Freelancer.com - Escrow Services, Work Tracking Systems and Payment Guarantees
All projects on Freelancer.com are flat rate projects (except for a tiny handful of “full-time projects” that aren’t really of interest to us). There are no hourly projects, and thus no tracking systems of the sort usually implemented around them.
Freelancer.com did at one point have a feature that it called “escrow”, back when the site was known as “GetAFreelancer.com”. I know there was an escrow service because I used it several years ago when I was just starting my own freelancing career. At some point, though, this service was done away with—perhaps this occurred as part of the large restructuring and expansion that the site undertook in 2010.
What the company now offers is something called the milestone payments system. What’s odd about this change is that Freelancer.com goes to great pains to emphasize that this is not an escrow system: there’s even a section in the site’s terms of service under “Milestone Payments” called, appropriately enough, “Not an escrow service”. Despite this, though, milestone payments seem to be exactly the same as an escrow service in functionality. Perhaps lawyers are behind the company’s attempt to draw a distinction?
Regardless of the reasons, the milestone system operates pretty much like escrow systems on most other sites. It allows clients to deposit funds for a project to Freelancer.com to show good faith, and then release them after work has been completed. But there are a few quirks to the system, some of which are a result of Freelancer.com’s own policies, and lead to an undermining of the system’s utility.
Many sites make escrow optional but strongly encourage it, and design their marketplaces so that using it is the standard method; very few projects on Elance, for example, do not use escrow. vWorker goes one step further, effectively making escrow mandatory to prevent the potential for abuse. On Freelancer.com, milestone payments are optional, but the way the site works tends to encourage inconsistent use of the service at best.
The main weirdness here is that milestone payments are driven by requests from contractors, not clients. Furthermore, providers are asked at the time they enter bids to choose a percentage of their bid that they want as a milestone payment. This contrasts to most sites, where escrow is all or nothing, and either party requesting it means the other must agree to proceed.
The end result of Freelancer.com’s design is that a client may receive a dozen (or more) bids that differ not just in the total cost of the project, but also in the amount that must be fronted as a milestone payment. This means that bidders who request the use of the service may find themselves at a competitive disadvantage: a client may prefer a bid of $100 with a 0% milestone payment over one that is $100 with 100% up front. Many contractors try to compete by not requesting milestone payments, which opens them up to potential abuse by unscrupulous clients. It also removes their ability to use the site’s dispute resolution service.
The name “milestone payments” is also deceiving; it brings to mind the scheduled milestone features found on sites like Elance or Guru, but that’s not how the Freelancer.com service works. There is no ability here to lay out a sequence of payments on specific dates, just a single dollar amount that is put in as the “milestone payment” and is held by Freelancer.com until it is released. It is possible to request a partial release of funds from a milestone payment, but this is optional and cannot be formally laid out as on those other sites.
Milestone payments suffer from many of the same flaws as other escrow-like systems. Clients must be careful to only release funds when they are sure that the work is up to snuff, because once money is paid, Freelancer.com cannot get it back (and will not even attempt to do so). Contractors are in a better position: if a client refuses to release money even after receiving acceptable work, the fact that a milestone payment was used allows the contractor to open a dispute to try to get the funds released as part of Freelancer.com’s dispute resolution system.
Freelancer.com offers no payment guarantees. Also, its terms of service specifically grant the company the right to come after contractors in the event of a chargeback.
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Last Site Update: December 13, 2011
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