Freelancer Referral Fees: Percentage, Pros, Cons, and Best Practices You Need to Know

Freelancers are always on the go, looking for clients and ways to make extra cash, which is why networking is so important.

Instead of scouring job boards and freelancing websites, you can also ask other freelancers if they know of anything. Sometimes, these freelancers do, but they will only give you the referral for a fee.

Referral fees aren’t a hard rule in the freelancing world, but some freelancers charge them, so it’s best to know about them.

Keep reading to learn more about referral fees for freelancers, including the pros, cons, and some best practices to consider.

What is a Freelancer Referral Fee?

Freelancer referral fees are fees, often a percentage of a job, charged to a freelancer when they are referred to a client by another freelancer.

These fees aren’t absolutely necessary, so not all freelancers charge them. But you can!

So, what does this process look like? Let’s say you are a freelance graphic designer. At the moment, you are slammed with work, but one of your clients comes to you with another project.

You don’t want to let them down or stress yourself out by taking more work, so instead of declining the offer, you refer another graphic designer to the job. However, before telling your client about the other designer, you should talk to the designer first.

When discussing the job with the designer, mention the referral fee if they successfully work with the client. Once the work is complete or the other freelancer has been paid, you get a cut.

Graphic designers are just one profession that can use these fees. Lawyers, like Kenny Habetz Injury Law, can also collect these fees if they refer other lawyers to clients.

Kenny Habetz focuses on injury law. What if a potential client came to him with a medical malpractice case? Well, instead of losing out on money, he could refer Malone Law.

How Much Should A Freelancer Referral Fee Be?

One of the hardest parts of running a business or working as a solo contractor is coming up with fees, contracts, and pay.

Really, the percentage is up to you. However, most people who charge a freelancer referral fee only charge 5 – 30%.

While you can change a flat fee, this can work against your favor. Setting a flat fee can discourage other freelancers from taking on the work because of the discounted amount. It can also hurt you as it limits how much you make.

For example, you charge a flat referral fee of $50. The job you referred to another freelancer is worth $100. This high fee is likely to scare them away as it’s half of the project’s worth.

However, if you charge low, like $10 on a $1,200 project, you can lose money since you’d make more charging a percentage.

Should You Use A Contract?

Ultimately, it’s up to you on how you want to run your business. However, if you are interested in keeping your money and business safe, consider creating a contract.

This way, there is no confusion on either side over what the fee is or how it is to be paid.

Even if you don’t charge a referral fee, you should have a contract with your clients regarding any other fees.

When creating a contract, consider speaking with an experienced lawyer in your area. If you live in Florida, you’ll want to find someone like Investor’s Rights who serves this community.

How To Collect a Referral Fee

If you do charge a referral fee, you’ll need to figure out a way to collect it. This information is also what needs to be added to your contracts.

Are you thinking about a flat rate fee or a percentage? Does the percentage change depending on the amount?

You’ll need to really brainstorm and write down your process. Some people prefer a set number like 15%, while others base it on the project’s total worth.

There is more money in the second option, but only if you find freelancers interested in work tied to referral fees.

Collecting referral fees can be done before, during, or after a project is complete. You can wait for the client to pay the other freelancer before submitting an invoice.

Are Freelancer Referral Fees Worth It?

So, are freelancer referral fees worth it? The short answer is – it depends on who you ask. If you scour the internet now looking for opinions, you’ll get a mixed bag.

To further help you make this decision, we’ve listed the pros and cons underneath this section.

Pros

The most obvious pro to collecting a referral fee as a freelancer is that it is easy money. You don’t have to search for referees as hard as you’d search for new clients.

Who wouldn’t want to make more money while also maintaining a good relationship with their clients?

Charging a referral fee and referring freelancers to your clients can also strengthen your relationship with them, helping to build client relationships. Instead of leaving them to struggle, you can refer a good freelancer that you’ve vetted.

Referral fees also provide networking opportunities. Although you don’t have to search as hard for freelancers versus clients, you do have to interact and build a list of interested freelancers.

Networking is a powerful tool. It can go both ways. Let’s say you really connect with someone and, in turn, they send you work with a referral fee.

Another pro to using a referral fee is that it makes your business seem more professional. Other ways to make your freelance business seem more professional are with a strong website and social media, like Powell and Pisman Injury Lawyers. On their website, they even highlight their excellent reviews.

Cons

Transparency is important in the world of freelancing, which is why we are also highlighting some cons to consider before deciding to use a referral fee.

One con is that not everyone is interested in paying for work. Although you can find people who won’t flinch at the idea of fees, it isn’t everybody. Get ready for some awkward conversations, flat-out rejections, and people who don’t respond.

Another con is that you can potentially harm your business by referring client work to other freelancers in two different ways. One way is by putting your name on the line. What if that freelancer is bad at deadlines? Or they are a poor communicator? Since you are the one who referred them, this reflects back onto you.

Even if the interaction is great, it can backfire on you. Freelance work fluctuates. So when it’s a slow season and you want work, the client might not choose you as the first option. Instead, they will go back to whom you referred because they are more familiar with the recent work.

Best Practices When Using Freelancer Referral Fees

Now that we know a little bit more about freelancer referral fees, we can dive into some best practices to make using them easier.

Honesty and Transparency

The most important thing to remember and consider when using a freelancer referral fee is honesty and transparency.

Not all freelancers want to pay money to get a client, nor are they familiar with this practice. Instead of warming them up with a long message detailing the project and its pay, mention your fee upfront.

No one wants to get to the end of what sounds like an amazing opportunity, only to feel let down when there is a fee.

If you have a website, highlight the fees and what to expect. An example of a business that does this well is HJV Car Accident Personal Injury Lawyers. Directly on their website, there is information about their fees. It’s right at the start of the homepage.

Be Picky

Another best practice to keep in mind is being picky. There is nothing wrong with taking your time to vet other freelancers.

When you refer a freelancer to a client, your name and reputation are on the line.

Only consider freelancers you’ve worked with or are familiar with their work. Some people build lists of 5 – 10 interested referral partners and vet them out with test work. This, of course, is just an option.

Check In

Don’t disappear when you get your fee. Because your name is on the line and to maintain a good relationship with other freelancers, check in during and after the project.

You can ask the freelancer if they have any questions or need any help.

Don’t Be Pushy

Not everyone is going to want to participate in networking or freelance referrals if there is a fee, and that’s okay! Referral fees aren’t an industry practice, so try not to take it to heart if only a few people are interested.

To maintain a good reputation and be open to networking, try not to be pushy with the referral fees. If someone isn’t interested, take the no for an answer.

The same goes for your client. If you ask if they are interested in a referral and they don’t take it, leave it be. There are plenty of other fish in the sea.

What Other Fees Do Freelancers Charge?

Referral fees are just one type of fee that freelancers charge. However, freelancers mainly charge fees to clients, not other freelancers.

Some other fees to consider using and researching as your business continues to grow are late fees and deposits.

Deposits are the first thing you should charge when getting a new project. It’s a way to keep you and your wallet safe while freelancing. For freelance writers, they can take half of the project payment at the start and the second half when the work is completed and edited.

This is super important as sometimes, clients disappear or take ages to finalize payments. No one wants to work for free.

What about late fees? Well, a late fee is charged when payment is overdue. It’s okay to provide your clients with a grace period, as anything can happen, but after seven days of no contact, charging a late fee is a way to put pressure.

As long as all of this is written in your contract, it can be implemented legally.

Wrapping Up

Overall, freelance referral fees are a good option if you want to make extra money without needing to look for work directly.

Although true, it’s not a concept that everyone is familiar with, so you’ll need to speak directly and honestly about your fees. Either way, talking with other freelancers, even if they aren’t interested in referrals, is a great way to network and grow your community.

Freelancing isn’t going away anytime soon. Actually, it’s expected to grow. Already, in 2024, 38% of the U.S. workforce did some type of freelance work. If you’re interested in joining a community of freelancers with a plethora of information, check out the latest articles on Millo or subscribe to our newsletter.

—Linkhouse

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