If you use a traditional relocation management company (RMC) to manage your corporate relocation program, here’s an elephant-sized piece of news you should know: many—not all, but most—RMCs routinely markup relocation expenses in order to make a profit.
For example, a domestic household goods shipment may be marked up by more than 7%. Short term housing may be marked up by more than $5-$10 per night. If you’re grossing up, the impact is multiplied by the need for extra tax assistance. Add it all together, and by our calculations, markups typically add an extra $2,000 or more to the cost of each move, on top of fees employers are already paying.
Maybe you don’t want to think about your relocation program this way. Maybe you don’t want to rock the boat. But there are several good reasons you should start caring about the cost of RMC markups—starting with our top five.
If you’re like most employers, you’re trying to keep your relocation program within a set budget. Given the current state of the economy, you may be working with deeper budget cuts.
So, take that typical $2,000 markup, and multiply it by the number of relocations you sponsor per year. For example, 100 moves per year equals $200,000. That’s $200,000 of pure waste in your budget. Can you afford to be okay with that?
RMC markups cost employees, too. Because their moving costs are inflated, they’re more likely to exceed their policy budgets and incur out-of-pocket expenses, including additional tax liability incurred solely due to markups.
A major goal of your program is likely to increase employee satisfaction and give relocating employees a positive relocation experience. Forcing them to use their own money to be where they need to be to work for you is as negative an experience as it gets.
Markups cost you time, too. With relocation costs higher than necessary, you may be struggling to make sense of your invoices and reports. Or, you may need to create a campaign every year, petitioning management to increase your budget. Maybe you’re wondering how to cut program costs without cutting benefits. Whatever way you look at it - you’re spending time where you may not need to be.