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How Do You Pay Your Freelancers?

Pay Your Freelancers

We’ve written frequently about managing and working with freelancers and independent contractors. But given some of the remarks tweeted around National Freelancers Day (June 28), it seems like a good time to discuss a big sore point for many freelancers: timely payment of freelancer invoices.

Cash Flow or Disrespect?

I worked with a freelancer some years ago who told me many horror stories about her lengthy career as a poorly paid freelance artist. She had become quite cynical about working with clients, who made grandiose promises and then all too frequently delayed payment to ridiculous extremes, or even flat-out refused to pay. These experiences occurred with individual small business clients and larger corporate clients alike. In my opinion, there are few things worse than stretching out payments to freelancers—maybe only bouncing full-time employees’ paychecks would trump bad payables management.

That’s what delaying payment of freelancer invoices comes down to, as a general rule—poor cash flow management. If you can’t afford to pay the relatively small bills owed to freelancers, you need to work harder to improve your financial situation. Freelancers should not be used as your “bank,” any more than clients should be permitted to use your agency as their bank. 

If you’re guilty of stretching out freelancer payables, stop now. Clear your books of currently owed invoices, and apologize—on bended knee, if necessary—for being a bad employer. Then commit to not letting it happen again. 

Agencies survive on goodwill. Vendor relationships are worth their weight in gold, and trashing those relationships by not attending to basic contractual obligations gives your agency a big black mark among the freelance community… and could extend to other vendor relationships. Freelancers don’t work for you exclusively; they talk among themselves and with vendors they meet through various professional relationships. The word that you pay poorly will get around, and even could affect relationships with clients and new business prospects who ask around before deciding whether to work with your firm. If the embarrassment of paying poorly isn’t deterrent enough, consider your agency’s reputation. Does poor treatment of vendors fit your brand values and positioning? I think not.

Disrespecting your valuable freelancers and independent contractors is no way to build reputation or goodwill. Set policies and best practices for working with freelancers. Treat them as professionally as you would expect clients to treat you.

Legalities. Address legal issues at the beginning of every project. Always determine in advance how you want to negotiate artwork ownership, and get agreement in writing before handing out a project. Also, use a fair and equitable non-circumvention agreement, barring freelancers from soliciting your clients for a certain period. Don’t be ridiculous about setting lengthy time limits, but make clear your requirements for confidentiality and protection of client trade secrets, and request that they ask permission before adding work created by the agency to freelancer portfolios.

Ensure that the freelancer will take care of their own taxes, by having them sign a statement attesting to that. Use either a Backup Withholding Validation Form or an Independent Contractor Status Agreement.

Clear Scope and Brief.Provide your freelancers with the clearest possible instructions, and agree to pricing and payment terms up front. Provide an in-house contact person freelancers can call with questions or to get materials or resources for the project. Set clear deadlines. Agree to a specific number of revisions inclusive within the price. Determine how you will pay for overages in hours or revisions. Negotiate terms so both you and your freelancer are happy. Then honor those terms.

In return for routinely accepting rush work, delivering good quality work, making sure their work is error-free and generally serving as reliable, dependable support people for your core agency employees, the very least you can do in return is pay freelancers on a timely basis. That means paying on their terms. They are working professionals and have a right to expect prompt payment for their time and efforts, just as your agency has the right to set prices and terms with clients. 

Timely payment.Payment is the biggest issue for the average freelancer; bookkeepers routinely bump them to the bottom of the payables queue if cash flow is tight. They are single individuals, i.e., they have no clout, unlike larger vendors and companies from whom agencies buy services. Yet, increasingly, agencies use independent contractors and freelancers as a way to reduce overhead. You would scarcely believe the payment horror stories I heard from my aforementioned freelancer. Or would you? Are you guilty of stretching out payments to freelancers to 45 days? 60 days? 90 days+? Two points:

  • Freelancers have mouths to feed, taxes to pay (quarterly) and their own business obligations to fulfill. It is no more fair to stiff them on payment than if you stiffed a favorite print vendor… or your clients stiffed your agency.
  • Every time you stretch out payment to a freelancer, you damage your agency’s reputation among the professional freelancer segment. You can review freelancers if you’re unhappy about how the project was executed… but they can also review you and warn other freelancers to not work with your agency because your payment terms suck.
     

Don’t become a square in Freelancer Facepalm Bingo.

 

Freelance does not mean “free.” Please, pay freelancers within terms.

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