What is a Lump Sum Payment?
A Lump Sum Payment is a single, one-time payment of monies owed as opposed to regular, smaller payments over time until the total amount owed is reached.
In the work environment, lump sum payments can occur for a variety of reasons. A company might offer payment to incentivize early retirement, as a stay bonus in the event of a downsizing, or as a distribution of a pension upon retirement.
For an individual, a lump sum payment might be a better option in the long run if the funds are invested well. Circumstances that give rise to such payments typically are not indexed to inflation, so periodic payments might cause the value of an amount owed to go down over time.
For a company, a lump sum payment can be a cost-savings by taking advantage of accounting strategies, or reducing administrative costs.