Working as a freelancer provides a handful of VERY attractive benefits:
- Flexibility to set your most productive working conditions
- Independence to ditch the 9-5 slog and watercooler politics
- Freedom to choose specific projects that suit your skills and interests
- Autonomy to build your own brand and choose your own hours
However, all of this upside comes with a tradeoff.
In most cases, freelancers forego traditional employment benefits, such as: a base salary, unemployment insurance, paid time off, sick days, social security contributions, and most importantly, legal protection and recourse.
Freelancing can be advantageous for your personal and professional goals, but you are almost certainly going to run into some bumps along the way. Facing challenges like abusive clients or chasing down delinquent payments is all part of the game, but there are steps you can take to limit or avoid these situations.
Today we’re going to talk about five strategies you can deploy to give you peace of mind and lay the groundwork for a more secure freelancing future.
1. Get Everything in Writing
As tempting as it is to get started right away and bypass tedious administrative forms, drafting a comprehensive independent contract agreement is an important tool for securing payment deadlines, penalties, and work scope.
The objective of this document is to outline expectations and project specifics, creating an explicit agreement around what is expected and leaving little room for one party to dispute payment or breach the contract’s terms.
You should also make it standard operating procedure to invoice clients immediately after the completion of a milestone or project. Some companies take several months to process payments to freelancers, so make sure that any delay in payment isn’t due to your lack of preparation.
Finally, you should steer clear of contracts that include clauses that heavily favor one party, because your legal recourse as a freelancer is limited and less thorough than that of traditional employees.
Having a pre-drafted uniform freelancing agreement will allow you to control the terms of the contract and give you a competitive edge in the market. Proactivity is key, and preparation today, could mean the difference between a constructive professional relationship and a headache or future litigation.
2. Require a Deposit and Late Fee
Requiring clients to submit a deposit prior to beginning the project is an effective tool for ensuring you are paid, at bare minimum, a percentage of the total fee that was agreed upon.
We recommended you request a deposit for all engagements, but especially in situations where you have no previous history with the client, or are working with a client who has notoriously delayed payment or failed to pay other freelancers.
Even if your client absconds to Burma to “settle their problems,” and leaves you with no means of legal recourse, at least you will have something to show for it.
Additionally, including a provision for a late fee in your contract agreement also incentivizes clients to pay on time. By preemptively including a late fee in your contract, you make it clear to your client that you mean business and that they will not be able to defer payment without consequences.
It’s surprising how many clients are suddenly “able to pay” after having a new invoice re-submitted to them with the additional late fee tacked on. The worse case scenario is that you are only paid the original amount, which accomplishes your payment mission.
3. Cease Continuing Work for That Client
Occasionally, you will have a client that wants to have their cake and eat it too, meaning, they want to withhold payment, and still expect you to continue working on other projects they have commissioned.
They may say something like, “We’re just having some issues with our payment system right now. Let’s just keep moving forward and we’ll get this sorted out next week.”
A phrase like this should be viewed as a red flag and cause for a more detailed assessment of the situation.
The problem is, ceasing work is not always as cut and dry as it seems. In order to best determine whether to cease work on other projects for a client, or continue, you should take a step back to assess what is best for your relationship with them, and whether it is a temporary or “one-off” occurrence.
Ask yourself, “Is this client so valuable that I want to risk isolating myself from future projects with them?”
If you decide the risk of continuing work far exceeds the benefits of a continuing relationship, it is in your best interest to firmly request payment before finishing any outstanding work for them.
If, however, they are a long-time and valued client, it is probably in your best interest to continue working on the project, but maintain accountability of outstanding payments and place any unpaid work lower on the prioritization scale than paid assignments.
4. Strongly-worded Letter of Demand
Sending a strongly-worded letter of demand to a non-paying client is a powerful way to communicate that the terms of your original agreement have been breached and you are serious about collecting what is owed to you.
If you want to make the demand sound more official, sending a traditional cease and desist letter for breach of contract will convey that you want your client to “cease” from engaging in such behavior (non-payment) and “desist,” or discontinue any actions of non-payment that may arise in the future.
When drafting a cease and desist letter, be sure to include the following elements:
- Who: Identify the party engaging in the unlawful withholding of payment. Make sure to use the company name or the full legal name of the individual who signed the agreement.
- What: Classify what behavior the client is engaging in. In this case, non-payment of compensation that is owed based on the submission of deliverables by you, the freelancer or consultant.
- When: List the dates your working relationship began and the agreed payment schedule. You may also want to include the dates that invoices were sent as well as any reminder emails or follow-on invoices with late fees included.In this situation, written correspondence is your most compelling evidence.
- Why: Cite any law that can help support your case for payment. Unfortunately, we can’t advise on the specific laws that may exist in your area, but a local contract attorney can certainly help.
- How: Describe how the non-payment has affected and harmed you. Be sure to include the direct (Ex: reduction of income) and indirect (Ex: forgone revenue from not taking on other clients due to unpaid work by the target of the letter) implications for your business.
In all areas, you will want to be a specific as possible and ground your assertions in undeniable facts.
For example, make sure to cite and emphasize specific sections of the original freelance agreement that were breached:
“Section 2(b) states that ‘the Client agrees to complete all payments in a timely manner, or by [X] date,” and as of [X] date, you have failed to fulfill your payment obligations under the contract, therefore you are in breach.”
5. Take Them to Small Claims Court
If all else fails, bringing an action in small claims court is a legally enforceable and relatively inexpensive way to recover unpaid wages and due compensation.
Small claims court is commonly used to resolve debt disputes and other minor issues associated with independent entities doing business with one another. One of the advantages of small claims court is that you are able to represent yourself, thus saving on expensive attorney’s fees.
All 50 U.S. states have a network of small claims courts, where the maximum addressable monetary claim is capped at anywhere from $2,500 to $15,000. It is important to note that some states allow you to hire an attorney to represent you, while others prohibit it.
Most freelancers shudder when they hear the word “court,” but small claims court can be a saving grace.
Where other legal environments rack up exorbitant expenses for attorney fees, research, document preparation, and printing and filing fees, small claims court has a much lower total cost that is typically covered by the losing party.
So, if you’re confident that you’re on the right side of the dispute and you have evidence to back up your claim, you shouldn’t have any reservations about taking a bad client to small claims court to collect your funds.
When bringing a claim in small claims court, make sure to keep the following tips in mind:
- Determine whether or not the total dollar amount you are owed warrants taking your client to court
- Acquaint yourself with your state’s monetary damage cap and ensure that what you are pursuing is within the addressable range
- Consider whether the other party even has the funds to cover the amount you are owed plus your court fees
- Abide by the proper filing guidelines; choose the right court location, file within the proper time, and use the correct names of parties
- Prepare and organize your evidence before court
Freelancing is a tough job, and opens you up to greater chance of abuse by clients, due to the lack of formal legal protections. However, by familiarizing yourself with the necessary protective measures and steps you should take before and after entering into a freelancing relationship, you’ll save yourself unpaid wages, headaches, and even future litigation.