Ask HN: Freelance Client Capping me on Hours – how to handle?

[wayzz]

HN, I'm recently begun working with a startup for about 3 weeks now.

They originally paid me for a week's worth of work, its now been (2) weeks - and pay day again.

I sent them my hours for the past (2) weeks (1 week at a time after each sequential week).

They now are complaining that they wanted each "task" to take only 2 hours to complete. (2) tasks were over (2) hours (one 7 hours, and one 3 hours).

How do you deal with clients like this? Are client's that refuse to sign your freelancer contract (when you knowingly sign their contract) a red flag?

Do you typically insist on your freelance clients signing your contract?

Thanks!

[patio11]

Clients having their own paperwork is normal. It will get even more common as you go upmarket.

Clients believing meaningful development work can happen in two hours is not normal. You should stop billing by the hour, change your minimum increment to a day or a week, and assist your clients in making the transition from "micromanaging every hour of wayzz's time" to "letting wayzz handle the specifics of how he delivers the fantastic value promised in his Statements of Work." It is possible this client will not make that transition with you.

Also, charge more.

[ekidd]

I agree strongly with patio11. I have a simple rule:

1. Programmers are the final authority on how long a specific piece of functionality will take.

2. Clients are the final authority on what to build, in what order, and how much money it's ultimately worth to them.

In general, clients who insist on negotiating (1) are often unsalvageable. It's better to structure the relationship so that this never comes up at all.

But if a client continues to insist, "No, you should be able to implement our video encoding server for $500," I find that the best response is, "If you have another programmer who can do that for $500—and do a good job—then you should hire them instead of me. That's a remarkably good price."

Basically, learn to qualify your sales leads: You want to work with competent, reasonable clients for whom you can earn a lot of money. Everybody else should be filtered out of your sales pipeline as quickly as possible.

[patio11]

FWIW: You can probably 10X your rates if you take responsibility for what to build, in what order, and how much money it's ultimately worth to them.

Otherwise, broad agreement with your comment.

[gk1]

Seriously consider patio11's advice about daily/weekly/monthly rates.

Issues like this are inevitable when you're charging by the hour. Overestimation, underestimation, false expectations, misunderstandings, ... All these things--even if you're very diplomatic and manage to resolve each of them as they occur--hurt the relationship.

I've been charging weekly and monthly rates for over a year, and I never--not even once--needed to resolve any misunderstandings about hours and time tracking.

[_delirium]

This does depend quite a bit on the market. Large engineering companies, for example, are often resistant to contractors billing in anything but hours, because their whole accounting/etc. system is set up to track internal and external person-hours and lots of things are keyed on that. You can de-facto bill them in 8-hour increments, and your direct contact may agree to that, but moving the bureaucracy so you can officially bill "days" is harder. Even quite large consultants end up following the hourly-billing standard, e.g. when Booz Allen Hamilton does work for oil companies, they bill hours, just like individual consultants do.

[tptacek]

To the best of my knowledge, we've never billed hourly, and though we haven't worked with "everyone", we've certainly worked with a representative sample of the whole industry. You can bill daily instead of hourly, and that's what you should do.

[_delirium]

Interesting. Have you worked with a company like Exxon or BP? I've obviously only met a tiny fraction of their contractors, but I do have a reasonably large sample of both small and large contractors across several fields, and they all bill hourly, and that expectation seemed pretty fixed into how their systems worked. At least the ones doing consultancy-type contracting on an open-ended contract over a significant period of time do so, whether big consultancies like Technip or Booz Allen Hamilton, or small shops like boutique metallurgy consultancies. Different billing applies to one-time deliverables, construction work, equipment sales, etc.

Of course in practice the work is usually chunked into day-sized segments anyway. If you have three of your people working on a particular project all week, and then send an extra two people along on Friday for a site visit, it's reasonable to bill 17 person-days. But in the cases I've run into that still gets formally invoiced as 17*8 = 136 hours.

[m0nastic]

I can't confirm specific customers, but I've done consulting work for virtually every large energy company (as well as financial and manufacturing), and all of those were fixed-price contracts. (I put together all of those SOW's, so I'm very familiar with how they were structured).

In fact, government contracting is the only case where we've ever used T&M.

For what it's worth, I work in the same space as Thomas.

[wglb]

Check out their page http://matasano.com/about/ and the last line saying Fortune 100.

[tptacek]

If you're going to consult professionally, take the time to write a statement of work for every project you undertake. If it's worth spending a day on, it's worth writing a SOW. If it's not worth spending a day on, don't do it.

The typical contractual form a consulting engagement takes is a one-time master services agreement that establishes all the terms and conditions under which you'll work (this is usually the client's paper), followed by a series of 1-page SOW contracts as projects come up.

Each SOW specifies:

* That it's being done under the master agreement

* The nature of the project being done (it's to your benefit to keep this somewhat abstract)

* The acceptance criteria, if any, for determining completion

* The pricing used --- here you'd establish, for instance, that the project is being done on a T&M basis, expected to take N days, and that you'll obtain written permission should the project take longer.

You should be doing this on every project you run.

[social_quotient]

Start back at the estimation. Who or how do they think its 2 hours?

I suggest to offer to "backlog groom" these estimates so the person that's actually going to do the work is providing the estimate. You can fairly be managed this way.

If they don't like the estimates, welcome input or clarification. Take a collaborative tone here.

Start the conversation of this new approach by saying something like. We seem to be drifting apart on hours and expectations. I have come up with some strategies with my colleagues and would like to propose...

If this doesn't work - time for a new client. If you need the cash and can't just quit. Make sure expectations are clear at all points in writing when you have warned them of the estimate and the actual hours. Keep this in the freelancing platform so you have room for debate if they stuff you on hours. Finally get approves on the tasks after you estimate. They might not have the money - they need to come to terms with this at each 5-7 hour block.

Good luck!

[dognotdog]

YMMV, but this is my experience so far:

The your contract / their contract thing doesn't worry me, I've never had my own standard contract to begin with.

Bigger clients usually have a standard contract, but it is negotiable to some extent. Some potential clients had two hundred page standard contracts where you're supposed to sign away the soul of your firstborn child, and even if those are largely unenforcable, I'm not going to sign it. (If the client isn't willing to budge on this, it'll just get worse later on)

Small clients I could visit in person, I've worked with single page contracts and a hand shake, to no ill effect so far.

I'm wary of small companies with big contracts, those tend to be the ones who take the first opportunity to screw you.

Also, I am always up front about estimates, making it very clear that it might take longer or shorter, and the smallest group of tasks I'm willing to give estimates for is a single day's worth of work. If I had to confer with the client every time some piece of work slips a few hours, I'd never get to the actual work. Also, there might be significant overhead attached to any little task, or simply overhead that cannot be assigned to any particular task, such as keeping documentation and planning up to date, which is invisible to the client if the work is broken down into too many single tasks.

For fixed deliverables, I give the client an estimate on the number of days it's gonna take, and we make a contract for that many days to work on the project, with the option to extend the contract at the same daily rate, should the need arise. If the client insists on the fixed deliverable being the subject of the contract, then it won't be a fixed sum of money or number of days; they can chose which way they want it, but can't have it both ways.

[IgorPartola]

I do not generally insist that people sign my contracts. This is a bad sign. The logic of "each task should take no more than 2 hours is flawed". You can easily combat this by breaking up tasks further into subcategories. In fact, that is generally a good idea for tasks over 8-16 hours when creating estimates. So there are things you can do on your end.

Having said that, I would give them a call and explain politely that you are a professional and your work is worth what you are billing them. If they are not going to pay you, then you will simply stop working for them (assuming you can afford to do so). You can even say "if you cannot afford to have me work X hours, that is one thing. Let's talk about that. But otherwise initially you agreed to pay X for Y. I delivered the work, and you are not paying. Why should I continue working with you?"

[dctoedt]

Most lawyers get to see this movie from time to time with their own clients; the bar has developed some folk wisdom that gets preached at continuing-education conferences and in bar-association publications. (Usual disclaimer: Don't rely on the following as a substitute for legal advice, YMMV, etc.)

1. If you signed the client's contract form, that likely is what governs; it's unsurprising that they don't want to sign yours, because that could lead to confusion if the terms are inconsistent.

2. [EDITED] It's super-important to put task expectations in writing, UP FRONT, even if just in a quick email, in part because:

(a) Putting expectations in writing will help you keep the client happy about your results. Whether or not the client should be happy is of less importance than that the client pretty much always gets to decide:

(i) whether to hire you again, and

(ii) whether to recommend you to others.

(b) If a dispute arises later, it's easier to dissuade the client from behaving badly if you can show them a writing to which (you can argue) they previously agreed, even if only implicitly.

(c) In the (unlikely) event you end up in litigation, courts tend to give more credence -- other things being equal -- to contemporaneous written documentation than to after-the-fact witness testimony. Courts realize that memory is fallible in the best of circumstances, and also that witnesses can have axes to grind, scores to settle, agendas to advance, etc.

3. It's not unreasonable for a client to want to cap what they pay for Task X. It's a different question if they want to do that after you've already finished Task X on an agreed per-hour basis.

4. To get a better "estimate of the situation," you might want to consider whether you're really an independent contractor, or whether instead you're an employee and thus entitled to certain legal protections (which can vary depending on where you are). [1]

5. [ADDED:] I agree with the commenters who suggest having a tactful conversation with the client in a collaborative tone.

6. If you still have problems going forward, you need to think seriously about whether to continue working for this client. Some clients just aren't worth it.

[1] http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employ...

[lgleason]

We usually have a higher rate for clients who want to use their own paperwork, and that is only if it is close enough to our own to provide us with adequate protections.

Obie Fernandez has some great freelancing MSA and SOW templates that we based ours off of.

I have seen too many contracts from clients that have provisions that will make it difficult to contractually collect on late and non payments. Because of that we usually require that we use our agreement, but then write it so that it is fair to both parties.

[acoyfellow]

You guys need to have your expectations outlined up front. You shouldn't be hitting them with a bill they don't understand. That is your opportunity to explain (because your the expert they hired) to educate them as to why your hours needed to be more than two on a task.

If you do explain this and you soothe their minds out, they will thank you and respect you even more. If they don't then fire them.

Biggest tip ever you can take away? Stop calling yourself a freelancer. Step up to a tech consultant. People treat freelancers and consultants differently, even if the work is exactly the same. Act accordingly, and use this to your advantage. There is no teacher or boss to tell you must be a freelancer.

[wingerlang]

Is there some term that lies between freelancer and consultant?

[acoyfellow]

What is there to be afraid of? I don't think anyone should call themselves a "freelancer". It just devalues you. And, when starting your own business: you don't need permission from anyone else to "call yourself something".

Call yourself a "Wordpress Consultant" for example, if you are a WP dev.

[mocko]

You have a bad client. Fire them and move on.

[sachingulaya]

Today my freelancer engineer billed me 180 hours despite not having a deliverable prototype. I was shocked. I paid him. When does work ever get done on schedule or within budget? Rarely.

[lifeisstillgood]

How many times in that period did you sit down with him and review the work done to date? How many milestones on the way did you agree with him and how many has he completed?

How much of the prototype is "I have an idea in mind but have never thought it through but know what I want it to look like" and how much is "written / drawn wireframes and explanations that have then been reviewed and planned with the two of us"?

I cannot feel too bad for what is over a months highly paid work that you did not have control over. If you did have control, why did it take 180 hours to kill it?

[weaksauce]

why do you think they are planning on killing the work?

[lifeisstillgood]

the comment something like "180 hours ! no prototype! WHy should you guys get away with it!" indicates to me either ending current contract or whole project.

[weaksauce]

I figured the part in their next sentence was being somewhat ok with moving forward: "When does work ever get done on schedule or within budget? Rarely."

[zura]

Huh, I billed my client for 181 hours today. Although, the payment is due on Monday and I delivered more than a prototype ;)

[BSousa]

Ever had a chat with them and change the work arrangements from freelance to contracting?

This way they pay you a fixed sum per day/week, and you can give them updates on the tasks as they go, without having to fight over 1 hour for this, 5 hours for that, 3.5 hours for the meeting where you end up spending 1/2 time talking about your daughters engagement.

As for the contract, depends, some companies have standard contracts that were done by their lawyers that protect the company (read it carefully) and prefer not to have to pay a lawyer again to read and validate yours.

[wayzz]

"refer not to have to pay a lawyer again to read and validate yours" I could totally see why this is why they didn't want to sign it.

[ilaksh]

If you think you can negotiate to get some of those hours they don't want to pay you, then do. If you think that trying to get them to pay that will cause them to refuse to pay, then don't.

Basically get what you can out of them and get a better client as fast as possible. If you can't fire them immediately then obviously get another client first.

[nextweek2]

The capping issue sounds outside your original negotiations. Surely you could agree to this if you factored it into the rate you charge.

Everybody has to make a living, if they want you to absorb the risk, then you can charge a higher fee. That common business practice.

[opless]

Like most people have said, it's a bad client

Also watch this: http://vimeo.com/22053820

[edgeman27]

If one party refuses to sign the contract that is a bad sign from day 0. What are their reasons for not signing it, out of interest?

[wayzz]

I thought it was a red flag too - but they had promptly paid me the week before (for week 1) with no problems. Their reasons for not wanting to sign it were "we have a standard agreement that all "freelancers" sign and we don't sign separate contracts as we have investors"

[k-mcgrady]

>> "they had promptly paid me the week before"

You can't judge people that quickly. I had a client I worked with on several projects and they paid fully up front which was fantastic. On the final project I worked with them they still owed me half the bill, deleted our basecamp project (nearly all communications), stopped replying to my emails, and ignored my invoices. It was 6 months before I tracked down their new company and surprised them with a phone call and threat of court. I eventually got the money but needless to say the guy was an asshole about it.

I guess my point is that even when you think you have built a good relationship with someone over a few months, when you're working on the internet people think they can do whatever they like. The internet makes it easy to gain trust and easier to destroy it.

As for how to deal with the client try to work things out without threats. Only resort to threats when necessary as the second you mention court people go on the defensive.

[wayzz]

This is a great point - thanks for this. I think this is 1 of some things I'm still learning - as being primarily "employed" and not "self-employed" as a consultant(freelancer). Thanks!

[lgleason]

The we have investors is a BS argument. If I shop at Amazon.com I am bound by their TOS. Your agreement is your Terms of Service for working with you. Sign someone else's agreement at your own peril.

[mallin]

"I have a standard agreement that all my clients sign. If you aren't willing to sign it, here are some other freelancers I can recommend."

[rubyrescue]

That can be tricky. Venture funded companies that are totally legit and run by competent people sometimes don't want to use a vendor's form. That's not really a red flag...

[wayzz]

Great point, noted for next time for SURE!

[song]

I would first read the agreement they want you to sign though. If it's not bad and you can live with it, it's sometimes worse it to compromise. Some of the bigger clients cannot be flexible on contracts.

Of course, one important thing is too decide how money you're willing to risk. If you're not willing to risk more than two week's worth of work, then bill them weekly so that you can act quickly in case they decide to stiff you.

[bluewolf]

I've been contracting for about 8 years now. Your client is trying to stiff you. It will only get worse from here.

Get out while you can, but still try and collect on money owing - even if it takes you a year or more.