Home – New Forums Marketing mastery Paying commissions for referrals – legal?

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  • #986833
    OpusNOIR Photography
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    Hello fellow FSers!

    I have launched a referral program whereby I offer a 10% commission for all referrals which means a third party can potentially earn anywhere between $80 and $210 just for sending me an email.

    My only concern is whether or not this is legal or if I need some sort of license or permit to do it. I haven’t found any answers elsewhere as yet, I thought somebody here would have some insights?

    Thanks!

    #1159788
    TehCamel
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    I see no reason this could be illegal.

    I’d check with your accountant though just to be sure.

    I know Telstra for instance, when they pay commision on MOS Products, require that the agent MUST have an ABN and be registered for GST. They then create a RCTI and issue it to the agent.

    I’m assuming you’re talking about a less structured system than that.

    IE, I could refer someone to you as an individual, and you’d pay me the $80.00
    in that instance, you just pay me the referral fee, record it as an expense or CGS depending on your book setup.
    Whether or not I then handle the referral fee appropriately is a different issue.

    #1159789
    AmyL
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    I don’t think it is illegal. There are heaps of businesses around that offer referral fees for business.

    I have a referral system in place at the moment, but I don’t offer to everyone. I have a few people that I have formal agreements with in regard to new and ongoing business generated by them. It is working really well and has allowed me secure meetings with decision makers of very large national companies who I wouldn’t have had a hope in hell of getting into on my own (at least not quickly).

    Good luck with it :)

    #1159790
    Divert To Mobile
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    Hi Alister,

    You cant find anything on it because its common business practice.
    If you are able calculate the real cost of attracting a new client through your typical advertising methods and you offer less than that amount for a referral then your in front.

    Steve

    #1159791
    bjmyers
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    There’s nothing wrong with rewarding someone for a referral. My preference is to give clients who refer a new client in a token gift. Cinema tickets, food hampers and bottles of wine tend to go down well.

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