Tie work to payments with milestones: Structuring contractor projects for success

Time sheets are a poor fit for contractor work. They measure input (hours) instead of output (results), create administrative overhead, and make budgets unpredictable. Milestones solve this by tying payments directly to deliverables.

A milestone is simple: define what needs to be delivered, set the amount, establish a due date, and pay when the work is complete and approved. This structure makes projects predictable, reduces disputes, and keeps both parties focused on outcomes rather than hours.

Designing effective milestones

Good milestones are specific, measurable, and independently valuable. They represent discrete deliverables that you can review and approve.

Bad milestone example: "Phase 1 - $5,000."

Good milestone example: "Homepage design with 3 layout options, mobile responsive, delivered as editable Figma file with component library - $5,000."

The difference is clarity. The contractor knows exactly what to deliver. You know exactly what you're paying for.

Break projects into logical phases. For a website redesign: Milestone 1 covers design mockups. Milestone 2 covers frontend development. Milestone 3 covers backend integration. Milestone 4 covers testing and launch. Each milestone delivers something concrete you can review and approve.

Size milestones appropriately. Too large (one milestone for the entire project) creates risk—you pay everything upfront or at the end, and the contractor bears risk if you reject the work. Too small (dozens of tiny milestones) creates administrative burden and slows momentum. Aim for 3-5 milestones per project, each representing 1-3 weeks of work.

Include acceptance criteria. State exactly what needs to be delivered. Example: "Mobile app screens for login, dashboard, and settings. Delivered as Figma file with interactive prototype. Must match approved brand guidelines and pass WCAG accessibility standards. Include all source files and design assets."

Acceptance criteria remove ambiguity. Both parties know what "done" means before work begins.

Set realistic due dates. Discuss timing with the contractor before finalizing milestones. Account for dependencies—Milestone 2 can't start until Milestone 1 is approved. Build in buffer time for review and revisions. A milestone due in 2 weeks with 3 days for review is tighter than one due in 3 weeks with 5 days for review.

Review and approval process

When a contractor submits a milestone, review it promptly. Delays in review delay the project and frustrate contractors.

Aim to review within 2-3 business days. If you need more time, communicate that upfront: "I'm reviewing other projects this week. I'll review your submission by Friday." Clear timelines prevent uncertainty.

Check deliverables against acceptance criteria. Does the work match what was agreed? Is the quality acceptable? Are all files included in the format you requested? If yes, approve the milestone. If no, provide specific feedback.

Be specific in your feedback. Instead of "I don't like the design," say: "The color scheme feels corporate. I was expecting something more modern and playful. Can you explore brighter colors and a flatter design style?"

Specific feedback helps contractors deliver what you need. Vague feedback requires back-and-forth clarification.

Document approval explicitly. Send a message: "Milestone 2 approved. I reviewed the mockups against our acceptance criteria and they meet all requirements. Payment will be processed by Friday." This creates a clear record and sets payment expectations.

Distinguish between revisions and scope creep. Minor fixes (typos, small color adjustments, layout tweaks) should be included in the milestone. Major changes (new pages, additional features, different approach) should be handled as change orders with new milestones and adjusted payment. Don't let scope creep silently eat into agreed milestones.

If work is incomplete or doesn't meet standards, don't approve it. Provide detailed feedback instead: "The homepage design looks good, but the mobile layout needs adjustment. The navigation menu overlaps content on small screens. I'd like to see the navigation moved to a bottom drawer or hamburger menu. Please revise and resubmit."

Contractors appreciate clear expectations. Rejecting poor work early prevents frustration later.

Payment timing and structure

Payment happens after approval, not before. This is the key protection milestones provide. You only pay for completed, approved work.

Process payments quickly after approval. Aim for 2-3 business days from approval to payment. Faster payment builds trust and makes contractors prioritize your projects. Contractors remember who pays quickly and on time.

Consider a deposit for large projects. A 20-30% upfront payment shows commitment and covers the contractor's initial setup costs. The deposit counts toward the first milestone. Example: $10,000 project with $2,000 deposit. Milestone 1 is $3,000 total, but the contractor only receives $1,000 more since the $2,000 deposit already covered part of it.

Avoid partial milestone payments. If a contractor delivers 80% of a milestone, you face a decision: reject it and request completion, accept it and pay proportionally, or renegotiate. Partial payments create confusion about expectations. Document whatever you decide to avoid future disputes.

Track milestone status transparently. Use clear statuses: Submitted (contractor delivered), In Review (you're checking it), Approved (accepted), Paid (payment sent), Confirmed (contractor confirmed receipt). Everyone should know where each milestone stands. This transparency prevents "Did you pay me?" questions.

Examples by project type

Website redesign ($15,000 total):

• Milestone 1: Design mockups for all pages ($4,000). Due: October 15. Includes 3 layout options, mobile responsive, delivered as Figma file.
• Milestone 2: Frontend development and responsive layout ($5,000). Due: November 1. Full HTML/CSS of approved designs.
• Milestone 3: CMS integration and content migration ($4,000). Due: November 15. All content migrated, CMS set up and tested.
• Milestone 4: Testing, bug fixes, and launch ($2,000). Due: December 1. All issues resolved, site live.

Mobile app development ($30,000 total):

• Milestone 1: UI/UX design and interactive prototype ($6,000). Due: October 31. All screens in Figma with working prototype.
• Milestone 2: Core features development ($10,000). Due: December 1. Login, dashboard, settings fully functional.
• Milestone 3: Additional features and API integration ($8,000). Due: January 15. All planned features working, APIs integrated.
• Milestone 4: Testing, bug fixes, and submission ($6,000). Due: February 1. App tested, bugs fixed, ready for app store.

Content writing ($5,000 total):

• Milestone 1: 10 blog posts, first drafts ($2,000). Due: October 31. First drafts for all 10 posts, following brief.
• Milestone 2: Revisions and final versions ($1,000). Due: November 15. Final versions incorporating feedback.
• Milestone 3: 10 more blog posts, first drafts ($2,000). Due: December 31. Next batch of 10 posts.

Marketing campaign ($8,000 total):

• Milestone 1: Campaign strategy and creative brief ($2,000). Due: October 15. Strategy document and creative direction.
• Milestone 2: Ad creative and landing page copy ($3,000). Due: October 31. 5 ad creatives and landing page copy.
• Milestone 3: Campaign setup and first month management ($3,000). Due: November 30. Ads live, tracked, and actively managed.

Common milestone mistakes

Vague milestones. "Complete Phase 1" tells the contractor nothing. "Design mockups for homepage" is better. "Design mockups for homepage with 3 layout options, desktop and mobile versions, delivered in Figma with component library" is clear.

Too few milestones. One milestone for a 3-month project creates risk. If the contractor disappears or delivers poor work, you've paid everything upfront. Break large projects into smaller milestones for protection.

Slow review process. Contractors submit work and wait weeks for feedback. This kills momentum and frustrates good contractors. Review within 2-3 days maximum. If you need more time, communicate the timeline upfront.

Scope creep. Milestones expand to include extra work without adjusting payment. This is unfair to contractors and breaks the value exchange. If scope changes, add new milestones or adjust existing ones. Document all changes in writing.

Paying before approval. Some contractors request payment before submitting work or before you approve it. Milestones protect you by ensuring you only pay for completed, approved work. Never pay before you've reviewed and accepted the deliverable.

Missing acceptance criteria. If milestones don't specify acceptance criteria, disputes are inevitable. "Is it done?" becomes subjective. Always include clear criteria.

The complete workflow

Here's how milestone-based projects work from start to finish:

Step 1: Develop milestones with the contractor. Define deliverables, amounts, due dates, and acceptance criteria. Get written agreement on all milestones before work starts.

Step 2: Contractor completes Milestone 1 and submits it.

Step 3: You review within 2-3 days. Check against acceptance criteria. Approve or provide feedback.

Step 4 (if approved): Process payment within 2-3 days.

Step 4 (if rejected): Send feedback and discuss revised timeline. Contractor revises and resubmits.

Step 5: Contractor starts Milestone 2.

Repeat steps 2-5 for each milestone until project completion.

This structure keeps projects on track, budgets predictable, and both parties aligned. Contractors know exactly what to deliver and when they'll be paid. You know exactly what you're getting and only pay for approved work.

The bottom line

Milestones are the best way to structure contractor payments. They tie payment to deliverables, make budgets predictable, and protect both parties. Design specific milestones, review promptly, and pay quickly after approval.

The alternatives—hourly billing or one lump sum—create problems. Hourly billing adds administrative overhead and makes budgets unpredictable. Lump sum payments create risk if quality is poor. Milestones provide the balance that works for most contractor projects.

Invest time upfront defining clear milestones. This investment prevents disputes, keeps projects moving, and ensures both parties know exactly what to expect.