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

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

Upwork’s announcement that they are making pricing changes sparked many questions. Keep reading to learn more about Upwork’s new pricing, 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 fee increase, 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% (called a Payment Processing Fee) 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 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 processing 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%

While not astronomical, these fees can certainly add up for clients and freelancers alike.

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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 or freelancers. We have collected some of the best Upwork competitors in the past.

Our alternative 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.

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, and automatic payroll, one of the major benefits is that all this comes with a simple and flat pricing structure.

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’re not interested in 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.

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