Over the years, pricing within the relocation management industry has morphed from strictly fee-based to something very different. Commissions, rebates, kickbacks, and markups now dominate the landscape resulting in a complete lack of transparency, conflicts of interest for providers, and missed savings for employers. Relocation Management Companies (RMC) promote a series of myths designed to perpetuate this system. This paper will serve to dispel those myths and provide recommendations on some simple steps for a better path forward.

MYTH #1. RMC SERVICES ARE FREE TO THE CLIENT SINCE RMCS RECEIVE ALL REVENUE FROM SUPPLIERS

In the early days of the relocation industry, employers paid relocation management companies (RMC) a fee to run the mobility program. All costs of services were passed through with no upcharge, just fees for professional services. This is no different from what you would expect for any consultative service company, accountants, attorneys, etc.

As the industry evolved, competition resulted in RMCs reducing fees. Employers saw this as a win. No fees meant less overall spending, right? Well, not always. Relocation companies needed to make up for the lost revenue. Gradually, fees were replaced by commissions, and rebates were added on top of the pass-through charges for the services managed. With every dollar that an employer spent on things like temporary lodging or household goods transportation, a percentage went to the relocation company.

At first, commission rebates were limited to real estate and household goods transportation, but as fees continued to drop, the scope of these rebates expanded exponentially. Today, RMCs collect rebates on virtually every passthrough service invoice.

We all know that there is no such thing as a free lunch, however, RMCs perpetuate the myth of “free” services by not disclosing the rebates and kickbacks received on services procured on behalf of clients.

It would be a different story if rebates to RMCs came out of supplier profits, but such is not the case. In most cases when an RMC works with a supplier, the rebate amount is demanded and documented as part of the contract. Suppliers have no issue with the amounts, which are simply tacked on to the amount that would have been normally charged. For example, the RMC wants a $25 rebate on every appraisal. No problem. The supplier’s standard rate for an appraisal is $750, instead the supplier charges $775 and sends $25 back to the RMC for each invoice.

For some services, the amount rebated is a flat dollar amount, in some cases it is based on a percentage of the invoice amount. For percentage-based arrangements, the more these services cost, the more an RMC earns! To add insult to injury, supplier rebates received by the RMC are not disclosed and difficult to identify even if a client knew where to look.