How to Set Up a Referral Agreement
Set up a referral agreement by defining what constitutes a qualifying referral, the commission or fee structure, how referrals are tracked and verified, payment terms, the duration of the arrangement, and any exclusivity provisions.
Last updated: February 2025
Step-by-Step Guide
Define a qualifying referral
Specify exactly what counts as a referral, how it must be submitted, and the criteria for it to qualify for commission (e.g. the referred party must become a paying customer).
- •Be precise to avoid disputes about whether a referral qualifies.
Set the commission structure
State the commission rate or fixed fee, whether it is one-off or recurring, and any caps or tiers.
- •Specify whether commission is based on the first sale or lifetime customer value.
Establish tracking and verification
Describe how referrals are tracked (unique codes, links, forms), who verifies them, and how disputes are resolved.
- •Use a referral tracking system or CRM to maintain accurate records.
Add standard contractual provisions
Include payment terms, duration, termination rights, confidentiality, data protection, and governing law.
- •Include a tail provision so referrals made before termination still earn commission if they convert within a defined period.
Legal Requirements
Referral agreements must comply with the Bribery Act 2010 if they involve introductions to public sector organisations. If the referrer is introducing regulated financial products or services, FCA regulations may apply. The agreement should be transparent about the commercial relationship to comply with advertising and consumer protection rules.
Common Mistakes
Template / Example
When to Get a Solicitor
If referrals involve regulated industries, public sector bodies, or if the commission structure is complex with recurring payments or multi-tier arrangements.
FAQ
Is a referral fee the same as a commission?
In practice, yes. Both terms describe a payment for introducing a customer. The key legal distinction is that in some regulated industries, referral fees are restricted or require specific disclosures.
Do I need to declare referral fees to clients?
In many cases, yes. Consumer protection and transparency rules may require disclosure, and in regulated sectors (e.g. financial services, legal), referral fee disclosure is mandatory.
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