Milestone payment is simply a certain percentage of the fee of a project that the client pays to freelancer over the course of the project rather than paying 100% at the end. Only employers can create and release them, and only freelancers can cancel and return them to their employers.
Payment milestone example
Project is website design.
The project cost is $400.
The employer creates a $100 milestone payment on the platform.
Freelancer creates a mockup and PSD design and sends it to the employer.
The employer releases a $100 milestone payment.
The employer creates another $100 milestone payment on the platform.
Freelancer creates CSS and sends it to the employer.
The employer releases a $100 milestone payment.
The employer creates another $200 milestone payment on the platform.
Freelancer creates PHP template files and finish the project and sends it to the employer.
The employer releases a $200 milestone payment.
The project is done!
How freelancers can ask for milestone payments
Freelancers provide services to their client and there is always a risk that they will not be paid for their work for the client, despite spending many hours doing the work which their client requested. This can result in financial problems for the freelancer when they do not receive the payment due since they have to pay for daily expenses like food and other expenses. Hence a freelancer should know how to ask for milestone payments from their client so that they get compensated at least partly for the work they do for others. Milestone payment is a certain percentage of the project fee, which is paid by the client while the project is being completed, instead of paying the entire amount at the end. The benefits of these payments and how they work are discussed below
Protection for freelancers
How freelancers are protected by milestone payments is discussed.
– they ensure that the freelancer receives some payment even if the project is canceled. Many projects take several months, and the client may disappear after a few months. The milestone payment ensures that the freelancer gets paid for a few months’ works.
– the freelancer will find out that the client is not paying earlier in the project and stop wasting time doing the work.Typically the first payment is due when one-third of the project is completed and if the client does not pay, the freelancer should stop work immediately. Some freelancers may continue working hoping that the client will pay. However, he should never complete a project, if a milestone payment is not made on time.
– periodic milestone payments help to improve the cash flow so that the freelancer can plan his budget properly, pay for regular expenses. Often freelancers have either a lot of money or no money at all, and this makes it difficult to pay expenses.
– the freelancer will have the structure of the project, divide it into smaller sections so that they can track the time taken for the project better. If the freelancer finds that they have taken more time than expected to complete the project, or have not reached the midway mark despite spending a lot of time, it is possible that the client did not clearly specify the scope of the project. Hence, the freelancer should discuss the increase in project scope, and either negotiate a new contract or revert to the original goal of the project.
Employers benefit from milestone payments
One of the techniques used by reputed clients to hire and retain quality freelancers, agencies are offering milestone payments. There is a risk in every relationship. The employer does not want the freelancer to take the first milestone fee and then leave the project incomplete. However, a freelancer should not be asked to take all the risks for the project. A client will usually agree to make milestone payments for a project if the payment is linked to deliverables, which are usually approved by the client.
How to decide on milestone payments
– The freelancer should decide whether milestone payments are appropriate for the project. Typically the milestone is associated with a project phase or task. For task-based milestones, the client will make payment after drafts or parts of the project are completed. These milestones are suitable for projects which are clearly defined and have a timetable specified. There are projects which require soft skills, without any deliverables, and in these cases, time-based payments are more suitable. Milestone payments are usually made for projects which are longer than two weeks and also for ongoing contracts, where an hourly payment is made. In some cases, an initial deposit may be required by the freelancer.
– The payment schedule should be included in the project proposal, including the milestone payments after discussing it with the client. The timeframe for the project is usually mentioned in the proposal.
– The freelancer may have to negotiate the payment schedule with the client, since some clients will try to protect their interests, demanding that payment should be made at a later date. The freelancer will get a better deal if he is considered reliable, has referrals from earlier clients, testimonials. In case the client does not agree to milestone payments, the freelancer should explain his risk, and if the client still does not agree, refuse to take up the client’s projects.
– ensure that the milestone payment schedule is clearly specified in the project contract