By Veronica Baxter
In today’s gig economy, over 57 million American workers are freelancers and are responsible for everything from procuring office supplies, to invoicing, to paying taxes.
There’s a freedom and a sense of ownership one gets from freelancing, but there are downsides as well. One downside is the need to procure work. A freelancer must spend (unpaid) time building a client base to ensure a steady stream of work.
The other downside is billing. Inevitably a client will forget or delay payment or, in a worst-case scenario, refuse to pay you. Now what? This article explains your options when you are not getting paid what you are owed, and how to prevent this from happening in the first place.
Enter into Employment Contracts
A contract protects both you and the people you work for in that it will unequivocally spell out expectations on both sides. You can set forth whether you get paid by the project or by the hour and your rate, and your client will receive an estimate of the cost of the project and a projected timeline for completion. Your contract can be as simple as a few short sentences addressing these terms.
If you perform multiple projects for each client, the terms can state a minimum or maximum number of projects per month or quarter, or a minimum and maximum number of hours of employment expected each week. If you expect a project to be one-off, then an email stating the terms of that project, such as rate of pay, time to completion, method of payment, and when payment is due, may suffice.
The most important thing on your end is to get the terms of payment in writing. In exchange for establishing that, you offer your client a time to completion and the cost or an estimate of the cost. Both parties are protected.
Repeat clients, the clients with whom you have an ongoing relationship, might be trusted to pay upon completion of the project, while new clients might not. Better to be safe than sorry. However, if you’ve agreed to do the project first and be paid upon completion, be sure to set an exact deadline for payment. This deadline can be ten days, thirty days, sixty days, or whatever your business model requires. Be sure to send an invoice upon completion of the project.
What if My Invoice is Not Paid When Due?
It is frustrating, but sometimes things are forgotten or put off that are not a priority. Your client has your completed project – what incentive do they have to pay you soon or ever?
For this reason, it is important to have the terms of employment in writing, just in case. But don’t rely on suing them to collect as a first step. Freelancers cannot afford to alienate potential repeat clients, so it is worth your time to take some remedial steps first.
Give them a call. Remind them that you rely on each gig and the money coming in timely to make ends meet, tell them you’ve enjoyed working with them and that you’d like to do so again in the future, and ask them if they’ve sent the check. If they haven’t, ask when you can expect it. When you hang up, make a record of what was said.
If you do not receive payment in the time promised over the phone, resend the invoice with a note along the lines of, “Just in case this got lost in the shuffle, I’d appreciate payment as soon as you can per our phone conversation of [date].”
Wait a week, then send a certified demand letter. Be polite. Include copies of the sent invoices and a copy of your contract or the email establishing the terms of employment. Give them two weeks to respond.
Taking a Client to Court
If your client simply refuses to pay after you’ve taken these steps, you may have to sue them. You will have to perform a cost-benefit analysis and determine whether it is worth the time, money, and aggravation to sue that client. If it was a large, costly project, it might be.
Most state court systems offer a form of “small claims court” where plaintiffs can sue to collect up to a certain amount, the filing fees are minimal, the process is streamlined, and all of the necessary forms and templates are available on the court’s website. This makes it easier and less expensive for a pro se plaintiff to exercise their legal right to be paid.
If you decide against suing the client, take the loss as the cost of learning a lesson and write it off. The lesson might be to arrange with new clients to be paid in installments over the course of the project, say, at 25% completion, 50% completion, etc. That way, if a client is going to refuse to pay you, you will have avoided doing the entire job for them for free.
About the Author
Veronica Baxter is a writer, blogger, and legal assistant living and working in the great city of Philadelphia. She frequently works with and writes on behalf of Elektra Yao, an O1 Visa Lawyer in NYC.