Payment Methods and Mechanisms
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Just as freelance marketplaces aren’t charities, neither are you! As a freelancing pro, you’re doing this for one primary reason, and that’s to make money. All of the freelancing sites want to help you achieve this goal; after all, the more money you make, the more they make as well. There are a few issues involved in the practicalities of how payments are made, though, and as usual, some are quite different from one site to the next.
Let’s take a look at some of the relevant issues here.
There are a few different ways that clients can agree to pay freelancers, the two most common being flat rate and hourly payments. In a flat rate project, the client and freelancer agree on a single dollar value for the job, or for larger projects, a set of payments to be made upon the completion of project milestones. Payment is a function of the deliverables, not how much time it takes for the work to be done. In contrast, with an hourly project, payment is made for each hour of work performed.
Some sites offer one of these, and some both; those that offer both often are geared more towards one method or the other. There are distinct advantages and disadvantages to both methods for freelancers, but that discussion is beyond the scope of this topic.
In theory, sites could also allow other methods, such as commission-based payment, but I am not aware of any sites that do. This is likely because such projects are speculative, can be hard to manage, and would make it harder for sites to enforce payment of transaction fees.
In a direct payment scheme, the freelancer does work for a client, and the client pays the freelancer directly. In an indirect system, the client pays the freelancing site, with funds accumulating in an account on the site itself. The freelancer can then choose to withdraw funds from their site account using a variety of payment methods, either at preset intervals or on an as-needed basis.
Nearly all of the big freelancing sites use the indirect method. There are some practical reasons for this; for example, it is easier for most freelancers to collect payments in their account and withdraw funds in a single payment, than to deal with checks from many people coming at random times. A centralized system also permits easier invoicing and tracking of payments due, and allows freelancers to use money they’ve earned previously to pay for membership charges and other fees.
That said, the real reason why sites use indirect payment is to ensure that they get paid; they make the client pay them so they can deduct transaction fees before the freelancer ever sees the money. If you doubt that this is the true motivation, try telling one of these sites you’d rather forego the advantages I listed above and have clients pay you directly. You won’t like the answer. :)
Sites vary in terms of when you get paid for work that you’ve completed. Most will credit your account as soon as the client signs off on the work—as it should be—but some impose delays. This is usually not anything nefarious, but just a consequence of how these sites use weekly billing cycles.
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