As a freelancer it can be hard to protect yourself and enforce contracts if there is a disagreement. Nothing is worse than doing a bunch of work for a client and then having them stiff you on payment. We’ve all been there at least once.
Here are some of the ways you can protect yourself:
- Write a solid service agreement or statement of work contract and have the client sign it: This contract should outline all the major activities, deliverables, assumptions, and exact payment terms for the work you are going to do for them. Dan Mall from SuperFriendly has a great combination service agreement/statement of work that he has open-sourced to the freelance community. You are free to use it and I encourage you to do so. It comes in Keynote, HTML, and Microsoft Word versions.
- Wait for a retainer payment before you send the first major deliverable: I always recommend asking for a percentage retainer payment from a client when you begin the project. This is acceptable to ask for when it’s a *direct new client. You can start the work before you receive this payment, but don’t deliver the first major deliverable until you receive the payment. Be firm on this. * By direct I mean a smaller client that hires you as an individual to do specific deliverables. Think an individual, small or medium size business, or a startup.
- For larger companies, understand their payment terms. Before starting a big contract with a larger company, or a sub-contract with an agency, ask them what their regular invoice and payment terms are. For larger agencies or companies, they almost always pay on the company’s regular payment terms, which usually means you get paid 2-4 weeks after a work period is finished, or deliverables are complete–just like if you were on salary. If the company is reputable, you should accept these terms if you want to work for them as they usually don’t make exceptions. But if you really feel wary about trusting them to pay you after the fact, perhaps you shouldn’t work for them?
- Invoice at regularly scheduled intervals specified in the contract: If you can space out invoices throughout the project, there is less risk of being left holding the bag with a large unpaid invoice at the end of the project.
- Hold back deliverables: The only real leverage you have as a freelancer is the actual work that the client has asked you to do. If you are at all worried about getting payment, then you can hold back deliverables and final root files or code until the client sends you payment. This can get sticky, and you should be careful about which clients you do this with. If they are sketchy at all, I would recommend it. But if it’s a reputable company and you don’t feel there is a risk you won’t get paid, then perhaps it may just create unnecessary conflict. You want to get repeat business, so it’s not always a good idea to have your actions show you don’t trust the client.
- Be Nice, Remind Regularly: One of the biggest mistakes freelancers can make is to be super aggressive and angry about missing payments. Clients respond much better to friendly, regular reminders than they do to a super angry email. Remind the person every week, without fail. Not more, not less, until you get paid. There could be a million reasons why a payment is late. Being professional and nice usually will eventually get you paid. Being angry and threatening usually guarantees you won’t get paid.
- Use Guilt: If being nice and reminding regularly doesn’t get you anywhere, then the final resort before legal actions is to try and make the client feel guilty about not paying you. This involves changing your nice reminders to explaining to the client that you trusted them, did all the work you were contracted to do, and have a family to support or bills to pay. Ask them how they feel about not treating you fairly. But do it nicely, not angrily. Play the victim. This can work in some circumstances.
- Online Claiming Service: The company PeopleClaim reached out to me recently and it seems like an interesting service for freelancers. They’ll send the claim out by mail or email; if it’s not resolved by your deadline, you have the option to post it publicly. The site’s peer mediation process invites the public–including freelancers– to offer suggestions for resolution. It’s a powerful process that focuses on a mutually agreeable resolution sourced by people who know the business. It’s quite economical as well. If you give it a try, please let me know how it goes!
- Legal Action: Your last remaining recourse may only be legal action. You could try a letter from your lawyer explaining that if they don’t pay, they will be liable for legal action against them. The threat of legal action is sometimes enough to trigger payment. In New York City, there is a new law that protects freelancers from wage theft. So if you are from there, you have more protection and recourse than in other places. But in most cities you are left with small claims court, and if the client isn’t in your city, it’s usually not worth the time to take legal action.
In the end the best way to protect yourself is to use your freelance spidey-sense! If you feel like there is a decent risk this client is going to stiff you, then perhaps you shouldn’t work for the client in the first place. But if you must, then use all the tools above.