Opinion - CNBC Work

5 actions freelancers should take right now to protect against crises like COVID-19

Oz Alon, co-founder and CEO of HoneyBook
Key Points
  • Freelancers make up 35% of the working population and drive $1 trillion in income.
  • But unforeseen circumstances, such as COVID-19, can majorly threaten their livelihood.
  • Strengthening contracts to include stronger cancellation and rescheduling policies and enforcing retainer payments can help.
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With the World Health Organization declaring coronavirus a global pandemic, full-time employees at companies across the country are transitioning to a remote working environment with relative ease. But there are 57 million freelancers in the U.S. who do not have the same resources or protections, and they are already feeling the squeeze on their wallets. This includes independent contractors, gig workers, project-based workers and temporary or part-time hires.

These individuals are at the heart of the American economy, making up 35% of the working population and driving $1 trillion in income. However, as events are canceled, group gatherings limited and travel curtailed, the self-employed are beginning to feel the financial impact.

Although some companies are responding to a wave of pressure by contract workers — Facebook, Google, Microsoft, Twitter and Amazon have committed to pay hourly workers regular wages despite a decreased need for services during the coronavirus outbreak — many who are self-employed are balking that these measures are not enough.

Fortunately, there are measures they can take to protect themselves and minimize the impact of unforeseen circumstances such as coronavirus.

1. Strengthen cancellation, rescheduling policies in contracts 

Unlike the traditional workforce, the self-employed don't have a human resources department to call on when they don't get paid.  To combat the financial loss that may be incurred when clients cancel, legal experts stress the importance of clearly defined cancellation and rescheduling policies in business owners' contracts. According to attorney Paige Griffith of The Legal Paige, the industry standard for which clients can cancel or reschedule and forfeit only the retainer is generally 30 days prior to the event.

However, there are clauses that can protect freelancers when they cannot perform services less than 30 days prior due to an unforeseeable and unavoidable event. They should consider adding the following legal clauses to strengthen their existing contracts and  protect their businesses:

  • Force Majeure clause: French for "superior force," this clause excuses you from performing the services outlined in the contract due to an unforeseen, unavoidable or impossible event, which includes epidemics and pandemics.
  • Safe Working Environment clause: Reserves the right to discontinue service in the event that an unsafe condition arises such as an area being affected by a communicable disease.
  • Failure of Company to Perform Services clause: Clarifies the procedure should you not be able to perform your services.
At Work: Coronavirus poses a new threat to gig economy workers
At Work: Coronavirus poses a new threat to gig economy workers

2. Prepare a crisis communication plan to manage expectations

By setting clear expectations with current and prospective clients that acknowledge and address the issues at hand, client and customer relationships can be maintained in the face of uncertainty.

To put clients at ease during a crisis and improve your chance of rescheduling services after, freelancers must show empathy toward their customers. A great way to do this is simply to reach out and schedule a call to discuss their concerns. Being proactive increases the likelihood of reaching a solution that benefits both parties.  

For prospective customers, showing proactive communication demonstrates preparedness for both COVID-19 and other unexpected events that could occur.

To prepare for a similarly critical issue in the future, freelancers can pre-create resources such as an FAQ page on their website and an email template, along with social media posts or blogs that detail their business' approach to the situation. Doing this in advance will allow business owners to react swiftly in a crisis and preempt any questions from their clients. 

3. Leverage national financial aid

At this critical time in the fight against the coronavirus, the U.S. government announced that affected companies will be given an additional $50 billion in low-interest loans. In addition, the Treasury Department is deferring tax payments without interest or penalties for certain individuals and businesses negatively impacted. Those who are self-employed get paid sick leave in the form of a tax credit.

Across America, various cities are offering financial aid to specifically help small businesses. Cities like New York will offer no-interest loans to small businesses with fewer than 100 employees that show a reduction in sales since the coronavirus outbreak. Certain cities are also providing grants of up to $6,000 for businesses with fewer than five employees. Freelancers can access this information and see if they qualify through their city's Small Business Administration office.

4. Enforce retainer payments

Even if a client chooses to cancel with 30 days' notice, freelancers are still entitled to any retainer payments that were initially stated as "nonrefundable retainer." As such, it's important to pay close attention to the detail of phrasing in contracts. For example, for some states it is required to give back deposits if services have not been rendered, so the word "deposit" will most likely require you to refund the amount. Check the rules in your state and construct phrasing accordingly. 

Even if a client chooses to cancel with 30 days' notice, freelancers are still entitled to any retainer payments that were initially stated as 'nonrefundable retainer.'

5. Account for backup help in your contract 

Even for the self-employed who work alone, building a network of professional support is an important part of a business preparedness plan. Every freelancer should identify a go-to industry peer that they can bring in for support if an unforeseen circumstance arises. 

Industry-based social communities are a great place to build a network of professional partners that can be called on for support. Business owners must then make their clients and customers aware of this possibility by outlining it in their contract. 

—By Oz Alon, co-founder and CEO of HoneyBook, an all-in-one business management platform for entrepreneurs and freelancers

JOIN @Work: Join CEOs and experts including Arianna Huffington, Lazlo Bock and John Chambers for an interactive discussion on leadership and management amid this unprecedented crisis at the CNBC @Work Virtual Summit on April 2 at 12pm ET. For a full agenda and details, visit CNBCevents.com.