Giving an Advance

You might already have a policy in place. Do your freelancers work under contract? If so, the terms should already be laid out.

Unless this is someone you've known forever and have a deep trust with, I'd advise against the advance with a contractor. The fact that he made you an ultimatum says a lot; if he needed the money that badly, he would have been happy even for a partial amount. If you pay him all at once up front, he has no incentive to finish the job - or do it right.

This is something that should definitely already be in the contract you have with this individual, outlining the full terms for when and how payment is to be expected. I may be willing to pay out for the percentage of the task that's complete, but there is no way I would pay out the full amount of the contract with only part of the work done. And, depending on the project, I might not be willing to do even that. If it will cost me significantly more to find someone to pick up his pieces and finish the task, I'd say no way.

Employees who issue ultimatums aren't really trying to work with you.

When it is me writing the cheque, I write based on the satisfaction of the contract terms. Period.

The minute I step outside of contract boundaries, I am opening a liability risk. This is a bad practice. If the contractor leaves due to my refusal, I can validate the additional risk.

When I have worked 1099, I have made very certain that the obligation of the corporate to pay is clearly defined. If they do not pay within the obligation terms, I simply do not work.

If this person is expressing dissatisfaction in one breath and demanding full payment outside of the contract terms in the next, I am already suspicious of the motivation.

Rest comfortably in the knowledge that you have done the right thing. I know that it isn't resting easy, but you saved yourself a potential legal issue as well as the potential for shoddy work going forward.

Deep breath. Part of the job and all that. You did the right thing!

Sounds like they need a loan.
Ask them, if they've tried borrowing from their bank?
If it's not in the contract, I'd shy away from offering money, most likely your funds are budgeted (just as tight?)

your job is to get the project completed, not to be this guy's personal banker.

if he didn't feel the job was what it was specified to be then he should call that out relative to the statement of work.

I agree with most of the comments, if there really was a problem with the work package description then a costed change request would be in order and an advance is also acceptable.
I would be concerned that his/hers unforseen finance pressure imply he 'out of control' and this could also mean that the work approach is the same. I guess the delivered work is going to be extra seriously examined / tested before payment?

I agree with you not to pay him. He does not have the right to force you to pay full. He should accept part of the amount. In such cases, if you paid him full, he will never complete his job.

It reflects well on you that you care about others, in this instance I would not feel bad.

You offered a reasonable compromise that he refused. As others have stated if you felt comfortable with his work it may be different, but if he was not comfortable with the terms of the engagement a different working arrangement should have been made at the start.

1. You should stick to your CONTRACT and follow policy - Why should you jepordize your standing by not following the rules what reason will you give if he leaves or comes up with another excuse ?.
2. His finnancial problem are not your concern he is and ADULT and made decision that he has to live with, unless you were part of those finnancial decisions you have no obligation to help.
3. You should advise him to get COUNSELING IF HE IS DESPERATE.
4.giving you an ultimatium is not the right attitude since he knows what his agreement is and now wants you to change it in mid stride for his benifit, will you do the same for everyone else ?. or will you start to show favoritism ?. again this seems to be one individual looking out for himself - I would be real carefull companies use contracts to show that they conduct business fairly and honestly, why even have the contract if you are not going to follow it.
5.I think you should counsel him on what the issues are in not completeing the work, I can only imagine what management will think if they knew you actually went into re-negociating the contract terms by offering him partial paymet - Really stuipid move since the guy just insinuated the work is too hard, that would leave me to believe he cannot complete it. I wouldlet him know that per haps he needs help and that I will get another contract to help him.

I think you were far too generous to even offer him a portion of his
commission in advance. In 20 years of work, I have always
understood advances as something to be frowned upon. The way I
figure it: if he was that in debt, he should have taken you up on
your offer, since in this case something is better than nothing.

But beyond generosity, what is your company's policy? How would
you handle this if something like it came up again?

I would have given him the same offer.

You win some goodwill and he gets some financial
help without putting your company at risk for paying in full without a completed project.

I will watch out now for performance. The person might be resentful that you did not give in to the demands, may not give you a best effort.

Never pay fully upfront for any freelance work. I am a freelancer and am very responsible with other people's funds, but I've seen many a freelancer who take the money and run cause they don't know how to handle money.

I even had to stop doing business with one of the best co-contractors I've ever worked with because he was so deep in debt that he couldn't keep his eye on the ball (the contract job is this case).

My common practice is request half the funds up front, then request the existing funds after the project is complete and approved by the employer. BUT, before I hand the final product over to the employer I make sure that check is processed through my bank which is usually a 3 day process.

I've been burned a couple of times with companies approving a project then saying they didn't want to pay the final payment til the project was in hand, but those times are few thank goodness. I also do a lot of Googling before doing business with anyone (company or individual). I've found the 30 minutes of researching a company on the net is well worth my time.

As a follow up to your question in the thread... You shouldn't feel bad since his money problems are not your fault or responsibility. If he can't handle money, he needs to get a good steady job for a few years while he builds a savings account. After his savings account is built up, he can take freelance jobs without worrying about where the next paycheck will come from.

I worked for a small software company when a contractor wanted to be paid in full before the work was finished, too. Turns out he needed to pay to stay out of jail. We saw him a few months later, but he blamed US instead of his own inaction for his incarceration. My boss found him another job in another city.

Let's split this in two: the scope of the task and the freelancer's financial situation.

If the person doing the work has uncovered details that cause him to believe the scope of the task is greater than he or you had previously believed, he definitely should present his case to you on its own merits. Then you can decide based on your knowledge, his presentation, the market, your relationship with this "vendor" and your business situation what you want to do about the problem (Even under the most favorable circumstances, I would segment or rescope the task or make progress payments rather than giving an advance).

His financial difficulties have no place in the discussion. By nature of being a freelancer, he is in business. It is his problem to make his business go. Do you get to approach your customers and tell them that you need more money because you're company's finances are a shambles? Will your boss give you a raise if you are up to your armpits in debt?

You don't actually mention what work he is doing in your initial post -- although you do mention that it is artwork in a later post. So, if you will excuse me, for the moment I'm going to pretend that we still don't know what the freelancer is doing.

There are three types/timings of payments: advanced, progress, and completion. Each solves a different issue.

The advanced payment exists to reduce risk on the part of the supplier. Will the client change their mind? Will they disappear? Will they not fulfill their promises? Will they not pay? By receiving a deposit up front (sometimes called a good-faith deposit) risk to the supplier is reduced.

Progress payments exist to reduce both the finance cost and risk associated with providing services or materials over a period of time. By receiving payments roughly as costs are incurred, the supplier avoids risk beyond what they are willing to invest and also avoids having to finance the full cost of providing the product. What appears to be an advanced payment is often a progress payment in disguise (for example when materials have to be special ordered).

Finally, completion payments exist to protect the purchaser. Often these are called hold-backs or guarantees. But they are always paid after the final delivery of the finished product.

Why is all this important?

All industries have a standard recognition of the risk balance involved (aka a standard payment scheme).

For example, in small construction the payments (generally) consist of an initial combined progress (covering ordering the materials) and advance payment and a completion payment. So the risks being covered are largely associated with one or either party not completing the contract.

In large construction, however, the payments generally consist of progress and completion payments. The risk of the customer not completing is covered off by the guarantor. The payment scheme instead is focused on reduced finance costs and supplier completion risk.

The point is that your contract needs to provide for all three risk/cost types in order to be fair. Typically, the industry standard will provide the base for a normal relationship between them. You need to be aware of what constitutes a sufficient variance between them to justify a different payment scheme (the difference between large and small construction being an example). To be fair your contract needs to allow for these oddballs.

Now to apply it to artwork. (For those of you wondering about the use of a week -- most artists (even commercial ones) earn below the poverty line. Waiting three weeks for payment is about the limit.)

Artwork is a nebulous term (my wife is an artist). A piece may take an hour or it may take months. There is a high risk that the client will bail (or more likely just not pay) and there is a high risk of the artist not delivering. So a mix of the advance and completion payment schemes are almost an automatic. Whether a progress payment is needed depends on the length of the project.

If you are expecting commissions to take under a week then payment on completion is appropriate (presuming there are sufficient guarantees of payment). And your contracted payment scheme will reflect that.

The point is that if a commission suddenly takes a month to complete, another scheme (progress) is more appropriate. And you may have to create milestones to balance the associated risks.

Your contract needs to provide an upper limit in order to be fair. At what point does an alternate payment scheme kick in?

That means that you need to be somewhat flexible with your existing contract.

Having said that, it doesn't mean paying in advance because the artist is in debt. It means adjusting your payment scheme appropriately to the length of the task set.

So ultimately, you need to negotiate between the two of you. Is the work involved legitimately over the limit (in which case you need to partial pay)? Or is this just a case of poverty sucks? (In which case, you're decision is much more complex).

In any case, full payment just isn't on since it leaves you with the full risk of his not completing the work.

I work freelance, most of the time on fixed price contracts paid on results: my pricing reflects that - if I find a contract willing to extend interim payments I expect to drop my price (substantially) to reflect the reduced risk.

Not a good business practice for any service. A contractor's personal finances are not your problem. I would have done the same thing. The "all or nothing" is suspicious.

I would agree with the other answers in this post. My concern also comes from his comment about how difficult the task is. What does this have to do with when you get paid? It would be different if he was disputing the amount he was being paid.

"So how did it go when you told him "no"? Any repercussions?"

He's fine now. Perhaps he misundestood the nature of the arrangement, or he didn't actually read the contract before he signed it. Anyway, there haven't been problems since, and he produces quality work.

I think the correct way to describe the relationship is "Work for Hire," and I haven't paid a retainer. This sounds like a good idea, though, and I will implement your system of paying a percantage up front. In other regards, my contract is very similar to yours.

I am in Japan, and the legal side can be quite different to Western countries. Generally, use of lawyers is frowned upon and you are expected to resolve disputes in a gentlemanly fashion. Laws are often vague so that authorities and bureaucrats have more power of discretion.

You did the right thing, both ethically & from a business POV.

First off, you hit the nail on the head when you stated, "...I feel obligation towards him, but not responsibility for his personal finances". His financial difficulties are HIS problem and NOT yours.

Second, who's responsible if he takes the money and doesn't complete the work? YOU ARE!

Everyone in a management position wants to be a nice guy/gal. However remember what Leo Durocher said about "nice guys".

- he has some urgent debts, that's because of his own personal problems and you are not responsible for them.
- he hasn't completed the work yet but requires his money in advance, all or nothing, sounds fishy to me, I would err on the side of caution and tell him that you'll stick the schedule of paying for work completed
- the work isn't finished yet, he's complained that the work is difficult, I almost get the feeling that he would take the money & run and you would never hear from him again and what kind of position would that leave you in
- I get a paycheque every 2 weeks, if I stop coming in for work I won't get paid, If I don't do my work I won't get paid, that's how a typical job works: you work you get paid, my employer doesn't provide advances to anyone, we all know when our pay arrives, we don't expect it to come in any sooner
- personal finance can be tough for certain individuals, alot of people budget poorly and don't have enough money for today & tomorrow because of something they did yesterday, although you may want to help him I don't think (just my opinion, the decision is yours) it's wise to do this. Once you do it once, you may be asked to do it again, if not by this person maybe by another, it's not a trend you want to set.

I think you made the right choice opting for nothing and not providing an advance to this individual. It wasn't right of him to ask or to let you know of his personal urgent debts because it wasn't your business or responsibility.

The role of manager often requires performing duties that may not leave a good feeling with you. You work for a company and they expect you to perform your job and to meet their expectations. Managing a team of people doesn't require you to get deeplyl personally involved with them and doing so hinders your ability to manage them successfully and get your jobs done.

I think you did the right thing.

If you still feel bad maybe call this person and provide him with some info on debt mgmt solutions, maybe get him in touch with a financial counsellor, etc.

Is that you have no gaurantee they will complete the job as you said they are a "Freelancer" so you have to weigh in on a few factors like is this person dependable and do you trust them enough to pay for something you haven't recieved yet.I personally feel you made the right choice

This is not an uncommon event amongst young and vibrant graduates. The trouble is they haven't yet developed a real sense of responsibility. I have done this a couple of times,it worked once- 50% hit rate. The guys I trusted had great ability and wanted their work, but they couldn't manage money. So I gave 50% up front and obtained a garantee of delivery of identifiable product. One guy honored his obligation and the other didn't. If yoy like this guy's ork and trust him it is worth a shot.

you have passed a very difficult test many managers face at one time or another. what makes this a success is the fact that 1. you did not give in to his ultimatum. 2. you care. you care but did not allow yourself to be swayed into defaulting the contract. reading the posts at anothere page, managers are mean spirited, tightfisted, sleeping greedy creatures. it is very hard to be a great manager and a great person. sounds like you are doing both. if you had given in to him, then you would always be put into this position. good judgement on your part, and its good that you care. keep it up, you are doing very good.