your lump sum was a "contribution" towards their relocation, not really intended to cover the full cost anyway. Why read this whole post then? Stop now and proceed as usual.
  2. Maybe you do care, and you want to adjust the amount upward to address inflation, much like is happening within many companies on other compensation. Then you could calculate and increase the lump sum or cap by that amount. Alternatively, if you were "deducting taxes," maybe now you consider providing "gross up" so that employees net a bit more.  Yes, these options cost the company more per person, and you may need to re-evaluate at some point in the future when deflation occurs.
  3. You could move to tiered policies, core-flex policies or even newer ideas on credit-based options. Many companies use lump sums because they are easier to administer, but there are new options out there that can provide greater flexibility, choice and autonomy to the employee without adding much (if any) cost on a per-move basis.

Keep listening to what you are hearing related to the employee experience and from the business with regard to cost and value. Whatever you decide, your mobility philosophy and company culture should help set the course for the contemplation and decision-making.

“We’ve all heard about rising inflation. The price of stuff is going up. And if you read this newsletter, you’ve heard of shrinkflation. That’s when the price of stuff stays the same, but the amount you get goes down. The economywide decline in service quality that we’re now seeing is something different, and it doesn’t have a good name. It’s a situation where we’re paying the same or more for services, but they kinda suck compared with what they used to be. We propose a new word to describe this stealth-ninja kind of inflation: skimpflation. It’s when, instead of simply raising prices, companies skimp on the goods and services they provide.”


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