Elance - Payment Methods and Mechanisms
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Indirect and Direct Payments
Elance’s marketplace is designed almost entirely around indirect payments, with Elance acting as the middleman. This is done for two main reasons. First, it is generally more convenient for both parties to work this way, as it allows access to important features like escrow. Second, it is the main way that Elance ensures it is able to collect its transaction fee, which is automatically deducted from the funds paid by the client before they are put into the contractor’s account when a project is done.
It is actually possible for clients and contractors to arrange direct payment without using the Elance system. However, the contractor is obliged by Elance’s terms of service to pay the transaction feed on all such funds received for a full year from the time the contractor and client establish a relationship. A client can pay Elance a flat $750 “buy-out” fee to bypass this requirement for a particular contractor. This represents Elance’s standard 8.75% fee on about $8,570 worth of work.
For fixed rate work, Elance does not use any sort of a weekly or monthly payment schedule; all projects can be assigned, worked on and paid for asynchronously. Funds generally appear in the contractor’s account immediately after a client pays an invoice.
For hourly work, Elance operates on a weekly schedule. Work is accumulated during the week, and the client has an additional week to review and approve timesheets. Thus, there can be a delay of up to two weeks until payment is received for some work.
Elance does not have a policy against contractors requesting advance payments, but the company discourages clients from agreeing to their use. Granting an advance payment is probably the most common way that clients get ripped off by unscrupulous providers, and Elance’s official position appears to be that its escrow feature makes advance payments unnecessary and this risk not worth taking.
Of course, not everyone agrees with this position; advance payments are always a controversial topic. Some professional freelancers ask for advance payments as a matter of course, both as assurance of payment and to increase cashflow during long projects. Some clients are fine with them, but many are reluctant to agree to advance payments for the reasons I just mentioned. If you prefer advance payments, be prepared to justify the client why they should be able to trust you; this is much easier to do if you already have a lengthy track record and sparkling feedback record.
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Last Site Update: October 21, 2011
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