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What’s to come with Upwork and its new fee structure

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A few weeks ago Upwork CEO Stephane Kasriel announced that the platform would be making adjustments to its service fee structure. On June 7th, all new contracts commenced with the new sliding scale and on June 21st the new structure will be applied to all Upwork contracts. Here’s how things look:

  • 20% for the first $500 you bill a client across all contracts with them
  • 10% for total billings with a client between $500.01 and $10,000
  • 5% for total billings with a client that exceed $10,000

Why the change?  Kasriel explains in his letters sent last month to both clients and freelancers that the community, which has garnered over 1 billion dollars in revenue since it’s inception, can no longer afford their one price fits all structure. “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.” Wrote Stephane.

What does this mean for clients and freelancers

Of course things aren’t too bad for clients, who will be charged a 2.75% processing fee per payment transaction and the majority will also have the option of paying a flat $25 a month instead. Not quite free, but not too shabby. Freelancers, however, don’t have it so easy. Paying 20% when you’re trying to break into a competitive market is far from ideal and realistically how many Upwork contracts reach the $10,000 mark? Moreover, the time and investment for clients to reach that mark is unlikely, as they will be forking over an extra 25 dollars a month in fees in addition to paying for the work.

If you’re like many freelancers, finding work on the platform is already a huge hassle because earning a competitive wage is… difficult. For example, Freelancers often have to negotiate their rates to account for Upworks 10% fee structure, if they want to earn $1000 they have to charge the client $1100. More times than not, independent contractors are pushed into a corner negotiating a rate for less than their bottom lines; to insure that some income is coming in. Now, with this new sliding scale fee structure there is an overwhelming feeling that matters are only going to get worse.

How the community is taking it

As expected, freelancers are not happy. A look at any community forum, will tell you that workers want to know who the top percent of independent contractors are that make over $10,000 from a single job. More importantly, why are they ok with getting supremely robbed by Upwork? Because this top percent has to pay the platform over 1000 dollars in commissions before they even get their 5% break. And for the rest of us who have been depending on the platform to supplement our incomes, those cozy with 10%, things just got that much harder.

Most freelancers on Upwork find success working various projects in a year. It’s actually safer to have multiple threads of income. But it seems as if the bread and butter, of the largest freelancer platform, has to pay the biggest price. Because middle of the road, independent contractors, have good track records but still will have to pay 20% when starting new contracts until $500 is reached. That’s $100 dollars that could have went to their livelihoods. Although, it’s clear that Upwork is geared towards clients finding cheap labor at the expense of outsourced and homegrown workers. Clients may even start shying away from the platform as exorbitant fees continue to detour freelancers and cause them to reach further into their own pockets.

What’s Next?

If you’re a freelancer you have to know there are other options out there, why throw your money away? If you’re an employer you have to decide if cheap (often mediocre) labor is more important than fair labor. Upwork’s old 10% structure and free to use basic plan for clients, wasn’t perfect but it worked for all parties involved. Now that clients have to pay and freelancers are being held over the coals, the largest bidding site may simply become the most expensive as they race to be the most successful platform on the market.

Independent contractors need to become empowered and realize they don’t need bidding sites to earn a living. Why not build your own site, market yourself or take existing relationships outside of Upwork? There is also software like Hubstaff which is inexpensive ($5 per person a month) and it allows for freelancers and employers to track time, much like Upworks software, independently. The bottom line, whether they want to admit it or not, Upwork has made these changes to make more money and weed out their competition. Will it end up backfiring in the end? Hopefully, freelancers will take their futures into their own hands before then.

Image source: imwizard.org
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