Networking is the backbone of Freelancing. Often times you’ll find yourself giving out freelancer referral for clients projects – and sometimes you’ll even receive a referral fee. While there is nothing necessarily wrong with paid referrals, it’s important that they’re done right!
Freelancer referral fees are an easy and low-maintenance way to get earn some extra cash as a freelancer.
And as long as all sides involved profit and nobody is being treated unfairly, paid referrals are a great way to help clients find the right talent for their projects – but things don’t always work out so well.
While you may be used to referrals and paid networking, it is important to remember that not everyone is used to the idea. And so you may encounter people who have never heard of referral fees as a concept. Check out a tips on go about setting referrals:
- Red flags Working With Freelancer Referral Fees
- How To Use Referral Fees Right?
- Reasonable referral commission
Freelancer Referral Fees – Red Flags
1. Not providing full-disclosure as early on as possible
Referral fees should be treated as a condition in a contract. You cannot just slip them in at a later date. If someone expects to be paid a lump sum of money or a percentage of a deal because they served as the middleman between contractor and freelancer, they should mention it right away.
2. Asking after the freelancer and the client have agreed on a price
This second red flag can lead to an infuriating escalation when not providing full disclosure. There are people who request referral fees after the deal between the two parties has gone through. This is incredibly unfair for a couple of reasons.
First, it may look like you’ve essentially dictated a fee after realizing the overall project budget – not a great look.
Secondly, the freelancer who is actually doing the job should be aware of the referral fee, thus giving them some possibilities. They can negotiate with the client for a slightly higher pay than their usual price to make up for the cost of the referral. Tricking people out of that option with an unexpected request of a referral fee is just not good practice.
3. Acting like it’s completely normal
“Oh yes, it’s totally a thing, everybody in our field is doing it.”
No matter what freelancers that charge fees for referrals claim, freelancer referral fees are simply not an industry standard. You cannot expect a referral fee just because it is a thing that exists. If someone acts like their late mention of a commission is completely normal, you might consider not working with that person in the future.
How to do Referral Fees the right way
Honesty and transparency
The one surefire way to implement referral fees is to be completely open about it with both sides.
Tell both the client and the freelancer you’re referring and if somebody doesn’t agree with the deal, they can walk out.
Yes, the client and the freelancer you referred can now just do the deal without giving you a cent. But they both know they are working with you for a reason. Don’t assume everyone is going to stab you in the back as soon as they get the chance. Honesty is the best policy when it comes down to paid referrals.
Dealing with unexpected referral fees – Say no!
There really is only one, very simple way, to deal with people who ask for referrals after the fact. Stay firm and say no. As long as there wasn’t full disclosure from the beginning, you are not legally obligated to pay someone anything they just decide to ask for out of the blue.
People who do that won’t stay in business for very long. And they are definitely not people that you want to be working with on a regular basis.
While they may be able to squeeze out fees from a few newbie freelancers, in the end, unexpected referral fees requests will burn all their business relationships, which are the single most important things in a business model that relies on commissions.
So, if somebody asks you for a fee after you’ve already agreed to do the work or even started doing it, just say no. Unexpected referral fees are unprofessional, unsustainable as a business model, and, quite frankly, a disrespectul thing to do.
What is a reasonable referral fee?
Deciding on the exact referral fee or commission that you’d pay someone who refers you to a freelancer project is up to you.
There are some details you should consider, though:
- Are you paying a referral fee for a lead or only if you get the job?
- Is the referrer further involved in the project?
- Is the referrer managing all client-side of things?
The standard referral fee percentage could be around 10% for closed jobs. It could start at 2 – 5% for an email introduction with the client and go up to 15 – 20% for projects where the referrer deals alone with the client.
You could also work with flat referral fees. For example a $100 referral payment for $1000 – $3000-projects, a $300 payment for $3000 to $5000 projects, and $500 for projects up to $5000.
Have you had to deal with unexpected referral fees? If so, how did you handle them? How much do you pay for referrals? We are always very happy to hear from our readers, so tell us your story in the comment section below this article!