McGraw Hill Publisher charging illustrators a fee to get paid

[davidhohn]

Please be aware that this is going on.
We all know that companies look to see what others are doing and how it is being received.
Share this with everyone -- fellow illustrators, authors, SCBWI events, agents, art directors and editors and make your views known.

Policies like this grow in silence.
Some companies will be hoping to adopt this practice while other will actively reject it to differentiate themselves from the competition.

https://inthesetimes.com/article/mcgraw-hill-freelance-fee-wage-theft?fbclid=IwAR3WdpHSSEomrMkTx2cnyIGOH49GowF85oxFQahEDVkXHf_lnED8nr5RUG8

TLDR Here's a quote from article that summarizes this new development:

The company instituted a new policy for all of its freelancers and independent contractors — they are now required to pay a fee of 2.2% every time they file an invoice through the company’s invoicing system, called Fieldglass. (There is no other system, meaning the fee is mandatory.) In other words, if a freelancer does $1,000 of work for MH, they will be paid only $978. The other $22 will be taken as an ​“administrative fee.”

[NessIllustration]

@davidhohn That's gross..

[braden H]

@NessIllustration said in McGraw Hill Publisher charging illustrators a fee to get paid:

@davidhohn That's gross..

Yup. I think that's about the best way to describe it.

[Michael Angelo Go]

@davidhohn At least it's not 20% like some places lol

But in all seriousness that is rather unfair. Lemme guess, is this administrative fee an addition to the normal 30%-35% cut we often see in freelance work? So we'd be losing 32.2%-37.2%?

[LauraA]

Hmphf! Thanks for pointing this out! It's kind of like when retailers have to pay a 3% fee for taking people's credit cards. But why pick on the illustrator?

[davidhohn]

@Michael-Angelo-Go Can you clarify what you are talking about? Where is the 30-35% being taken off?

[davidhohn]

@LauraA Kind of -- but also, not really.

The 3% to retailers is a "convenience fee" right?
Basically it pays for a company like Visa to allow a business to get paid more easily by customers who want to use credit cards.
BUT (and this is a big "but") the business is not required to only use Visa.

In the case of McGH everyone is required to use their version of Visa.
Also keep in mind that McGH in this case owns their version of Visa.
So rather than paying a 3rd party for the convenience they are paying themselves.

I could maybe see McGH making a case that "if you want to get paid TODAY then use this service and pay the 2.2% fee" otherwise you'll be paid in full by check in 30 days.

But that's not what's happening here.

[BradAYoo]

@davidhohn Wait a minute, so essentially we will be charged a fee for Accounts Payable to do the job they're already doing? This is horrible. I can't understand why companies like this take advantage over the workers that are pivotal to their success. It's nice to hear that National Writers Union is offering to step up to a giant like McGH.
“When McGraw Hill freelancers are ready, NWU will represent you and together, end this practice.”

I wish it were as easy as boycotting them but the advantage of these large companies is they know someone else is waiting for a chance and will accept the fact that they're getting charged to work. It's just disgraceful.

[Michael Angelo Go]

@davidhohn Oh I'm sorry is this illustration freelance work? Don't publishers or agents usually take a cut of 30% when an illustrator is working on a book or project? Or am I just confused? Lol sorry if I went off-topic.

[NessIllustration]

@Michael-Angelo-Go Publishers don't take a cut, they're the client (they're paying you). The agent does take a cut if they found the contract. You're assuming all freelancers have an agent, which they don't. Even if you have one, your agent is not directly involved in all of the contracts you have. If they do have an agent and the agent did all the leg work of finding the contract and negotiating it for you, then they deserve to be paid for their work just like everyone else. They do valuable work.

[davido]

Disappointing that McGraw Hill would treat freelancers/creators as "suppliers" and not consider the ramifications. Fieldglass is part of the larger SAP enterprise software platform. I would guess that McGraw Hill is already using other SAP products and was pitched on using Fieldglass to manager their "suppliers." Except artists are not commodity suppliers competing on massive projects to supply widgets or commodity services.

I have seen some companies do this when dealing with commodity suppliers, staffing pools, or complex supply chains. Sometimes a supplier will mark up their prices but then risk competitive advantage or selection (as @davidhohn alluded to earlier). In my opinion if a company is going to adopt this type of system they should just absorb it in their costs and offset that cost by either:

• reducing how much they will pay someone (although not great for illustrators)

• or, attracting the best talent and increase their overall revenue (and everybody wins)

This is an excerpt from the Fieldglass marketing material on why "suppliers" will love paying this fee:

Why suppliers are willing to pay the bill for VMS technology
Despite some initial concerns about the benefits of a supplier-funded model, suppliers now realize that the technology creates value for them, offering advantages that can lower their cost of doing business and drive higher revenues.
A VMS rewards suppliers for excellence and makes it easy to demonstrate a vendor’s strategic value to the buyer, opening up greater opportunities to deepen client account penetration. It also promotes transparency, ensuring that suppliers are evaluated strictly on their ability to perform rather than their ability to promote their business.
How suppliers benefit from VMS participation
In addition to opening up new business opportunities, VMS participation offers suppliers a host of automated processes that can promote productivity and lower operating costs, as well as access to robust reporting and performance metrics that can drive continuous improvement in service delivery.

[davidhohn]

@BradAYoo I liked that quote too! I'm going to look into how to properly support the NWU.

At the same time organizations like SCBWI have a mandate* to advocate (not lobby exactly) on behalf of their members. So consistently bringing up this topic at SCBWI events is a good idea.

*For more info on why SCBWI has that obligation check out the concept of "reprographic royalties"

You are right it's not as easy as simply boycotting. But discussing it with everyone will at least shine a light on the practice.

[davidhohn]

@Michael-Angelo-Go I think you are mixing some issues a bit.

Publishers do not take 30% of an illustrator book project.

Agents do take a percentage as part of the partnership with the illustrators they represent. That percentage can be as low as 10% and as high as 30%. (A discussion about agents who require 30% is worth having on another thread. I'm not a fan)

In my experience there is no reason to do an illustration project for educational publishers like McGraw Hill with an agent. The rates are too low and the volume of work too high to justify an agent.

But in the event that you did a project for McGraw Hill via an agent then both you and the agent would be splitting that 2.2% "processing fee" proportionally.

[davidhohn]

@davido Whoa! Thanks for participating in this thread!
Getting this bit of insight into how Fieldglass got wrapped up in freelance contracts at least opens the door to solving the "problem" McGH is looking to address.

Is this just from you googling? Or do you have first hand experience with Fieldglass or SAP enterprise software?

[davido]

@davidhohn Primarily googling but I have been involved in the enterprise software space on and off for the last 10+ years,through the lens of the tech startup world and generally trying to disrupt larger players. So over that time you can't help but bump into industry leaders like SAP. I haven't really been involved with Fieldglass at the transactional level, but this category of software and business model follows a fairly standard pattern.

And there is a genuine need for enterprise software to deal with managing higher volumes of contracted/gig workforces or complex supply chains etc. Historically this would be a piece of software that somebody like McGH would pay for directly based on some type of ROI analysis that said we spend X for Fieldglass every year but save Y on managing all of these contractors and or suppliers. And essentially it would just be one of their line item costs.

But in this case SAP (and other VMS software providers) has implemented one of the holy grails of business models for enterprise software: get the downstream user to completely or largely offset the cost of the software to the decision maker, by charging them (the supplier) a percentage of their revenue stream. An infinitely more expandable market value not tied to a fixed monthly cost or annual fee, traditionally paid by someone like McGH. And on top of that they get the network effect from suppliers onboarding into the system now ready to go for the next McGH, already pre conditioned.

So now SAP has a painless meeting with McGH. Something like this: "McGH thanks for meeting with us (SAP) today. Fieldglass is an incredible platform with every industry leader using it to manage the complexities and compliance monitoring for the ever growing volume of contracted workforces and 3rd party suppliers. On average we save companies like McGH 15+% a year compared to trying to manage this with your own team members or in house software solutions. But here's the best news: you dont have to pay us anything. We'll deploy it, train your staff, and maintain the software through a convenient SaaS model and charge your suppliers a small service fee." McGH purchasing team looks at each other and says,"where do we sign?"

It is possible McGH is paying some amount to SAP as there is a spectrum of hybrid to full supplier funded pricing models. And there is a legitimate arguement to be made that a supplier can benefit from this but it is very difficult to see how the illustration contracting world dynamics receive that level of benefit, and certainly not on a revenue based percentage fee that is not tied to any explicit basis for that received "value." What is also interesting is that a number of invoice payment systems , quickbooks, etc do a similar model, but in the opposite direction, where they charge the company trying to pay their bills to the suppliers a service fee.

whew. sorry for the long post.

[davidhohn]

@davido No, this is really insightful!

[NessIllustration]

@davido I can certainly understand how that would benefit McGraw Hill. But it's still really gross for us As the article points out, since they're using freelancers they already don't have to pay for employee benefits, insurance, vacations, pensions, mat leave, etc. So on top of that not even wanting to pay the freaking invoicing system and being more than willing to have their freelancers, who are vulnerable workers with little rights yet absolutely indispensable to the creation of their products, take on that burden instead, feels just slimy, greedy, and insulting.

[davido]

@NessIllustration I totally concur. I don't see how it makes sense for the illustration industry.

[Kim Hunter]

So you do the work and then the boss says they won't pay you unless you pay them a fee? Sounds like extortion. Here's a few definitions:

"Extortion is the practice of obtaining benefit through coercion. In most jurisdictions it is likely to constitute a criminal offense;"

Financial crimes that involve fraud, especially corporate fraud, mortgage fraud, or other investment fraud schemes where significant dollar losses have occurred, including those impacting you or your place of work

This is a type of corporate fraud copied from the FBI website:

Non-payment of funds: Fraud occurring when goods and services are shipped or rendered but payment for them is never received.

If you think any of this applies to MGH, you can always call the FBI and ask.

[davidhohn]

@Kim-Hunter This is an interesting take. I imagine the response from McGH would be: "You agreed to this in the contract". I would be very surprised if this payment method isn't specified in the contract. Perhaps someone with first hand experience can clarify this?

The next question to be raised is: Given the size of McGH does a children's book freelancer have a reasonable choice NOT to work with McGH?

I would say "Yes. A freelance illustrator does have the choice not to work with McGH" -- as I don't happen to work with McGH.

But I can easily see other illustrators saying "No. I HAVE to work with McGH. They are my biggest client. Therefore I HAVE to agree to this new fee." This of course is a slippery slope because agreeing to this new company practice makes it easier for other publishers to adopt the same practice, or for McGH to pass on yet another operational cost to freelance illustrators in the future.