You get a call and someone has a potential job for you to do on a freelance basis. What do you do? This article talks about the basics of the freelance job. (Look for our other article that talks about the business aspects of freelancing, this is geared towards working on a specific project.)
As always, we are not offering legal advice. Consult with a qualified attorney for your own personal circumstances.
Freelancer vs Employee?
First of all, let’s figure out the different types of work scenarios where you are considered a freelancer. It’s been known for businesses to hire people to do projects, employing them as a freelancer, but later running into trouble because they actually were treating the freelancer as an employee.
There are advantages to a business hiring a person as a freelancer instead of being an employee, so some will try to take advantage of the situation.
Here are some of the basic ways to figure out if the freelancer is actually an employee or not:
1) The freelancer is the boss of their work schedule. They get to pick when they work and where they work. If the hiring party dictates that the freelancer must work at their location, or must work during certain hours, the freelance status is in jeopardy. (Not to go overboard on this, if there is a meeting to go over a details of a project, or set time where others are involved, like a photoshoot, that is a reasonable expectation to comply with a set schedule.)
2) The freelancer maintains a business that works for others. If a freelancer only has one client, their freelance status may be in jeopardy. In addition, if the hiring party dictates who else they can work for, that may turn someone into an employee. However, non-disclosures and some limited non-competes are reasonable. (This is a gray area that may require expert legal advice.)
What about work for hire? A work for hire situation maintains a freelance status. Work for hire means that the hiring company is paying you as a contracted laborer to do a job, but they are maintaining ownership of the work that you do under that contract. So all copyrights transfers to them as if you were an employee. (More on copyright later in this article.) There is nothing wrong with accepting a project under a work-for-hire basis, just be aware of the legal ramifications that goes with it.
The Project Parameters (in writing)
It is essential for the freelancer to get in writing the project parameters and expectations. This can be a formal contract, but often is just a written document that doesn’t go into extreme ‘legalese’. Courts have found that emails can serve as binding contractual documents so just an email outlining the project with a reply confirmation should be sufficient in many cases.
Items that need to be in that written overview include:
1) Deliverables. What is it that the freelancer is supplying to the hiring party? Is it a file that is emailed? Is it a physical project that is delivered? Are there rough drafts that are approved during the process?
2) Timelines. When does the freelancer need to supply the deliverables? Is it just one final deadline where as long as the freelancer meets that due date they are fine? Or are there steps along the way that must be met and a schedule maintained?
3) What is the agreed upon payment? Freelancers can set up a set price, a pre-determined number that does not fluctuate. Freelancers can also give a range based certain parameters. Or they can set up an hourly charge and keep track of the time spent on a project. A quote for a project means that the price is determined in advance. An estimate for a project means that this is a reasonable expectation of a final cost, but that could fluctuate. If you are giving an estimate on a project, make sure that everyone agrees on the definition of an estimate and that the final price may vary. (Many people don’t understand the difference between a quote and an estimate and think they are synonymous.)
4) What are payment terms? This will depend a lot on the company that the freelancer is working with. Some larger corporations that have purchasing departments will dictate terms that typically aren’t favorable to the freelancer. In most cases, however, freelancers can be paid in installments. A common approach is 1/3-1/3-1/3 on larger projects where the freelancer gets 1/3 up front, 1/3 when delivering the final project, and 1/3 in 30 days.
5) Who owns the copyright when done? Legally, the artists owns the copyright until they turn it over to the hiring party in writing. A savvy business will make sure to get this copyright transferred in writing. Most simply ignore this part of the transaction and assume that they will own the copyright. Here are two recommendations for the freelancer when it comes to copyright:
A) Copyright transfers when the final bill is paid. This little caveat to a contract can help a freelancer get paid if there are any controversies down the road.
B) Copyright is only transferred for the final accepted piece. All of the ideas and work leading up to the final piece remains the copyright of the creator. Many times creative artists will come up with several ideas while trying to find their client’s solution. An idea for one company, that is never produced, can spark an idea for another client down the road. By putting this stipulation in the written agreement, that the company is only getting the final accepted piece for their use, it allows the freelancer flexibility to re-use and modify their development ideas for other clients. (A really depressing situation for a creative person is to come up with a brilliant idea and not ever seeing it produced. This allows options down the road.)
Remember, copyrights have values that can be more complex than just who owns it. A freelancer can grant copyrights that have geographic restrictions (United States only), time frame restrictions (for one year), usage restrictions (for print reproduction only, not web or TV), and other predetermined usage restrictions.
In addition, a freelancer needs to be aware of other usage restrictions and copyrights if they use outside sources. If they hire a photographer or illustrator for a project, what rights are granted by the photographer? If they hire models, did they get releases and are there any limitations on those copyrights? All of this information must be passed on to the client so they know if there are usage restrictions.
6) Negotiate promotional rights. When a freelancer sells the copyright to the hiring party, it is recommended that they maintain rights to still use the works in their own promotional materials. (To show others their abilities for future work.) This may be considered one of those “fair usage” items (a part of the copyright law that allows usage of materials in limited circumstances to non-owners of the copyright), but just to be safe, it is best to get this as part of the agreement. Always check with the client about when showing the work in our portfolio is appropriate. It is a major faux pas to reveal work before the client makes the work public.
7) Liability on supplied materials. Many times the hiring party might supply the freelancer with materials. This could include photos, logos, etc. A line stating that the hiring party is responsible for copyrights on all supplied materials is a good safety net to include in an agreement.
8) Who owns the tangible items when done? Some freelance projects involve the creation of a physical piece. For example, a freelancer may develop a painting for a project and will send that painting to the hiring party to be reproduced. It is a good idea to have in writing who owns that painting afterwards. Should it be returned to the artist? Does it become the property of the hiring party? (And it is possible that a freelancer may sell a physical item to someone but not sell the copyrights to it. So the buyer may hang the painting up in their corporate headquarters but the freelancer still maintains the rights to the image for other purposes.)
9) Revisions and scope creep. Many times a project will have changes needed. How this is handled needs to be determined in advance. Many contracts will include one set of changes as part of the agreement, but other changes are billed in addition to the original agreement. Many projects will also change in progress. This is often referred to as “scope creep”, where the more someone gets into a project, the more is determined to be needed. This can destroy a predetermined budget. It is always good to have a line in an agreement that says “based on pre-determined parameters”. In other words, if something is not included in this agreed upon document outlining the projects deliverables, or if something changes that wasn’t discussed in advance, it is allowable and expected that the freelancer can adjust their bill accordingly.
It is recommended if changes in the project require a change in direction and billing, that a “change order” is written up that talks about the changes and is signed by the hiring company. In a change order, it will state that additional charges may apply. (If you know what those additional charges will be, you may put that right in the change order.) Always get change orders signed prior to spending the extra time making changes.
An invoice should be sent for every payment needed. Each bill should show all agreed upon payments, what has already been paid, what is due for payment with that particular bill (now due, or due in 30 days, etc) and what will be due in the future. To help clarify billing, refer to billing in installments. (Installment #1, downpayment, due now.) Make sure to include the terms that was agreed upon. (Due now, due in 15 days, due in 30 days, etc.)
If future payments are unknown, for instance they are based on an hourly amount and the number of hours have not been determined yet, you can put TBD (To Be Determined.)
Remember to include appropriate taxes in the invoice. (See the other freelancing as a business article for more information about taxes.)
You should list the items that you are billing for in each invoice. It is recommended to put the items in list form, but do not itemize the amounts for each element (do not line item the invoice.) In other words, don’t put $1,000 for photography, $1,500 for design, $500 for copyrighting. Instead, put $3,000 total, includes photography, design and copyrighting.
The reason for this is simple, it keeps the client from questioning your bill. They may think that the photography should cost $1,500 but you should have only charged $1,00 for the design. If you itemize it, they may argue with you about your design charge. If it is all added together, and it works in their head for the total, no problem. (Remember, they won’t argue with you if they think they are being under billed on an item.)
And of the hardest things to do when starting out is determining your billing rates. If you’re just beginning in your career, you probably won’t be charging the same rate as some one more tenured in their position. Often a company will give someone a chance on a project because they know that the rate is lower. This allows them to test a person out with lower risk. (If it doesn’t work, well the price isn’t going to cause too much pain.)
To determine a pricing structure, a freelancer simply has to ask around. What are other people getting? Does the location change that price? (Hint: a business in downtown Chicago expects to pay more for everything compared to a business located in downtown DeKalb.) Does the type of company, or the size of company, change that price? Does the negotiated rights (see copyrights above) change the price?
Don’t be afraid to ask a potential client what their expectations are. If it is someone that hires a number of freelancers, they might already know what they want to pay. But don’t be surprised if they expect you to tell them what you charge.
And, at some point, you just have to go for it and don’t look back. If you misquote a job and you realize it after the fact that you didn’t quote enough, you still need to do an outstanding job. Your reputation is more important than the money you make on any one job. It doesn’t hurt to let the client know after the fact that you misquoted it and undercharged, setting up an expectation that next time you will be asking for more. And who knows, maybe the client will suggest that you charge more on the job itself. But never charge more than you originally quoted unless there were extenuating circumstances and the client agrees to the additional costs prior to receiving your final bill.
The more you freelance, the easier it is to figure out these items. Seek out professionals for accounting, tax and legal advice. Freelancing is a business and to be successful, you have to understand the business components of the job. It is just as important as the work itself.
Look for the other article about the business side of freelancing.
About the author…
Randy Gunter is a thirty year advertising agency veteran and agency owner. The Gunter Agency has worked on national and international projects for companies that include Charter Business, Firestone, Fiskars, John Deere, Kimberly-Clark, Oscar Mayer, OshKosh B’Gosh, Rayovac, and others. Randy and his agency have received Adweek’s Media Plan of the Year award, NAMA Best of PR award, and hundreds of creative awards and recognitions.
Randy still consults with companies on marketing, but today his main concentration is CEO of Sugar River Trading Company. Sugar River is best known as the manufacturer and distributor of McNess home products.