What Do the New Upwork Fees Mean for Freelancers and Employers?

Upwork’s announcement that they are making changes to their payment structure sparked many questions. Keep reading to learn more about their current pricing structure, and what it means for you and your business.

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What was Upwork’s previous fee structure?

Upwork has become one of the largest freelance platforms and has earned $1 billion in revenue and have historically charged a flat 10% to the contractor side of the transaction.

What is Upwork’s current fee structure?

Until the latest announcement, Upwork has had a flat structure of 10% on every project, taken from the freelancer’s payment.

So for example:

If a client is billed $100, this will be split $90/$10 between the freelancer and Upwork.

10/90 = 11.11 (In effect, Upwork’s commission is above 11%.)

Starting in June 2015, Upwork is changing their fee structure in 2 ways:

  • Employers who post projects on the platform will now pay 2.75% for every transaction they make through the platform
  • Freelancers will pay a commission under a tiered structure based on their relationship with the client:
    • 20% for the first $500 in turnover with a single client
    • 10% for the total billings between $500.01 and $10,000
    • 5% for the billings that exceed $10,000

Let’s see how that would affect the same example used above:

For each $100 billed through the system (for a project $500 and under):

  • The client would pay $100 + $2.75 = $102.75
  • Upwork will keep $22.75
    • 20% commission on the $100 = $20 (provided total billings with this client are <$500) + $2.75 service fee from client
  • Freelancer will receive $80
    • $20 commission on $80 makes the effective rate 25%

For each $100 billed through the system (for a project between $500.01 – $10,000):

  • The client would pay $100 + $2.75 = $102.75
  • Upwork will keep $12.75
    • 10% commission on the $100 = $10 (provided total billings with this client are between $500.01 – $10,000) + $2.75 service fee from client
  • Freelancer will receive $90
    • $10 commission on $90 makes the effective rate 11.11%

For each $100 billed through the system (for a project greater than $10,000):

  • The client would pay $100 + $2.75 = $102.75
  • Upwork will keep $7.75
    • 5% commission on the $100 = $5 (provided total billings with this client are greater than $10,000) + $2.75 service fee from client
  • Freelancer will receive $95
    • $5 commission on $95 makes the effective rate 5.23%

What are the alternatives?

Many people, both freelancers and employers, are looking for alternatives.

There are many places where you can find work or people to work for you as contractors/freelancers. We have collected some of the best Upwork competitors in the past.

My personal recommendation for finding the top remote freelancers and agencies is Hubstaff Talent. It’s a free directory for companies looking for remote talent across the globe. There are no markups and no fees on either side (freelancer or business owner). That means freelancers get exactly what their client pays them.

Get 100% of what your client pays you

Hubstaff Talent is completely FREE! No fees.

To complement the free directory, our own software Hubstaff allows you to manage a remote workforce. Along with the numerous features our software offers, such as time tracking, activity monitoring, etc., one of the major benefits is that all this comes with a simple and flat pricing structure.

Hubstaff time tracking system

Hubstaff is a great Upwork alternative for time tracking designed to manage projects and track the work of remote contractors. It takes 1, 2, or 3 randomized screenshots within every 10-minute block, so that the client can check the progress of their contractors. Each contractor can add manual time if they work on tasks away from their computer. Hubstaff’s timesheets can be exported to QuickBooks, Paypal MassPay or CSV for the client to review the progress of the contractors.

More importantly, Hubstaff doesn’t take anything from the project money that the client gives to the contractor. There is a standard $5/person rate for using the software each month, and there are no additional costs. It doesn’t matter whether you are working on a big project or small project; All the money goes to the contractor alone! It doesn’t matter if you have 2 projects going, or 52 projects running – you only pay per user.

Hubstaff helps you to save both money and time and gives you great insight into how your business operates and what drives value for your and your clients.

Manage remote contractors

Free for 14 Days

How to track time on Upwork?

Clients make payments based on the hours freelancers spend working on assigned projects. But, can a contractor track the progress of every individual freelancer? Fortunately, Upwork Team makes this possible; the app allows freelancers to log time whenever they are working on a project.

Upwork Team can also track mouse movements and keyboard activities, as well as take screenshots every 10 minutes. Some employers are not happy with the monitoring system, though, since it only takes one screenshot every 10 minutes and doesn’t accurately capture what happens between those intervals.

One thing to note about the screenshots is that contractors can delete them if they are not related to the project in question. In the end, they will only receive money for their actual work (Upwork doesn’t take deleted screenshots into account).

What is Upwork Payment Protection?

With the Payment Protection feature, Upwork guarantees that contractors will receive their hard-earned money.

Hourly rate

Hourly-rate contracts are based on the hours tracked by the Upwork Team app and the obligation of the client to pay for the tracked hours. The contractor agrees to the contract terms, lets the app track working hours and offers the work diary to the client for evaluation.

However, contractors should always check if the payment methods of their clients have been verified. Otherwise, a client may not stay true to the agreement and cancel the PayPal billing after the contractor has done their part.

Fixed price

A fixed-price contract sets some standards before the client and the contractor start working together. The client is required to send a fixed amount to the contractor once the project is finished. If negotiations about a large project are taking place, the contractor can also set a milestone payment. This payment is transferred to an escrow account, thus, the money is secured.

Unfortunately, a lot of contractors complain that their clients disappear the moment the project is done. In other words, contractors don’t get the money they’ve been promised. Hence, a milestone is a great way to find out if a client is reliable. But, not many clients are willing to agree on a milestone, as there are also cases where freelancers disappear as soon as they get the milestone payment.

Time to switch?

If you feel you’d be affected by the new fees Upwork is imposing on both employers and freelancers, perhaps it’s time to consider an alternative. Adopting a platform like Hubstaff Talent allows you to remain independent of platforms for managing your workforce and control your expenses.

Hubstaff an easier way to manage remote workers
  • RSP

    when bill payment out of 10, 8 client first ask question “how you want payment, by upwork or paypal” .. obvisouly i prefer paypal

  • Anil Dadwal

    This is total crap.! Upwork should really reconsider this because majority of Upwork freelancers will get stuck in the 20% charge. Besides, how long will freelancers work to attain the 5% rate per long-term client? It’s like travelling to MARS in a Helicopter!
    Clients and Freelancers will definitely look for options outside Upwork.

  • Marta

    I’ve been working with UpWork for three years, but this new policy it’s a robbery. 20 % of our hard earned money!!!! For What??? To be able to use a platform??? Really???!! They even don’t invest in having a decent customer service, every time there is a problem they take ages to answer back. Yes, UpWork it’s a popular platform but it’s not the only one. They can raise their rates, but it’s our decision to stay there, move to other platforms or work directly with our clients. What will be next??? 50% fee??? !!!

  • Mário Silva

    Digital Nomads hate greedy Marketplaces, its a bad move for upwork guys…Today we have fair and trusted options for the best ones. Gun.io, Toptal, X-team and Task4IT will transform the web next couple of years.

  • Dueep Jyot Singh

    I am really sorry to say that there is no way in which I am going to be touching UpWork with a sterilized bargepole at all now. Once upon a time, ODesk was the only reasonable place on Earth, where a hard-working professional could get proper jobs at reasonable prices and at billings/deductions, which did not make him wince.
    And then Elance took over and everything went steadily downhill. Because I was working for just one long-term client, I decided to tote up my earnings per annum for income tax purposes – I knew that XYZ dollars was about the annual amount I received every year, – and at the end of the year, I was shocked to see that UpWork had calmly been deducting a sum of money from my earnings, including the money which they took from the client. That means I was paying them and my client was paying them. The yearly amount came to USD500, which they had purloined all quietly without us getting to know about that.
    I am one of the premier five-star clients, and I have told all my friends not to have anything to do with UpWork at all now. And with this 20% pricing, they are going to understand that my Cassandra like premonition that these people were out to make money, by any method, including letters to me to become a premium member and all that jazz which only shows how desperate they are, my suggestion is – all those people who think that they can survive with jobs got through UpWork, the answer is a definite resounding No.

  • Muhammad Basim

    Dear Dave, Thanks for sharing your thoughts. And as per my thought I just think that Upwork is pushing its freelancers to other Freelancing Platforms. Which Upwork revise their policy I also wrote an article http://askbasim.com/upwork-new-pricing-policy-upwork-try-lose-market/ . There are also many others who want Upwork to take its new pricing policy back.

  • Andy Baldacci

    As far as I can tell, no, Payoneer or Transpay won’t give you that. So at that point it becomes a question of what the expense of having a tax professional prepare those documents for you. If you are earning more than a few thousand dollars a year from Upwork, I imagine it would be cheaper to pay somebody to handle your taxes, but that decision comes down to your own situation.

  • Marcos Eliziario

    The problem with Hubstaff is that it ignores that development is not only typing and moving the mouse. Even with python projects, my experience with hubstaff is that the short moments of inactivity (when for example running a test suite or some other build step) end up being discarded, and this with dynamic languages like python. So, for every hour worked, you lose roughly 10% of your billable time.
    I can’t even start figuring how much of your billable hours would be lost in C++ or Java. I’ve worked on projects where a build took roughly 10 minutes and the full test suite (a requirement before doing the daily push of my commits) took well over one hours.
    If you were not remote, you’ll be paid for that anyway, it is part of the friggin job, even machines are not supposed to work on a 100% duty cycle.
    So, hubstaff model, while great for Mr Nevogt can only contribute on the long term do demoralize workers and lead to low quality work. Being a slave master may look great on the books on the short run, but on the long run, is not exactly a sound software engineering practice.

    • Marcos, I’m afraid you don’t understand how Hubstaff works and that leads you to the wrong conclusions.

      When you track time, the activity monitoring only keeps track of how active you are, but it doesn’t deduct the time during there isn’t any activity on your part. The purpose of this feature is to allow managers to get insight into what’s a normal level of activity among team-members – I don’t think anyone would expect workers to be able to perform consistently on a 100% level, that’s just not feasible.

      What you’re referring to is the idle timeout, however this feature is fully customizable – you can turn it off, set the timeout to 5, 10, or 20 mins and allow workers to keep idle time (there’s even the option to add a note as a worker).

      We’ve created all this in order to provide the most comprehensive set of features to empower both managers and remote workers.

  • How can hubstaff help with escrow / payment protection and arbitration?

  • SenG

    I was not comfortable with their existing 10% fee structure itself, but pissed-off with 20% fee. I’m thinking of consider another tracker systems like hubstaff, but how are they help us with escrow / payment protection and arbitration?

    I had a bad experience with one client earlier using hubstaff, I lost several hours of efforts.

    • Andy Baldacci

      I’m sorry to hear about your bad experience! Losing hours of effort can be frustrating. How did this happen?

      While we can’t help with escrow and arbitration, I can give you some tips. The best thing I can say is to push to for payment, or at least a significant deposit upfront. I know that smaller clients aren’t always going to want to take on the risk of paying upfront, but I think it is something you can overcome with a strong reputation and portfolio.

      If you cannot get them to agree to that, then set very clear milestones that once they are met payment needs to be made. Until the payment is made, no additional work will be done. While you can still be hurt in these situations, it minimizes your risk.

      This does require you to change the way you do business, but I strongly believe it is a change that is worth the effort.

      This is a great article by Brennan Dunn on how to minimize the issues of payment without using an escrow: https://doubleyourfreelancing.com/getting-paid/

      • SenG

        Thank you. Hubstaff did track efforts clearly, but the client had random reasons to reject my efforts (this task shouldn’t that long, this is not part of the task, etc). In these situations, upwork may do some arbitration, but with just client and me, I got stuck.

        The way I develop applications are also make it hard for billing at regular intervals. I usually go over the same features multiple times rather than set milestone and never go back. I will go over the suggestions and try to change my business model.

        • Andy Baldacci

          That’s frustrating. The best strategy I’ve found when billing hourly is to make it clear what is part of the task and what you will bill for (if you need to do research, planning, etc.). There is a lot more to software development than just writing the code, and you should charge for that time, but also make it clear upfront that you are charging for that and why it is important to delivering a good product.

          I hope this helps, and let me know if you have any other questions. Good luck!

          • I’ve been using Hubstaff for over 6 months and I’ve never had problems with it. You have to discuss with the client before starting a project and let him know approximately how much time the task will take +/- a few hours.

            Also, if your business goal works for you, you shouldn’t change it. Just try to find a client who is comfortable with it 🙂

  • FloBorg

    you’d be happy to know that Upwork just raised the freelancer fees to 20% for jobs under $500