# Payment Flow Specification - RateRight *Defining how money actually moves from contractor to worker* *February 16, 2026* --- ## THE CRITICAL GAP **Current Understanding:** - Contractor pays RateRight $50 via Stripe - Worker gets "hired" notification - Then... what exactly? **Missing Links:** - How does worker actually receive wages? - When does $50 charge occur vs when does work happen? - What happens if worker no-shows or job gets cancelled? - Who handles tax, super, insurance obligations? **Business Model Confusion:** We're not a payment processor, we're a matching platform. But the payment flow implications are undefined. --- ## PROPOSED PAYMENT FLOWS ### Option A: Pay-After-Work Model (RECOMMENDED) **Flow:** 1. Contractor posts job, worker applies 2. Contractor selects worker (no payment yet) 3. Work arrangement confirmed, worker completes job 4. Contractor confirms work completion in app 5. RateRight charges $50 + processing fee 6. Worker paid directly by contractor through their normal payroll **Advantages:** - No payment until value is delivered - Reduces risk for contractors - Aligns payment with actual work completion - Clear separation: we match, they employ **Disadvantages:** - More complex confirmation process required - Risk of contractors not confirming completion - Potential disputes over work completion ### Option B: Escrow Model (HIGH COMPLEXITY) **Flow:** 1. Contractor deposits $50 + estimated wages into escrow 2. Worker completes work 3. Both parties confirm completion 4. Worker wages released from escrow to worker 5. RateRight takes $50 fee **Advantages:** - Guarantees worker payment - Reduces both-side risk - Clear payment process **Disadvantages:** - Makes us a payment processor (complex compliance) - Requires significant capital for escrow account - Complex dispute resolution required - Tax/super obligations unclear ### Option C: Current Model with Clarification (SIMPLEST) **Flow:** 1. Contractor pays $50 at hire confirmation 2. RateRight provides worker contact details 3. Contractor and worker arrange payment directly 4. Onboarding pack facilitates employer setup **Advantages:** - Simple, already implemented - Clear legal separation - Minimal compliance requirements **Disadvantages:** - High risk of circumvention - Payment timing issues (charge before work) - No recourse for either party --- ## RECOMMENDED SOLUTION: HYBRID MODEL ### The "Completion Confirmation" System **Step 1: Match Confirmation (No Payment)** - Contractor selects worker from applications - Both parties confirm arrangement (start date, rate, duration) - No money changes hands yet - Job status: "Confirmed" **Step 2: Work Period** - Worker shows up, completes work - Direct payment between contractor and worker - Standard employment/contractor relationship **Step 3: Completion Confirmation (Payment Triggered)** - Either party can mark job "Complete" in app - 48-hour window for other party to dispute - If no dispute, RateRight charges contractor $50 - Job marked "Successful" **Step 4: Dispute Resolution (If Needed)** - Either party flags issue within 48 hours - Basic mediation: both sides submit evidence - RateRight makes final call on fee charged - Disputed jobs marked for platform review ### Refund/Cancellation Policy **Pre-Work Cancellation (Free)** - Job cancelled before start date: No fee - Worker no-show day 1: No fee charged - Contractor cancels before start: No fee **Post-Work Completion** - Work completed satisfactorily: Full $50 fee - Work partially completed: $25 fee (judgment call) - Major issues/disputes: Case-by-case basis **Grace Period** - First 30 days: Lenient refund policy - After establishment: Standard policy enforced --- ## IMPLEMENTATION REQUIREMENTS ### Technical Changes Required 1. **Match confirmation without payment:** Button to "Confirm Match" 2. **Completion tracking:** "Mark Job Complete" for both parties 3. **Dispute system:** Basic flag/comment system 4. **Delayed payment processing:** Charge after confirmation, not before 5. **Refund capability:** Handle cancellations and disputes ### Legal/Compliance Updates - Terms of service must clearly define completion criteria - Dispute resolution process documented - Refund policy published - Payment timing disclosures ### Operational Processes - **Dispute handling:** Who reviews, how quickly, what evidence required - **Payment timing:** When do we actually charge the $50? - **Customer service:** Handle refund requests, disputes, edge cases --- ## EDGE CASES & SOLUTIONS ### Scenario 1: Worker No-Show Day 1 **Problem:** Contractor expects worker, no one shows up **Solution:** No payment charged, contractor can immediately find replacement **Platform action:** Worker marked as unreliable, potential suspension ### Scenario 2: Contractor Changes Requirements **Problem:** Job scope different from posting, worker walks away **Solution:** Mediation process, determine if original posting was accurate **Platform action:** Contractor education if posting was misleading ### Scenario 3: Quality Disputes **Problem:** Contractor claims poor work, worker claims unfair treatment **Solution:** Both submit evidence, RateRight makes judgment call **Platform action:** Rating system helps future matching ### Scenario 4: Circumvention Attempt **Problem:** Contractor and worker arrange future work directly **Solution:** Accept this as natural progression, focus on new matches **Platform action:** Not enforceable, not our business model concern ### Scenario 5: Weather/External Cancellation **Problem:** Job cancelled due to weather, not either party's fault **Solution:** No fee charged, both parties can reschedule through platform **Platform action:** Grace period for rescheduling --- ## FINANCIAL IMPACT ANALYSIS ### Current Model Issues - **Charge timing:** Before work = high refund requests - **Trust problem:** Neither party wants to go first - **Circumvention risk:** Pay once, hire direct next time ### Proposed Model Benefits - **Lower refund rate:** Only charge after work completion - **Higher trust:** Payment aligned with value delivery - **Better retention:** Positive experience = repeat usage ### Revenue Impact - **Short term:** Potentially lower revenue (more refunds/cancellations) - **Long term:** Higher customer satisfaction = more repeat business - **Scale impact:** Better model scales more reliably --- ## MEASURING SUCCESS ### Key Metrics to Track 1. **Completion rate:** % of confirmed matches that complete successfully 2. **Dispute rate:** % of jobs flagged for review 3. **Refund rate:** % of $50 fees refunded 4. **Circumvention rate:** % of contractors who hire same worker directly later 5. **Repeat usage:** % of contractors who post additional jobs ### Success Targets (First 3 Months) - Completion rate: >80% - Dispute rate: <15% - Refund rate: <20% - Customer satisfaction: >4.0/5.0 for both contractors and workers --- ## IMPLEMENTATION TIMELINE ### Week 1: Technical Development - Builder implements completion confirmation system - Add refund/cancellation handling to payment flow - Update UI to show job status progression ### Week 2: Legal/Policy Updates - Update terms of service with completion criteria - Document dispute resolution process - Create customer service procedures ### Week 3: Testing & Refinement - Test completion flow with seed users - Refine dispute handling based on edge cases - Train customer service approach ### Week 4: Launch Preparation - Monitor first real jobs with new system - Quick iteration based on real user feedback - Document lessons learned for scale --- ## CRITICAL SUCCESS FACTORS 1. **Clear Communication:** Both parties understand when payment occurs 2. **Simple Process:** Completion confirmation must be easy 3. **Fair Dispute Resolution:** Perceived fairness critical for platform trust 4. **Quick Response:** Disputes handled within 24-48 hours 5. **Consistent Policy:** Same rules applied to all users --- ## THE BOTTOM LINE **Current payment flow is fundamentally broken.** We charge before value delivery, have no recourse for issues, and create perverse incentives. **The solution:** Align payment with work completion. This requires more sophisticated systems but creates a sustainable, trustworthy platform. **Implementation priority:** HIGH - this affects every single transaction on the platform. --- *Without fixing payment flow, we're building a platform optimized for one-time use and customer dissatisfaction.*