When a person pays a kickback, the act of giving someone something of value in exchange for a payment, the individual is engaging in a form of bribery. Kickbacks are a common practice in certain cultures where corruption is tolerated. A person may receive a payment in return for a service or for recommending a product to a customer.

Kickbacks can be difficult to spot. However, there are some signs to look out for. For example, if you are bidding on a job and the price of the services or goods you are requesting is unusually high, this may indicate a kickback scheme.

If you are dealing with government contractors, it is important to know that kickbacks are illegal. Many federal laws, such as the Dodd-Frank Act, prohibit kickbacks in government contracts. Also, there are many anti-kickback provisions in the Foreign Corrupt Practices Act.

businesswoman rejecting money in white envelope offered
Image by Unsplash+

The practice of paying kickbacks can be dangerous. It can affect your business and can also hurt your reputation. Kickbacks can be given in exchange for a commission, cash, credit, or favor. Your company should have an internal control system in place to reduce the chances of a kickback occurring. This can include a zero tolerance policy.

Kickbacks are often disguised as gifts, travel, designated health services, or other special treatment. These can be hard to determine if they are actually kickbacks, but the timing of the gift can be a sign. Sometimes, the gift is given during a bid or closing. Other times, the gift is given for an unspecified reason.

Kickbacks can also be disguised as fraudulent invoices. Often, the invoice is inflated. For example, if the vendor submits an invoice for inferior or defective goods or services, the purchaser will receive a kickback.

Some examples of kickbacks are a cardiologist who pays a doctor for referrals, a restaurant owner who gives a hiring committee a bonus for hiring a particular employee, or a contractor who offers concert tickets to a purchasing officer. All of these scenarios are considered illegal.

In addition to determining the legality of kickbacks, it is important to recognize that they can be very harmful to your business. They create a distortion in the market and can be a source of unfair competition. Even if you have an established internal control system, kickbacks can still occur.

a businessman giving money to his partner while making contract
Image by Unsplash+

Kickbacks are a corrupt and unethical practice. You should always take the matter seriously, especially if you are facing kickback charges. Ensure that your rights are protected by a lawyer.

Regardless of whether or not you are guilty, kickbacks can ruin your business reputation. Always keep your employees honest. Otherwise, you might end up with a company that shuts down. While most people do not understand the concept of kickbacks, they can be avoided. By establishing a strong set of ethics and a strict internal control system, you can prevent kickbacks from happening in your business.

As with any illegal activity, you can minimize your risk of kickbacks by ensuring that you have an internal control system in place. Moreover, you should avoid gifts that appear to improperly influence your business decisions. Keeping your employees honest will encourage them to reach their full potential and to perform at their best.

Photo by Markus Spiske on Unsplash