Guru - Payment Methods and Mechanisms
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Indirect and Direct Payments
Guru insists that clients pay contractors indirectly, with the site acting as an intermediary. This is done for a variety of reasons, including convenience, safety (via escrow services) and to ensure that transaction fees are paid. To address the problem of clients finding contractors and then taking them off-site to avoid paying fees, Guru also requires that their SafePay service be used for paying any contractor that a client finds on Guru even if it is for work not related to a Guru-listed project. Sadly, the name “SafePay” is made into somewhat of a joke by Guru’s chargeback policies.
This is fairly standard for large marketplaces, but most of them also impose a time limit after which a client and a contractor that the client found on the site can take their work off-line. Guru, interestingly enough, does not: it insists that their service be used in this way in perpetuity. This does not strike me as very reasonable policy, and my guess is that many clients and contractors are not even aware of it. Even worse, Guru also does not offer an “opt-out” option that allows a fee to be paid to allow a client to “emancipate” a contractor from the site, which is also rather strange.
Payments from clients to contractors are all handled independently and not on any schedule. However, Guru generally requires that a contractor create an invoice and send it to the client before payment is made, which is atypical for this industry. Once an invoice is received and paid, the funds generally show up in the contractor’s account immediately.
Some freelancers ask for advance payments both as an assurance of the client’s intentions and to keep cashflow steady, especially during longer projects. This is a somewhat controversial practice, because while it can be perfectly fine when dealing with professionals, it also represents a serious risk for clients who don’t do their homework diligently before selecting a provider.
Guru does not have a policy against requesting or offering advance payments, and takes a surprisingly neutral tone on this subject, neither encouraging nor discouraging it. The company does make clear to employers in its help files that any advance payments that are made to a contractor cannot be recouped if the client is dissatisfied with the work performed (or even if the contractor simply disappears).
The usual alternative to advance payment is the use of escrow, but here Guru’s policy of charging an extra 2% for escrowed payments can lead to problems. Contractors who are already faced with membership and transaction fees have an incentive to try to ask clients for advance payments instead of paying for and using escrow. Thus, even though Guru has legitimate reasons for wanting to charge for the escrow service, making it a fee-based option actually ends up doing a disservice to the company’s clients by putting them at an increased risk of loss.
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