Money Concerns of Freelancers (And How to Solve Them)

Singaporeans going freelance may face unique money concerns that regular employees do not. Here's what you should look out for.

The number of freelancers in Singapore is on the rise. According to the Straits Times, more graduates are moving directly into freelance work rather than regular employment, and freelancers now constitute about eight per cent of our workforce.

If you’re considering freelance/contract work yourself, here are the money issues to consider and brace for:

1. Not Getting Paid on Time

This is the most common complaint among freelancers. They are often paid last, which makes it difficult to maintain their cash flow. On top of that, freelancers’ wages are not protected in the same way as a regular employee’s - the Ministry of Manpower can’t intervene, and freelancers often need to take their client to the Small Claims Court to settle payment matters.

There are three things a freelancer can do about this:

• Get everything in writing
• Budget for a payment “three times delayed”
• Incentivise early payment

Get everything in writing

Always have a proper contract signed and in place, before you decide to start work. This contract should include the terms and method of your payment.

Remember that, as a last resort, you may need to go to a magistrate to resolve payment disputes. When that happens, statements such as “the client said she’d pay me in one week” don’t hold much weight.

In addition, the sheer psychological impact of having signed something is important. This encourages your client to take your fees seriously, and make a commitment to paying you for work done.

Budget for payment “three times delayed”

Plan your finances with the assumption that your client will be three times later than expected. So if the expected payment date is within 30 days, plan your finances as if the payment will only come in 90 days.

This mean saving much more than a regular employee. You may want to set aside as much as as 40 per cent of your income, or build an emergency fund for one year of your income (six months will suffice for most employees). This will prevent you having to take out high-interest loans, should your client pay you late.

Incentivise early payment

Work out how much you want to charge, then add on 20 per cent. For example, say you want to charge S$5,000 for a project. You could then consider charging S$6,000, but the price is dropped to S$5,000 if you are paid within 30 days.

(This is really a late payment penalty, but calling it an early payment discount sounds more positive).

2. Not Getting Paid at All

If your client doesn't pay you at all, you may have serious difficulties getting the money back. This is especially the case if they are a private limited company, and close down (in a private limited firm, the company’s owners are not liable for the company’s debts).

For freelancers, avoid holding off payment until the very end. Consider asking for 50 per cent upfront, or ask for payment in progressive stages (e.g. 20 per cent payment for each stage of project completion).

In some cases, you will need to pay upfront costs for a project (e.g. you need to hire actors, to make a film for your client). Ensure that the client pays for such operational expenses first - you could be left in the lurch if your client pays late, and you’re the one owing money to others.

3. Signing a Non-compete Clause

Some clients won’t want you working with other, similar businesses. For example, if you’re a freelance illustrator for a website, your contract may stipulate that you can’t do similar illustration work for their competitors. However, signing a non-compete clause can seriously hinder your income, so make sure  you’ll be well-compensated for exclusivity.

Never sign such non-compete clauses lightly, as it can drastically affect your income. For example, say you sign an agreement not to illustrate for any more education-based websites, and you conclude a project for a client.

As your work is popular, many other education websites now approach you for your services. Unfortunately, your prior contract had a non-compete clause, where you agreed not to work for other education industry clients for “a period of three months following the termination of this contract”.

This drastically cuts down on your earning capacity. As such, always be sure you’re well compensated for such exclusive deals (if you’re even willing to accept them).

4. Clients Not Paying for (Excessive) Revisions 

Some clients are picky or disorganised; they may also simply not know what they want. They may force you to redo your work again and again, thus delaying payment and stopping you from working on other projects. This will impact your income, as you wind up losing more money than you make on such projects.

For this reason, always stare the maximum number of revisions for any given project. For example, a maximum of two revisions per brochure designed.

5. Affording Your Own Equipment 

Unlike regular employees, freelancers are often expected to have their own equipment. If your line of work is making videos, for example, your client may expect you to already have all the editing equipment, cameras, sound gear, etc.

Always clarify, before you sign anything, if it’s the client or you who will be providing the equipment. Otherwise, you could find you agreed to provide everything, and are now saddled with the cost of renting all the gear.

If you use your own equipment, you should also be sure to buy insurance. If you’re a photographer, for example, a wrecked camera could cost you jobs, which you desperately need to buy a new one.

Many freelancers need a lump sum to get started (their initial capital), and most of this goes toward professional equipment. If you’re acquiring this money through a loan, be sure to compare and pick the one with the lowest interest rate.

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