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Take care over commissions
Financial Times
05 July 2008
"I run an IT support business and a lot of our work is obtained through agents who place contracts on behalf of large corporate users, we’d like to offer these agents commission payments. Are there any issues we should be aware of before we introduce commission payments?"
Commissions are paid in many areas of business but unless dealt with correctly, they present serious risks of civil and criminal liability.
A commission given to an agent that is not disclosed to the agent's employer is in fact a bribe. The agents you deal with are legally obliged to try to get the best deal for their employer. They cannot lawfully obtain any benefit from a third party without their employer's consent. An agent who does so is legally liable to give the benefit to his employer.
How does this concern you? First, if the agent doesn't disclose the commission to his employer you are equally liable to compensate the employer.
Second, any contracts awarded where a commission was paid will be void. You will be liable to repay all money paid to you under that contract.
Third, you may face allegations of deceit and/or conspiracy; which can lead to criminal proceedings.
Even if you believed you were acting honestly, you may be tainted by the agent's conduct if he deceived his employer.
The only way to safeguard against these risks is to ensure that the employer is fully aware of your proposed arrangements with the agent. You should not rely on the agent's assurances. If the agent has not given full disclosure to his employer, it is no defence that you believed he had.