Freelancing with Companies in Other Countries?

DutchSter asks: "I've been doing PHP web development for a few years now, including a few small jobs for a client in the UK (I'm currently in the US). The jobs have been so small I've never worried about a contract or anything. I was recently offered to do some long-term projects (about 6 months of full-time work). Does anyone have experience doing freelance work for another country, and if so, how did you handle contractual issues? Basically, I'm looking to minimize the risk of me being ripped off, and second, eliminate problems caused by miscommunication due to the lack of a written agreement."

Comments

Retainer

[reinard]

The way our small company does it, depending on project size we either divide the total estimate costs by 2, and ask for the first part at contract signing and the rest on completion, or split in 3 parts and ask for the first part at contract signing, the next part at about halfway through the project and the rest on completion. That splits the risk about evenly between yourself and your customer.

By the way contracts with oversee partners are virtually impossible to enforce (unless you have huge financial resources), so don't waste too much money on it, and make it just simple and clear. They're more intended to point out some rules between the two parties and point out copyright issues etc, but I highly doubt you'd be able to enforce anything with it.

Re:Retainer

[HyperbolicParabaloid]

Alternatively, define milestones (writing the spec; delivering a prototype, delivering feature A, delivering feature B, etc.) with agreed-upon payments for each deliverable.

Re:Retainer

[DuckDuckBOOM!]

Payment by major milestone is good practice for any development contract.

Hedge your FX risk

[b_pretender]

You may want to give some thought to hedging any foreign exchange rate risk.

For example if the company wants to pay you 30k Euros up front and 30k Euros upon completion (in 6 Months), then you should minimize the risk that something will happen to the currency in 6 Months that will make your final payment worthless. Although Euros seem like a stable currency, it is new, and other currencies, such as Rubles or Yen are not as stable. It's cheap and easy to hedge your currency.

All you have to do is go to the bank and lock in a 6M forward exchange rate. These are cheap instruments and they are easy to obtain. For the Euro example, today the Euro trades at 1.1 Euro to the dollar. It's reasonable that you could walk into a bank and purchase a forward exchange agreement for 1.07 Euro to the dollar in 6 Months. Now you have *locked* in US Dollar amount of your contract for the small price of less than 3%. It's a small price to pay for insurance that your contract isn't worthless in 6M.

If you are uncomfortable setting up a forward contract through a bank, then you can synthetically create such an agreement via options on interest rates and the inflation index. This is a little too complicated for one Slashdot comment, but feel free to read Hull's Options and Derivatives book if you are interested in more info.

GET A WRITTEN CONTRACT

[ptomblin]

I got badly burned by a company whose name rhymes with "Horacle" when I did some work without a written contract. I'd done three things for them, each one taking about a month, and got paid for all of them, and then I did a fourth that took two months, and they refused to pay me. Unfortunately I didn't have anything in writing to prove that they'd promised to pay me for this work.