I worked for a client a dozen years ago. Since then, he's gotten a PA; he's moved on; and this PA has called me for work for another client.

I did the work. It was a rush situation. I got it done. Invoiced. All bills paid. All good.

Since then she has broached the subject of my paying her a percentage -- 10% has been floated -- of what I bill. She apologized for not mentioning it at first, and she says others who do work for her clients were informed of this setup and have paid a percentage to her of all bills paid to them by the client.

My response was that for me to do so, I would have to raise my hourly rate and the prices of future equipment. The PA said that would not be acceptable. We have not talked about it since, and I've only helped with a couple of phone calls. But I need your opinions and your experience.

A friend says what she's asking is illegal. I wonder. I'm ready to tell her that if I'm not to raise my rates, I'll be making less with this client and will be less motivated to ever put him first. If necessary I'd be willing to ask her if the present client knows of this "profit-sharing" situation.

So... ever run into this? Especially after prices have been set and work has been done? How about the legalities of it?

Unethical at the very least...
Had an Interior Destroyer try and do the same to me, I walked. Found out later it was a fantastic decision.
Maybe a conversation with your client is in order, at the very least he/she needs to know this going on and if they are ok with it then so be it.

We've had this conversation and went to the client with this letting them know we would be charging additional fees. One needs to maintain a certain margin to operate, a 10% cut is pretty significant.

Usually, we work for the client. If the decorator or contractor wants to add a "management" fee, that is a negotiation between them. I make clear to decorators that the margin system for electronics is different than for their furniture. We can't give the decorator 20% then allow the decorator to make 20% while showing the customer a 20% discount. Anyone can go on websites and get a lower than low price for electronics.

Also, we are painless to deal with. Everyone soon learns that we get things done on time and don't muck up the site. Typically, we are the only sub on site and work into the evening. I don't know anyone who would do this with the plumber or drywall guy. We sometimes collaborate with a particular electrician who has a similar work ethic.

The electronics industry is not like the furniture industry as noted.

In a noted seminar “watch before you discount” it was pointed out that a “measly 10%” may be giving away 50-75% of your net profit.

“Ma’am, rather than giving up half to two-thirds of my profits, I think I’d rather just go home two hours early today. Thank you for calling.”

10% is quite a shakedown. Isn't PA a glorified term for a gopher?

I think a 1 time referrral commission could be asked for. I wouldn’t like it but I would understand.

However a fee for every time you bill is ridiculous and shows what a POS that person is.

Walk away.
There's no two doubts in my mind.

Maybe you could ask "Don't they pay you to do this?". 10% is pretty steep- I would be tempted to ask her to justify her part in having you do anything and how she got your name. If it came from the previous client, she doesn't deserve anything.

While it doesn't involve a PA, I did a job for a previous client and the contractor asked her how much I was billing for my part in the project because he wanted to add a 6% surcharge as GC. She told him "I don't think so". He didn't hire me, he hasn't hired me for the other jobs where he did work for my previous clients and if he tried to hire me, I would tell him to pound sand because of what he pulled on one job.

Nope.

Anybody taking a percentage should be handling the invoicing and payments, and be upfront with their clients that's how they work. Got a couple builders that work that way, they handle everything as if they were the client after the initial presentation, for that they earn their money. For us, the clients see pricing info like any other client, builder handles the rest of the relationship.

Depends on the state, but it IS illegal in many places, since it's considered a kick back. Had a friend (somewhat) try this with builders by calling it a referral fee, and he got a letter from the state attorney general's office. Wasn't a nice letter either.

The only way the PA can get a percentage legally is if the PA gets it directly from the client via a cost plus contract. You bill the client, get paid by the client, and the PA bills the client and gets paid by the client.

It all has to be above board or someone can end up in trouble.

Same thing as cost plus in construction. The contractor charges the client directly.


I dealt with this with a variety of builders, up to and including some major tract builders.

I also dealt with this when I was a real estate agent. Insurance agents would push this kind of arrangement. I would read about agents getting fined for doing it, and some would lose their license.

In CA, you may find this article interesting. [Link: smwb.com]
May also be relevant in other states. Bottom line is that finders fees or kick-backs may be construed as bribery in your state. Probably good idea to learn what is legal in your area so that you can be prepared when this arises.
Another way to look at this would be as a General/Sub contractor arrangement. In this case, the referring party would need to hold all required general contractor licenses. Asking the PA for license, bond, and insurance info would probably shut the conversation down pretty quickly.

I would have told her "when I speak to the client I will tell him to put you on salary so you don't have to rely on tips".

Why would a physician's assistant be referring AV work?

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