Remote contracts as a freelancer or independent contractor and work-at-home opportunities, seem to be the way many of us go to work in the twenty-first century. The use of online, freelance escrow payment accounts is the way many of us get paid.

Mickey Perry, 2017 All Rights Reserved

In the virtual sphere, the use of freelance escrow payment accounts offers security and quality control to both clients and workers.

Cloud-based environments such as Confluence, Salesforce, Jira, FogBugz, Dropbox, OneDrive, and Google Drive have made your cubicle in the cloud a reality. Virtual offices give workers the freedom to live in Spain and work in New York. Workers can work any hour of the day or night as they interact in the global market. They can dress in fuzzy slippers and nurse the baby while they provide customer support, enter data, and change that line of code.

Companies benefit from virtual workers as well. In the quest to find the next line item to reduce, many businesses are opting to hire freelance or independent contractors. As businesses expand into the global market, they require staff that is available 24-hours a day. You are tucked into bed in the US, but orders are still coming into the office in Dubai. Selling globally is the backbone of the freelancer work world. Hiring freelance workers reduces the requirement for physical, square-footage office space, cuts the overhead of office electronics and utilities, and allows companies to realize savings with reduced employer paid taxes and benefits.

 

Freelance freedom of brick and mortar workspace has its downside:

It is nice to avoid a daily commute and have the freedom that comes with working from home. However, a freelancer must still consider several things. The freelancer must take a leap of faith in trusting their virtual employer. Will the work be consistent? Will the work pay a living wage? Can the employer be depended on for payment after the job is done? Consistent employment and earning a good wage are not the focus of this article, but perhaps this information can make you feel more comfortable about securing payment for your hard work.

In the global, work-for-hire marketplace, your employer is anywhere and everywhere. You will seldom see them other than on Skype, Google Hangouts, or GoToMeeting. So, how do you know you can trust this stranger to pay you when the project is done? One solution is to create an escrow account. Escrow accounts are funded by the client before you beginning work. Many work-for-hire sites, such as Upwork, Guru, Peopleperhour, and 99 Designs, have built-in freelance escrow payment features.

 

Job sites have built-in freelance escrow payment functions, but easy access comes at a premium:

There are many freelance jobs posting sites on the internet. These one-stop shopping sites have a built-in freelance escrow payment system. Each of these jobs posting sites has membership obligations and fee structures. Some job posting sites will focus on a single industry, such as graphic design. 

Posting sites will usually require the freelancer to create a profile. In some cases, they also require clients to have profiles. These sites will charge a servicing fee to process the receipt of, holding of, conversion of, and transfer of funds between employer and employee. The freelancer pays the fee. However, some employers will work with freelancers to offset or split the servicing fee.

Convenience comes at a price. In some cases, work posting sites will charge a service fee that can be as high as 20% of the total contract price. One of the great things these sites do offer is an arbitration process for clients and freelancers, alike. Arbitration is invaluable when there is a disagreement between the client and freelancer. Some of the escrow options you will read about below also have an arbitration process. If you are working with someone for the first time, you may wish to use one of the work-for-hire sites to see if you are a good match before moving to a private escrow payment system.

 

Private freelance escrow payment accounts may be an option:

Luckily, there are alternatives for clients and independent contractors who want to escape the competition of the client-rich, lower paid/lower quality freelancer-for-hire websites of the world. Create a private or independent freelance escrow payment account. This escrow will hold funds as a third-party. It can provide some of the same quality and payment security work-for-hire sites offer. At the same time, it can significantly reduce the cost of doing business. The downside is both client and freelancer will lose some power of arbitration in the case of a dispute. For trusted clients, however, private escrow may be the way to go.

Of course, it goes without saying that neither the client nor the freelancer should approach a project without first having a firm and binding contract in place. After a contract has been agreed upon and signed copies exchanged, it’s time to build an escrow account. Use an online service like PayPal, Escrow.com, or even Google Wallet. These accounts are not FDIC insured. All taxes are the responsibility of the client and the freelancer.

 

PayPal as a third-party escrow holder.

 

PayPal is probably the best known of all the alternative payment systems out there. They accept bank accounts, credit cards, and debit cards to fund your freelance escrow payment account. They offer a client and freelancer arbitration process for tangible goods. Tangible goods are those items shipped to a physical address. The downside is that this protection is not provided for products you create for use and delivery in a digital or electronic format, such as music or software.

The transaction fees start at 2.9% of the total dollar amount, plus $.30 per sale fee when using a fully funded account in the US or Canada. The fees schedule for other currencies will vary and can be found here.

 

Escrow.com as a third-party escrow holder.

Escrow.com is another good source for the creation of an independent freelance escrow payment account. It is a popular international option. Once a contract is in place, the client will deposit into an escrow account. Escrow will release the funds after the client has an opportunity to review the work and either accept or reject the final product. Escrow.com includes an arbitration process to dispute payment. The accounts use PayPal and other linked banks for funding. Escrow is a California company and is audited on a regular basis.

Calculation of fees come from on a sliding scale based on the total value of the project. As an example, a USD 1000 project would have a handling fee of $32.50. You can find their fee calculator here. The downside to Escrow is it does not work well for small projects as their minimum fee is $25.

Google Wallet and other methods to transfer funds.

Google Wallet (Google Checkout) can be used to send a payment to a person using their g-mail account or phone number. The client can upload money using a U.S. linked banking account or a debit card. Use the Wallet can to send or receive payments up to $10,000 ($50,000 over 5 days). It allows for monthly or recurring billings. Google’s Wallet can only be used for the purchase of an actual, physical product.

Skrill (Moneybookers) allows you to send and receive money through linked bank accounts in 40 different currencies. Fees to upload money into an account, are as high as 7.5%. An additional a fee based on the total amount of money transferred. Skrill will charge for conversion from one currency into another. The Skrill account must be active at least every 12 months. Otherwise, a monthly fee is deducted from any linked banking account.

Wire transfers, such as those offered by companies like Western Union, MoneyGram, Xoom, Wells Fargo and many others will charge service fees, conversion fees, incoming and outgoing fees. The fees vary greatly by the institution and the way the funds are requested or secured. A good comparison of fees can be found here.

The bottom line

Working for yourself as an independent contractor or freelancer can provide a sense of freedom and individuality. You can look through for-hire websites or other sources and find jobs. You can set up freelance escrow payment accounts to give you and your client peace of mind. There are alternatives to the for-hire sites. Now, get out there and find your place in the cubicle cloud.