Ways to Get Paid Working from Home

15 March 2011
smiley with dollar signs for eyes
No matter which way you look at it, one of the best things about working from home is thinking about how to get paid for your work and what you'll do with your earnings.  While there are actually a number of ways that work-from-home employees can receive compensation, this blog post will give you an overview of the most popular payment options for freelancers.

Online payment processing entails the sending and receiving of money via a website. When you use a payment processor, you have to log in to the site in order to initiate a transaction.  Your funds are technically held online until you decide to transfer them to your credit card or bank.

PayPal, Alert Pay and Moneybookers are some of the trusted and reliable online payment processors being used by freelancers and their clients today.

  • Pros: Payment is almost instant. You get to see the funds reflected in your  online account statement within a few minutes after your client sends the money. More importantly, this option protects your privacy by not requiring you to disclose sensitive credit card or bank information.

  • Cons: The payment processor usually gets a "cut" of the funds sent or received. The conversion rate from dollars or pounds to some other local currency is significantly lower than the market exchange rate. There is  also a minimum withdrawal amount ($10 for PayPal), and verification procedures may be tedious.  

Escrow systems offer both clients and freelancers some form of protection. Online job sites such as ODesk, Freelancer and Elance offer this type of payment method. Basically, an escrow system collects your client's advance payment and releases the funds to you as soon as you deliver the job satisfactorily. Depending on your preference, you can opt for the escrowed funds to be sent to your PayPal account or directly to your credit card or bank.

  • Pros: Payment is secure. Because the funds are available, you can commence your work knowing that you will not be scammed. Clients can keep a tab on the quality of your work by choosing to withhold the money until you submit a complete and decent output.

  • Cons: Security comes with a price, and for you, the freelancer (not the client), this translates to as much as  a 10 percent cut from your overall earnings. This means that when you agree to be paid $500 for web content writing for example, you will receive only $450. The $50 will go back to the freelancing site as payment for the escrow services.  

Money transfers are carried out by commercial agents that have established a number of branches worldwide. Money transfer agents are more like your off-line payment processors. This method is an alternative to regular banking, as neither you nor your client need to have a bank account in order to send and receive money.

Money Gram and Western Union are some of the well-known agents for money transfers. In the Philippines, the cheapest alternatives by far include Cebuana Lhuillier and M Lhuillier, both of which also established outlets in remote areas not frequently served by the big wigs.

  • Pros: You need not own a bank account to receive payment. You can receive the funds in cash. and in just a matter of minutes. The conversion rates at money transfer agents are a lot better than those set by banks.

  • Cons: Due to the ease of receiving and transferring funds, this method has become associated with scammers. Granting that the transaction is legit, you need to go to the outlet in order to claim your funds and present your identification card -- if not the password assigned to you by your client.

Bank transfers involve the transfer of funds from your client's bank account to your own bank account. The term is often used interchangeably with wire transfer, although some individuals clarified  that bank transfers often happen between accounts (and might sometimes be free) while wire transfers happen between banks (and always with a fee). 

  • Pros: Inter-branch bank transfers are free and almost instant. This option is advisable when you have established a level of trust with a long-term client and when both of you have accounts from the same bank. The money can be deposited to your account electronically via online banking or over the counter via a bank teller's help.

  • Cons: Bank transfers are generally risky for online providers. You must disclose sensitive information such as your full name, account number, branch name, bank name and your bank's SWIFT code to your client for the transfer to be successful. In addition, international bank-to-bank transfers may take a while.

Checks (also spelled as Cheques) are bank-issued notes that order your bank to deduct funds (equivalent to your agreed wages) from the client's account. Although bankers deem electronic checks to be just as secure as paper checks, this form of payment is altogether not advisable for the people working from home. (Find out why freelancers should avoid big, fat checks.)

  • Pros: This form of payment benefits the issuer more than the recipient. Paying by check allows honest clients to keep track of their spendings. The method creates a paper trail for records and taxation purposes.

  • Cons: Checks can get lost in the mail. Any damage, tear or alteration can render the check void. More importantly, checks can bounce. This happens when your client issues a check and does not actually have the funds to cover the amount promised in the note. 

Money orders resemble checks in appearance but are more secure. Money orders do not bounce as the funds are already paid for. Lost or damaged money orders can be replaced. Nevertheless, this method is time-consuming and in the digital age, there's nothing that irks freelancers more than waiting to get paid. 

  • Pros: As with checks, money orders can be encashed or deposited directly to your bank account. The notes are replaceable and do not bounce.

  • Cons: Be prepared to shoulder bank fees for encashing or depositing international money orders. Check with your bank. There are a series of deductions that might just shock you.  

A word of advice: Just because a payment option is widely used does not mean that it is the most advantageous. Each method has its own set of pros and cons. I have tried bank transfers, online payment processors and escrows and find the latter two to be just right for me. In your opinion, what are the best payment options for freelancers?

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