Let’s start with definitions.
A finder’s fee, or referral fee, is money paid to someone by an individual or agency for referring a new client. In other words, it’s a commission. This may be paid according to a predetermined percentage of the value of the transaction arising from the referral, or it may be a flat rate. The parties in such arrangements usually have a formal or informal agreement between them.
A kickback is money
paid to someone in return for arranging a transaction or an introduction – more
commonly understood as a bribe, incentive or inducement.
Search online for any of these terms and you’ll find an abundance of views that these kinds of inducements make good business sense, and a plethora of others who say they do not. In this post I focus on some ethical issues associated with fees for referrals in the editing profession.
Are they legal?
Finder’s fees and referral fees are not illegal, per se, but
they are strongly regulated in industries such as real estate, banking and
financial services.
Strictly speaking, kickbacks are not illegal either, but they can land you in hot water with employers and clients. For example, in government and other civil services, policies on probity and governance prohibit employees from receiving gifts, services, money or anything of value in return for favourable treatment with tenders and contracts – or even as a gesture of appreciation.
As far as I can tell, none of these types of payments are
illegal in the freelance/consulting world of editing.
Are they ethical?
Kickbacks or incentives are by definition corrupt practices and therefore are unethical. They often involve a degree of deception and usually interfere with our ability to make fair and unbiased assessments.
I am aware that some professional editors have agreements
between them that involve the payment of finder’s fees and referral fees. However,
I have never been a party to such agreement and therefore I don’t have a deep
knowledge of how this works in practice.
Some ethical considerations in such an arrangement relate to:
- Transparency – whether the prospective client is made aware of the arrangement; how much the client is told about the arrangement; whether the finder’s/referral fee is itemised in the invoice to the client; and how much information is shared between the referring party and the party receiving the referral.
- Burden of expense – whether the finder’s/referral fee is paid from payments to the party receiving the referral, or is charged to the client.
- The nature of collegial relationships between professionals.
What are collegial relationships?
When people work together as part of a team or in a particular
workplace, as colleagues they have a shared responsibility to their employer/client
and to the task, project or work they are doing. Legally and morally they also
have a responsibility to each other. For example, to seek help in an emergency.
How deeply people experience and respond to this moral responsibility to their colleagues can vary greatly.
For the most part, consultant/freelance editors work alone as individual business owners, and thus their legal responsibilities and loyalties lie with their business. But we are also members of a mutual profession, and in this sense we have a moral responsibility to each other as professional colleagues.
In a formal sense, our collegiality is expressed through our membership of professional associations such as the Institute of Professional Editors (IPEd). And informally we support each other through mentorship, advice, a shoulder to cry on when things go wrong or to throw a (virtual) party when we have something to celebrate. We also provide each other with referrals, formally and informally. The Editors Directory is essentially our formal professional referral.
My approach to referrals
Even though I have been an editor for more than 30 years now, I am still not able to say confidently that I can edit any manuscript that is offered to me. For example, mathematics and physics for academic audiences have always baffled me and so I really couldn’t offer the high-quality editorial services I take pride in providing to all my clients. And I’m clearly just not cut out for certain topics – crime fiction and novels that include graphic descriptions of violence come to mind, as do scary stories.*
At least several times a year, clients or potential clients contact me with what sound like amazing projects but I’m unable to take them on because I’m booked out and/or can’t deliver within their required timeframe. So it makes sense to refer them to colleagues who may be interested and/or available in taking on their project. Over the three decades I have made a great many recommendations – probably numbering close to a hundred, if not more – often resulting in long-term gigs for the editors receiving those referrals. In other words, many thousands of dollars in revenue.
A few of those editors have sent me a bunch of flowers or a book voucher, or have bought me lunch or a drink as a gesture of appreciation. While these are lovely, they have always come as a pleasant surprise rather than an expectation. Sometimes the editor contacts me to say thank you, sometimes they don’t. But until recently I have never had a conversation about, or a suggestion of, a referral payment.
I’ve been a volunteer with Editors Victoria/IPEd from as far back as 1992.* Just as I consider this to be my personal contribution to the profession of editing, so too do I see the practice of referring clients or potential clients to trusted colleagues. In my view, we are all in this together, and it behoves us to look after each other in the best ways we can.
I do not seek, nor do I pay, finder’s fees, referral fees or kickbacks. Not now, not ever.
*sentence updated 14 February 2022
