Upwork Slashes 20% fee — Freelance News
Upwork, the largest freelance marketplace in the world, has announced a major change in its fee structure.
Effective from 3 May 2023, Upwork will remove the sliding-scale tiered freelancer service fee — 20% for contracts up to $500, 10% from $501, and only 5% for contracts above $10000. The fees charged on earnings of Upwork agencies will also move to 10% on May 3, 2023.
The new fee structure charges 10% flat across the board. This will encourage Upwork beginners by letting them keep more of their earnings on the platform, but the story may be different for top rated freelancers who already have Upwork clients whose transactions have exceeded the $10000.01 milestone and are currently being charged only 5% by Upwork, thereby not finding this change favorable.
The reason for the change in service fee structure, was not stated by Upwork, but since Upwork has been making a lot of upgrade attempts recently in response to feedback, I opine that feedback like Liam’s below could have influenced the decision of the gig economy giant:
Firstly, here are the reasons I think the Upwork service fee rate is largely unjustified: It’s a higher commission than what a real life agent would take.
A real life agent would find the work and clients for you whereas on Upwork you have to apply, do your own research and negotiate yourself, among other things.
Escrow/mediation is useful but not worth 20% of my wage
It would be cheaper for me to draft up a contract myself, and to join the musicians union for a very reasonable fee. As a member of that union I would get legal representation that would make any rogue client cave, I’m already on to this by the way…
I have an Upwork monthly subscription, it has done nothing for me but recommend jobs that aren’t suited for my skills
Also, Upwork reported a loss of $89.9 million in 2022, with the possibility of turning a profit in the second half of 2023. Hence, it seems Upwork is doing everything possible to reduce marketing spending by 12% in 2023 and increase profit. Hence, the drive to make freelancers by more connects for bids and availability badge. Upwork seems to deduce that the bulk of money made on the platform is made by the top rated, expert-vetted freelancers and agencies, and it may not be most profitable for Upwork to charge a lower service fee of 10% or 5% to these high-tier freelancers who have a higher tendency to hit over $10,000 on a single project or contract. Hence, Upwork sees a need to change the current fee structure.
The current fee structure charges freelancers different percentages based on their client spend, while the new structure charges a flat rate of 10% regardless of client status, lifetime billings, or earnings. This new fee structure applies to both fixed-price contracts and hourly projects. However, the standard client-side payment processing fee remains unchanged.
Compared to other popular marketplaces like Fiverr, Upwork’s new fee structure will be more competitive. Fiverr currently charges a flat 20% fee on all earnings. It remains to be seen whether other marketplaces will follow Upwork’s lead.
Unfortunately, freelancers currently working on contracts with over $10,000.01 in client spending and enjoying the 5% rate will only be temporarily exempted. These contracts will remain at 5% until the end of the year, at which time they will rise to 10%. However, clients brought to the platform through BYOC (Bring Your Own Client) will remain at 0%.
Some top-tier Upwork freelancers have already reached out to Upwork to encourage them to reconsider the changes.
Myself and other expert vetted and top-rated freelancers received an email from Upwork urging us to share our feedback, as feedback is important to Upwork. I opine that Upwork is doing what they’ve got to do to survive in business and be profitable. If the business, Upwork Inc., dies, it will be a big loss to top-tier freelancers. Hence, I understand Upwork’s actions, though they are unfavorable to me. On the other hand, Upwork needs to deal more with income management than over-saddle freelancers who are already contributing substantially through the current service fee.
What are your thoughts on Upwork’s recent change? Do you think this will affect the way you use the platform? Let me know in the comments below.
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