What exactly do you mean by "unfair chargeback"?
Odesk's protections are pretty clear. If you work an hourly contract then your pay is protected as long as you are using the time tracke software ("oDesk Team") and annotating your work with memos.
Fixed-price contracts are explictly done at you own risk, so whether or not clients pay the agreed-upon amount or not is not really about "fair" or "unfair." It is based on what the client feels like doing. They have the option to pay whatever amount they feel is "fair" based on the work that was submitted. Usually the client pays the full amount that was agreed upon. But he is not required to do so.
Officially, a contractor can file a "dispute" if a client doesn't pay the full amount, but that seems like a recipe for disaster that will almost certainly get your account penalized by oDesk's automated algorithms, even if you "win" the dispute. I would personally never file a dispute with a client, for any reason, no matter what.
I am fortunate in that the type of work I do is so unusual and so useful to clients that they are simply very eager to pay me whatever amount was agreed upon, because they don't want to do anything that might cause me to not want to work for them again in the future. In my opinion, that is the best way to guarantee that clients won't do a "chargeback" or a dispute or try to cheat me. Unfortunately, this might not work for everybody, but it works for me.
I understand that this might sound arrogant or off-putting, and I apologize for that, but I'm simply being honest about my situation. I do highly specialized work at a high level - work that has required 20 years of study and practice to be able to do. There are advantages to offering clients a service that is rare or unique, versus offering a service (such as data entry) which is offered by a million other contractors.
Even if the work you do is not unique, if you provide great service and value to your client, it is unlikely they will do any kind of "chargeback" because they will recognize how beneficial your work is to them.
But if a client is simply intent on being a cheater and is determined to try to get free work out of you, it is possible to do so with a fixed-price contract, no matter how good you perform your job. That is why it is important to limit fixed-price contracts to small contracts that you can afford to lose when dealing with a client for the first time. When you know you can trust a client to deal with you fairly, then you can do larger fixed-price contracts.
By unfair chargebacks I believe Eva means fraudulent chargeback, aka "friendly fraud".
Friendly fraud is when a buyer pays by credit card and then requests their bank to cancel the payment after they receive the good or service. They claim they didn't intend to make a payment and banks don't investigate further.
In short, credit card payments are not reliable for the seller.
In fact the only reason why I registered as a freelancer on Upwork is I expect Upwork to help build trust between client and freelancer by acting as a trusted third party and protecting against fraudulent chargebacks.
So this question matters to me, and I believe it matters to all (even if they don't know it).
So what happens when the buyer cancels the payment of the funds held in escrow?
Will Upwork maintain (refill) the Escrow funds in case of a chargeback?
If not, then dispute resolution and arbitration don't protect the freelancer as they can be bypassed (in case of credit card payments).
If yes, how Upwork protect themselves against chargeback is another issue.
Preston writes Fixed-price contracts are explictly done at you own risk, so whether or not clients pay the agreed-upon amount or not is not really about "fair" or "unfair." It is based on what the client feels like doing. They have the option to pay whatever amount they feel is "fair" based on the work that was submitted. Usually the client pays the full amount that was agreed upon. But he is not required to do so.
I'm originally from Elance. - on that site, to "proctect" fixed price jobs, a contractor should not start work until escrow is funded. This shows that contractor that the client has the money and does intent to pay. Sort of like Good Faith. On Elance, if a client doesn't want to pay the full, agreed on price, then they have to go through a dispute process which the first step being, negoiation between the client and contractor as to what should be paid and what should be refunded. If an agreement can't be reached then both parties go through the rest of the dispute resolution process.
Having funds in escrow prevents an employer from paying just what they want and taking back the rest without going through some type of dispute process to determine who should get what.
In the above statement, it sounds like even though funds are in escrow, the client can pay what they want and take back the rest withough any type of dispute resolution or negoiation process between the 2 parties. If so, wow, what is the purpose of escrow on here then if a client can just take back the remaining funds after paying a contractor what they feel like?
Although escrow is safe, it's not fool proof. As a client can initiate a chargeback at any time, but they have to do it through their credit card company and not through their "whim" of taking back whatever they feel like.
Upwork has no dispute resolution team. They plan to. They will only try to get you to take less money than agreed. If you do not agree to this then your only option is $300 US arbitration.
Fixed price has no protection at all for anything that is not a large sum of money. Even then you'll still lose some money.
There is one freelancer who posted that after the job was over, good feedback left, 18 months of working and the client wants his money back. The dispute team asked him to settle!!!
Hourly jobs are protected as long as you are actively working when using the time tracker. They expect x amount of keystrokes and mouse movement and the description of activity matching what you are working on. There have been several people here who did not put in details of what they were working on and clients disputed it and the freelancer lost their money even with a guaranteed payment. If you are not active enough a client can dispute it. There are some limitations here. Some of this you and your client are going to have to trust each other.
You would be paid by Upwork in the case you are mentioning with a chargeback if you have everything documented and all your stuff from the tracker was in order.
You can read more on the hourly payment guarantee in the Upwork Help documents
I don't yet see any answer to the question. The question is specifically about chargebacks. Chargebacks are well documented on the Web. Please google it before answering. Thanks 🙂 But if you don't know what chargebacks are, you probably don't have the answer to the question anyway.
Here is the scenario that could pose a problem:
1 - the client makes a payment to Upwork. The payment is used to provide the funds is held in escrow.
2 - the freelancer delivers the work as expected.
3 - instead of validating the release of escrow funds to the freelancer, the client chargebacks the initial payment made in step 1.
What happens to the escrow funds?
Option a: Upwork maintains the amount of funds in escrow.
Option b: Upwork decreases the amount of funds in escrow by the amount called back by the client's bank.
For instance, Paypal doesn't protect against chargbacks. When a buyer's bank calls back a payment through paypal, paypal calls back the payment made to the seller. This is why Paypal is not suited as a means of payment for services that involve a lot of work and large payments.
I would expect Upwork to cover for any chargeback, and attempt to recover their funds by using content exchanged between the client and freelancer to prove to the client's bank that the chargeback was fraudulent. But I don't see a confirmation of this. Please confirm, anyone who can. Thanks.
@Garnor M wrote:Should you encounter a situation like this, please check in with our team. If you're following the guidance outlined in our payment protection programs and documenting discussions and deliverables in the Message Center we will do our best to ensure you get paid. Chargebacks aren't something we can control but we make every effort to ensure you get paid.
This is NOT how the team handled my issue with a fixed price, fully funded, messages all done through Upwork as well as deliverables through the proper place.
Why was I told there was no dispute mediation in place at this time but they were working on it.
Why did they only tell me to settle for less money? Why should I settle for less money when I did everything correctly?
I ended up in arbitration in order to get my money because they would no do anything. Cost $291 USA.
I work mostly as a contractor, but I have also hired dozens of contractors as a client.
I'll say something here that maybe some clients might disagree with, but I think it should be said:
Upwork is providing a FREE service that lets you find contractors.
Then it lets you hire contractors, and Upwork collects 10% of whatever fee you pay.
NOT EVERY contract works out.
There are many contractors who won't do a good job on your project. Sometimes they're a really good contractor, but they are a bad fit for your job. Sometimes they're not good at all at what you need them to do. They over-sold themselves or mis-represented themselves. It happens.
But I don't regard this as grounds for a credit card chargeback.
I typically use hourly contracts. When a contractor is not working out, I close the contract and work with other people.
This is the price of doing business. Upwork legitimately did their part. The contractor actually did do work. Maybe the work wasn't good at all. That's why I stopped the contract. But they worked, and so I pay. Maybe I don't pay a lot, because I monitored the work of new, unfamiliar contractors to see what they're doing. But even if it wasn't a lot, compared to the contractors I continued working with, I still paid for whatever time was spent working.
Take it in stride. When Steven Spielberg and Roger Zemeckis made "Back to the Future," they began filming with Eric Stoltz in the lead role, as Marty McFly. They filmed for SIX WEEKS with Eric Stoltz, before realizing that although he was a talented actor and comedian, he wasn't right for the part. He wasn't right for the movie.
They had 6 weeks of work that they couldn't use. But they still paid the guy for the work that he completed.
Zemeckis made the painful decision to fire Stoltz. The studio hired Michael J. Fox, and they made a classic.
Nothing you do on Upwork* is going to add up to the expense of filming a major motion picture for 6 weeks, dumping all that footage, and re-shooting with the same cast and crew except with a new the lead actor. (*Unless you have a huge budget and a horrible management team, you'll never lose as much money on Upwork as was wasted filming with Stoltz.)
But sometimes you need to drop people you're working with if they're not the best people for your project.
If you hire a contractor and he turns in a few bad logos or poorly written articles or can't quite get your WordPress template right after a couple hours, then let him go, hire somebody else, but you still need to pay him.
Thanks for the answer.
May I suggest that you start covering for chargebacks, i.e. always maintain escrow funds at pre-chargeback level. It would be a unique feature that could make upwork very attractive to freelancers.
Upwork not covering for chargebacks sends a message to freelancers. It says that you don't believe in your ability to discourage or challenge chargebacks. It says freelancers are not safe working through Upwork.
All chargebacks from Upwork users are fraudulent. Legitimate users do as Preston said and cancel contracts or use the dispute resolution provided by Upwork (Preston mentions hourly contracts, but fixed priced contracts with appropriate milestones are also safe for clients).
Even if you can't control chargebacks, and especially so, you should cover for them. Upwork deals with many more cases than each individual freelancer. High numbers make costs statistically predictable. You can keep track of that cost and start optimizing it by beeing more effective at challenging or discouraging chargebacks.
Consider yourself an insurer, and start charging for it or just take on your profits. If you don't have the shoulders for it yet, talk to your insurance company and ask them to insure you against chargebacks.
Someone will handle the problem anyway. If Upwork doesn't they will loose market share and eventually die as a company.
I believe the key to succeed in your market is the ability to build trust as a third party. You should fully embrace that mission. You should provide a near perfect system where every room for distrust if sealed off. Chargebacks are a huge, pervasive and obvious room for distrust. They're the reason why online consulting - your market - hasn't yet shown its real potential.
So someone will handle it and we, freelancers, legitimate clients, and investors will all move to, or stay with that someone. And online consulting will become pervasive.
Please keep us updated. Thanks.