I am really hoping someone is going to correct me on this post. I have been studying Odesk lately, and been putting together a bullet proof financial situation for Purpose Inc., as we start to expand at a good steady pace.

There is a massive upside to hiring contractors on odesk, but at a certain size, you can no longer manage them yourself, you need to bring on other managers.

The problem we are running into on Odesk is a bit of a security hole.

Hopefully by publishing this, and making it public, either someone is going to immediately point out a flaw in what I am saying, or Odesk will be pressured into putting in some controls that will handle this.

Let’s say you have ramped up to where you have 8 or 10 Odesk contractors busily working away for you or your company. You decide that there is just no way you can manage them all yourself, so it is time to bring on a manager to work under you.

You have a few options.

1. You have the manager set up their own Odesk account, and hire, fire and manage the contractors in this managers account. The downside to this, is what happens to the contractor if they run up a $10,000 payroll bill for the week, and you the owner of the company don’t pay. The manager is then on the hook for the money. I think the assumed position is that if Odesk can’t get the money from you, then Odesk is just going to have to pay themselves, and will never get you. If you are a real company as we are, Odesk would simply ask us for the money, and we would pay them. The manager you hire, who is making $30k a year, will probably not be comfortable, running up a $10k per week payroll debt.

2. The other option is that you give your login info to your manager and they hire, fire and pay, from within your Odesk account. There is a huge downside to this which I did not think of until last week. What if your manager decides for whatever reason on their own, that they deserve more money. They can then take a friend or family member and hire them. Then they can pay that person say, $1,000 per hour. The person can then do real work for 40 hours that week. At the end of the week, they are then rightfully and legally owed $40,000. Even if you fired the manager, as far as I can tell, you would still be legally responsible to pay the $40,000 to their niece.

What am I missing here?

If I am correct, then there is a very simple fix Odesk can make to this.

1. They could offer more options on what rights you give each user. For instance I could approve my hiring manager to hire anyone they wanted, up to a total of 10 people, and that each one could be paid no more than 45 hours per week, at $20 per hour.

2. The account could simply have a limit set, that if the payroll owed goes over $5k, then the entire account shuts down until the owner personally logs on, and approves a higher weekly spend for the week.

There are a bunch of ways Odesk could set this up.

One hack that we did figure out, handles things up to a certain point of expansion and then will break down.

American Express currently offers free insurance on employee cards against theft. I called them and their claims adjuster told me that this covers employees and independent contractors. Bottom line, from what I understand, you need a written employee purchase approval system, you have 75 days after the fraud to report it, and you must fire or get rid of the employee. If you do all of those things, Amex says they will cover up to $100k in losses.

Since we only have extremely honest people working with us, the above should be more than sufficient.

I still with Odesk simply just gave us more controls on spending limits and responsibilities.