I don’t think anyone expects freelancing sites to be completely free. Somebody has to be paying for something somewhere to keep those things going.
But I don’t think anyone likes the substantial cuts these sites take. And how complicated the fee structures can be.
Take Upwork, for instance. Yes, I am generally a fan of Upwork–it’s how I was able to break into freelancing and become my own boss–but their fees now can be steep and confusing. Upwork’s fee structure now bills both clients and freelancers, and the latter pay at different rates depending on the value of a contract over time. And there are a lot of people who are pissed about this.
Why Upwork did this
I’m not privy to their rationale behind this change, but I have a few ideas. I think it’s profit for them and to raise the overall quality of the opportunities and freelancers on the platform.
So yes, they wanted to make more money. Duh! But it’s not that straightforward.
It’s all about quality
One of the biggest (and growing) complaints about Upwork from freelancers is the quality of some of the gigs on there. I don’t have any actual statistics on this stuff, but I’m going to estimate that about a quarter of the posted jobs on their super duper suck for the majority of freelancers. I’m talking about $10 logo design, $2 articles, and $100 customized websites.
People want to get work done for next to nothing. And they get away with this because there are people who take these jobs, either to build their profile (guilty!) or because they are from a place with a low cost of living and their work isn’t good anyway.
Speaking of this latter group, they also apply to less crappy jobs and sometimes get them by undercutting the competition. This causes clients who may be awesome to jump ship because they expect shitty work from Upwork. It also causes many freelancers to charge far less than they otherwise would just to keep getting gigs. It’s a pretty gloomy downward spiral.
But what does this have to do with fees?
Well, now that Upwork is charging 20% for contracts under $500, Upwork is raking in $100 from a $500 gig. That’s a substantial cut. For freelancers across the board, they now need to compensate for this in what they charge clients. If they want to make money and not feel too light in the pocket book, they have to raise their rates. This includes those folks who always undercut everybody and deliver mediocre work (I’m being generous).
Suddenly, at least to clients, the average rates begin to climb slowly closer to market rates (but still pretty far away, to be frank). They have to pay more for what they get, and this should make them value the work more and expect more. Lowballers who don’t deliver good goods should start to find themselves doing more revisions to get it right and getting worse feedback. They will have to step up their game to stay competitive, and then they should bring up their rates too.
At the same time those clients who are looking for editors and artists for $5/hour (or less) are going to see less and less traction on their cruddy jobs. And many of the bids they will get will be from freelancers bidding over their abysmally low budgets. The situation should boil down to them needing to pay more or get the hell off the platform–especially as these cheapskates probably are already cringing about the 2.75% clients now need to turn over upon each payout.
It’s going to get better
It looks to me that Upwork is indeed trying to raise the caliber of opportunities and freelancers that you find there. And the incentives they offer to large contracts and clients that pay out over $910 each month cement this for me.
Contracts that are over $10,000 over the life of the contract only pay 5%. Freelancers are now incentivized to take on big, honking projects and long term gigs. And freelancers can incentivize clients that offer these opportunities by being able to offer lower rates than they would to someone offering a shorter, less lucrative opportunity.
Additionally, instead of paying out 2.75% as a client, you can pay a flat fee of $25 per month if your payouts cross that $910 mark. This is incentivizing clients to hire prolifically (and possibly exclusively) on Upwork, as they will no longer be paying a greater fee after this point.
So yeah, bitch all you want. I don’t like fees either. But, this move really could be for the best.
But what about other freelancing sites
Yes, they are out there. And yes, they have fees too. They have to–otherwise there is nothing in it for them.
And there’s a lot in it for you.
And all of these platforms are serving up opportunities for freelancers and a selection of (often vetted) freelancers for clients to choose from. This is a great service that connects people and organizations that need each other but would otherwise not meet. Heck, most of these folks wouldn’t know where to find freelance gigs if it wasn’t for freelance sites, and even with Google on your side, most clients would be floundering to find good help.
It’s a beneficial service, so you pay for it. It’s a cost of doing business, and like all other costs of doing business, it should be worked into your pricing. I’m on Upwork, and I generally charge 25% more on Upwork than I do for direct client engagements with my agency. The biggest reason for this is to offset the fees that I’m perfectly happy to pay.
You too should be ready to pay to have opportunities to make money served up to you constantly that you wouldn’t otherwise get. Most folks wouldn’t have a freelancing career without these sites.
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Also published on Medium.