Referral fees for HR consultants: what the rules actually say

HR consultancy has no SRA, no FCA licence, no code with teeth. So when a payroll provider or an employee benefits firm offers you £250 per introduced client, nothing in statute forbids taking it. Two laws still hover. First, the Bribery Act 2010: a referral fee is lawful commission, but a payment intended to induce someone to perform a function improperly is a bribe, and the Act carries up to ten years' imprisonment. The practical dividing line is disclosure — a fee your client knows about is commission; a secret one invites the worse characterisation. Second, contract law. Many consultancy agreements contain conflict-of-interest clauses, and an undisclosed fee for steering a client somewhere can breach them, and can breach the fiduciary flavour of trust that retained advisory work creates. Sunlight solves both. Cheaply.

Here is where HR work gets closer to regulation than it looks. Auto-enrolment, group life cover, private medical insurance, salary sacrifice — HR consultants constantly stand next to decisions that are regulated financial territory. The rule of thumb: you may introduce a client to an FCA-authorised adviser and be paid for the introduction. You may not advise. Telling a client which pension scheme to pick, which group protection product to buy, or whether to switch provider is regulated activity, and doing it without authorisation is a criminal offence under the Financial Services and Markets Act 2000. The distinction feels pedantic until it doesn't. 'Talk to this authorised firm — they can assess it' is safe. 'You'd be better off with a master trust' is not. Introduce warmly; recommend nothing.

A referral usually means handing someone's details to a third party, and that is a UK GDPR event. You need a lawful basis to share a contact's name, role and situation with the firm you are referring them to — and 'they'll probably be pleased' is not one of the six. The clean route is simple: tell the person, get their agreement, then make the introduction. Thirty seconds of consent beats any amount of retrospective justification, and the ICO can fine up to £17.5 million or 4% of turnover for the worst breaches. Practical habits: never bulk-share client lists with a referral partner, never pass employee-level data at all without explicit instruction from the employer, and record the date and basis of each share. It is a two-line log entry. Keep it.