In episode four of Unsure? Insure! we cover what to do when a client threatens to hire another freelancer.
“I’ve been working with my client for a year on a web app. I didn’t have them sign a contract, but everything was fine until the scope of the project changed. Part way through the project my client asks me to build new features, which I agreed to do for free as they’d run out of funding.
Initially I thought I was doing them a favour, but it’s turned out to be a nightmare. The project continues to drag on because they keep asking for changes and I’m losing money. I let them know that—after fixing the current bugs—I wouldn’t be involved in the project.
After fixing everything and thinking we’re now done, they contacted me with more bug fixes. Today, however, I’ve received an email saying they’re unhappy with the app and the service they’ve received, so now they’re going to hire another developer and claim damages from me for the cost of doing so.”
Let's start with the obvious. All freelancers should have their clients sign a contract with every project. Whilst a contract may not have prevented the outcome (which was dissatifaction with the app and a threat to invoice the freelancer) contracts lay down the foundation of what duties are to be expected from both parties.
If a client acts unreasonably or the project spirals out of control, you can refer to your signed agreement to highlight the boundaries that are there to protect you.
Secondly, it’s incredibly important to have a project scope to give the project structure. For example, here are the features we’ve agreed to build, here’s the timeline you can expect these features by, here's how much this project will cost based on the scope of work etc.
In this situation the freelancer talks about the client adding in features as the project is underway, meaning the project drags on.
We call this scope creep, which is a common problem and involves continuous changes and uncontrolled growth. Having a project scope helps to keep the project controlled and any additional features would require the budget and timeframe to be revised.
Lastly, before we move onto how insurance could help in this situation, don’t work for free!
The freelancer says, “Part way through the project my client asks me to build new features, which I agreed to do for free as they’d run out of funding”. It’s surprising how often I see this sentiment. Some freelancers don't have the confidence to ask for the money they deserve, or they hope that by giving the client more it will secure them further work.
In most cases, the client is going to take advantage of your generosity if you work for free. That’s exactly what happened in this situation—the client kept coming back with more features and bug fixing requests.
Don’t work for free in the hope that you get more work out of that particular client in the future. That’s usually not how it works.
How Can Insurance Help In This Situation?
Because there is a threat from the client to recover damages to hire other freelancers as a result of what the client perceives to be poor work and service, your professional indemnity insurance would be able to help.
It’s difficult to say what the outcome would be, but the insurer would pay for legal experts to negotiate with your client to reach an agreement. It might be that the insurer is able to diffuse the situation or—if they can’t reach an agreement with the client— cover the cost of the damages the client is claiming so it doesn’t come out of your own pocket.
To recap, your client is threatening to hire another freelancer and send you the invoice. What now?
- Have all clients sign a contract so that clear boundaries are set
- Have a project scope in place to define what work you’ll be doing and when. Anything else that crops up outside of that scope should require the budget and timeframe to be revised
- Don’t work for free. Simple
- Professional indemnity insurance will help. The insurer will be able to negotiate with your client and reach an outcome—the cost of which will be covered under your policy