How Escrow Works

If you are new to freelancing platforms, the word "escrow" might sound unfamiliar. But it is one of the most important features that keeps your money safe on Opengates. This guide explains exactly what escrow is, how it works step by step, and why it matters for both clients and freelancers.

What Is Escrow?

Escrow is a financial arrangement where a trusted third party — in this case, Opengates — holds money on behalf of two people who are making a deal. The money stays in this secure holding account until both sides have fulfilled their part of the agreement.

Think of it like this: imagine you are buying something from a stranger. You do not want to hand over your money before you receive the item, and the seller does not want to hand over the item before they are sure they will get paid. Escrow solves this problem by holding the money in the middle. Once the item is delivered and the buyer confirms they are happy, the money is released to the seller.

On Opengates, the "item" is the work a freelancer delivers, and the escrow system ensures that:

• Freelancers can start working with confidence, knowing the money is already set aside and waiting for them.
• Clients can hire freelancers knowing their money is protected and will only be released when they approve the delivered work.

The Escrow Process Step by Step

Here is exactly how the escrow process works on Opengates, from the moment a task is created to the moment the freelancer gets paid.

Step 1: Client Creates a Task and Funds Escrow

When a client posts a task and selects a freelancer to work on it, the first thing that happens is the client funds the escrow. This means the client pays the full contract amount (or the first milestone amount, for milestone-based contracts) using one of the available payment methods:

• Credit or debit card — Visa, Mastercard, and other major cards accepted through Paystack
• M-Pesa — Mobile money payment for clients in Kenya
• Bank transfer — Direct transfer from a bank account

Once the payment is processed, the funds are deposited into the Opengates escrow account. The money is now safely held and cannot be accessed by either party.

Step 2: Freelancer Begins Working

After the escrow is funded, the freelancer receives a notification that the contract is active and funded. This is the green light to start working. The freelancer can see on their dashboard that the funds are held in escrow, giving them the assurance that they will be paid once the work is done.

This is a critical part of the process. Without escrow, freelancers would have to trust that clients will pay after the work is complete — a risky proposition, especially with new clients. Escrow eliminates this risk entirely.

Step 3: Freelancer Submits Work

Once the freelancer completes the task (or a specific milestone), they submit their work through the Opengates platform. The submission may include deliverable files, links, documentation, or any other materials specified in the contract.

After submission, the contract status changes to "Work Submitted — Awaiting Client Approval." The funds remain in escrow during this review period.

Step 4: Client Reviews the Work

The client receives a notification that work has been submitted and is ready for review. The client then examines the deliverables to make sure they match the agreed requirements. The client has several options at this point:

• Approve the work — If the client is satisfied, they approve the submission, which triggers the release of escrow funds.
• Request revisions — If the work needs changes, the client can send it back to the freelancer with specific feedback. The funds remain in escrow while the freelancer makes revisions.
• Open a dispute — If the client believes the work does not meet the contract terms and cannot be resolved through revisions, they can open a formal dispute.

Step 5: Funds Are Released

When the client approves the work, the escrow funds are released. Here is what happens to the money:

1. The platform service fee is deducted (12% standard, or 7% for Premium subscribers).
2. The remaining amount is instantly and automatically sent to the freelancer's payout method of choice (M-Pesa or bank account).

For example, if the contract value is $100 and the freelancer is on the standard plan:

• Service fee: $12 (12%)
• Freelancer receives: $88 — sent instantly to their M-Pesa or bank account

Step 6: Automatic Release (If Client Does Not Respond)

What happens if a client simply never reviews the work? Opengates has a built-in safety mechanism for this. If a client does not respond to a work submission within 14 days, the escrow funds are automatically released to the freelancer.

This automatic release feature prevents clients from indefinitely holding up a freelancer's payment by ignoring submissions. Freelancers can rest assured that even in cases of unresponsive clients, they will eventually receive their earned payment.

How Escrow Works with Milestones

For larger projects, contracts on Opengates can be divided into milestones. Each milestone acts as its own mini-escrow:

1. The client funds the first milestone's escrow amount.
2. The freelancer completes and submits the first milestone.
3. The client approves it, and the funds for that milestone are released.
4. The client then funds the next milestone, and the cycle repeats.

This approach benefits both parties:

• Clients can evaluate work quality at each stage before committing more money.
• Freelancers receive partial payment as they progress, rather than waiting until the entire project is complete.

For example, a website development project worth $500 might have three milestones:

Each milestone is independently funded, reviewed, and released.

How Escrow Works with Hourly Contracts

For hourly contracts, the escrow process works slightly differently:

1. The client sets a weekly or monthly budget and funds the escrow accordingly.
2. The freelancer logs their working hours through the platform's time tracking feature.
3. At the end of each billing period, the logged hours are submitted for review.
4. The client approves the time entries, and the corresponding amount is released from escrow.
5. The escrow is topped up for the next billing period as needed.

This system ensures that hourly freelancers are paid accurately for the time they invest, while clients maintain visibility into how their budget is being spent.

What Happens During a Dispute

If either party is unhappy and a resolution cannot be reached through direct communication, a formal dispute can be opened. When a dispute is initiated:

1. Funds are frozen — The escrowed money is locked in place. Neither party can access it.
2. Both parties submit evidence — The client and freelancer each provide their side of the story, including messages, files, screenshots, and any other relevant documentation.
3. Opengates mediates — The Opengates dispute resolution team carefully reviews all evidence from both sides.
4. A decision is made — Based on the evidence and the terms of the original contract, the mediation team decides how the escrowed funds should be distributed:
   • Full release to freelancer — If the work meets the contract requirements.
   • Full refund to client — If the work clearly does not meet the agreed terms.
   • Partial split — If both parties share responsibility, the funds may be divided.

The entire dispute process typically takes 5 to 10 business days, depending on the complexity of the case and how quickly both parties provide the requested information.

Why Escrow Matters

The escrow system is not just a nice feature — it is the foundation of trust on Opengates. Here is why it is so important:

For Freelancers

• Guaranteed payment — You know the money exists before you start working.
• Protection from non-payment — Clients cannot receive your work and then refuse to pay.
• Automatic release — Even if a client goes silent, you will still get paid after the review period expires.
• Fair dispute resolution — If there is a disagreement, a neutral third party reviews the case.

For Clients

• Quality assurance — You only release payment when you are satisfied with the work.
• Revision safety — You can request changes before approving, without losing your money.
• Refund possibility — If the freelancer fails to deliver, you can get your money back through dispute resolution.
• Budget control — With milestones, you fund only one phase at a time.

Frequently Asked Questions

Can a freelancer access escrow funds before the client approves?

No. Escrow funds are only released when the client explicitly approves the work, or after the 14-day automatic release period expires.

What payment methods can clients use to fund escrow?

Clients can fund escrow using credit/debit cards, M-Pesa, or bank transfers — all processed securely through Paystack.

Is there a fee to fund escrow?

Clients pay the contract amount to fund escrow. The service fee (12% standard or 7% premium) is deducted from the freelancer's side when funds are released.

What if I funded escrow but want to cancel the contract?

If work has not yet started, you can request a cancellation and the escrowed funds will be returned to you. If work is already in progress, the cancellation may need to go through the dispute resolution process.

How long does it take to receive payment after the client approves?

Payment is instant. Once the client releases the payment, the funds are immediately sent to your payout method of choice.

Still need help? Contact our support team and we'll be happy to assist you.