Well, Damn It: Significant Increase in Upwork’s Fees

Freelancers everywhere, this one’s for you.

TL;DR: if (like me) you cobble together funds during tough times by taking side jobs through Upwork, you’re kind of fucked.

Freelancers who contract work through Upwork (formerly Elance) will wake up to find this in their inboxes:

I’m writing to share an important update to Upwork’s pricing and Terms of Service. Starting in June, we will change our fee structure so that the more business you do with your clients on Upwork, the more earnings you keep.

Upwork will charge a sliding fee based on your lifetime billings with each client (across all hourly and fixed-price contracts you’ve ever had with them on Upwork). These are the fees you will pay:

  • 20% for the first $500 you bill your client across all contracts
  • 10% for total billings with your client between $500.01 and $10,000
  • 5% for total billings with your client that exceed $10,000
  • For example, if you begin an hourly or fixed-price contract with a new client for $600, you’ll be billed 20% on the first $500 and 10% on the remaining $100.

Here’s what your net earnings will look like over time, as a percentage of what the client is billed:

Pricing Structure

When the new pricing takes effect, we’ll honor the previous 10% fee for all active contracts, unless you’ve billed over $10,000 with a client, in which case we’ll automatically lower your fee to 5%. On all new contracts, the new pricing will apply.

These changes will reward long-term work and cover the costs of small projects, which are more expensive for us to support. I realize these are significant changes, but I believe they’ll allow us to deliver you a higher level of service and opportunity in the future.

We’ll follow up with an update before these changes roll out in June. In the meantime, visit our pricing page to learn more about this change as well as a new fee for clients.

Thank you for your business,

Stephane Kasriel
CEO, Upwork

That “new fee for clients” (who previously paid nothing to advertise jobs on the site) is a relatively modest 2.75% processing fee per payment transaction. Many of the clients who hire through Upwork are looking for the lowest bidder on jobs, full stop. I think we’re going to see the average budget for projects across Upwork go down by 2.75% per payment milestone.

Many authors and editors take on freelance work to get by. In the past, I’ve personally recommended Upwork as a good place to find work. If you’ve been thinking of signing up to work with them, I suggest you do it today and try to land as many clients as you can before June 1st. After that…welp, it’s probably better to make other plans.

Their new client rate isn’t a 20% fee that goes down to 10% after you earn your first $500, it’s a 20% fee charged against the first $500 you earn per client. Upwork claims they are trying to foster long-term relationships, but they are fully aware that long-term relationships with individual service providers are not what most of their clients are looking for: if that’s what the clients wanted, they’d post actual jobs on Monster.com.

Most jobs I’ve seen advertised through Upwork have a budget of less than $500. Many have budgets under $100. Upwork is a place where (for example) first-time authors who need formatting for one ebook or small companies who want website landing pages or a quick fix to a coding problem can get qualified talent to apply for jobs. Clients like that need to fill a particular service requirement now, and they are not looking for long-term relationships with anyone.

Other clients have deeper pockets: they may spend $10,000/year, but in $50 increments for a handful of blog posts. These clients are often article or SEO mills. They tend not to rehire the same people over and over; for each $50 job, they just go with the lowest bidder who meets their minimum criteria. These are the clients who are most likely to return to soliciting jobs on Craigslist or similar message boards, or to torpedo their Upwork budgets (since they’ll be paying that 2.75% per transaction, and some jobs have milestones that require more than one payment).

A few clients with the relatively deep pockets you’d need to earn at least that $500.01 (and so get back down to only paying Upwork 10%) will already have sort-of-long-term relationships with their providers, and may balk if they not only have to pay that 2.75% fee but if their regular providers suddenly have to raise their rates to compensate for those last couple hundred dollars that will bump their total earnings for that client past $500.

To be fair, there are some jobs that pay in multiples of $500 available on Upwork – but that is not the bulk of the work you’ll find there. UpWork is claiming that these changes have been made to offset costs of project oversight and mediation, and that these services are often needed for smaller projects. That’s probably true – but thousands of their service providers and clients who have never had a problem are going to be affected by this. A much better solution for more of us would have been to offer the 10% rate not only for long-term one-on-one relationships, but also on smaller jobs between clients and service providers who’ve both been consistent in their quality of work. Smaller jobs offered by one- or two-time clients are ultimately the core of UpWork’s business, and they are penalizing those of us who have enriched them for years by providing those smaller services to their clients.

They have been good to me in the past, so I won’t take all of my business elsewhere just yet. I will, however, start moving my freelance services across all accounts off of their platform. As I make my contingency plans, I’ll also watch the jobs lists very closely.

As I said before, I think this policy is going to drive a lot of potential clients back to Craigslist and to other free jobs boards. It will also increase opportunities for scammers on those boards, on both sides of the aisle. If that happens, it’s bad news for all freelancers; one of the main benefits of Upwork is that, for a (formerly) small fee, you have an intermediary to act on your behalf in cases of scope creep or nonpayment. I’m lucky enough to have other options and a great deal of experience that will serve me well if I should decide to walk away. Unfortunately, many newer freelancers are going to have to price themselves out of Upwork’s core client market to offset this fee, or seek out other similar services. I fear far too many of them will likely head for free jobs boards and just hope they don’t get scammed.

No matter what, things just got that little bit harder for freelancers everywhere who need to take the occasional side job for individuals and smaller companies. Good luck to us all.

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