For the first time in years, Upwork is changing its fee structure.
This represents a monumental shift for freelancers – here’s what you need to know about the new Upwork freelancer fees, and answers to all your questions:
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Upwork Changed Freelancer Fees To Flat 10%
On March 16, 2023, Upwork announced that fees on all new contracts starting May 3, 2023 will incur a flat 10 percent fee. Contracts started before May 3 will be updated with the new flat fee as of May 3, though contracts at the 5% level on May 3 will be “grandfathered in” and retain the 5% fee through the end of 2023. Any contracts with a 20% freelancer service fee will switch to 10% on your next invoice after May 3.
What The Shift To Flat 10% Upwork Fees Means
When do 10% Upwork freelancer fees come into effect?
According to the Upwork Community Blog, the 10% flat fee structure will apply to all new contracts from May 3, 2023.
Will this affect my existing freelance contracts on Upwork?
According to Upwork, as of May 3:
1. If your current contract has a 5% freelancer service fee, you will continue to have that rate through the end of 2023
2. If your contract has a 20% freelancer service fee, you will switch to the 10% fee on your next invoice after May 3
New contracts created from May 3-onward will carry the new 10% flat fee.
Has Upwork changed what clients pay?
The changes to freelancer fees announced by Upwork on March 16, 2023 only affect freelancers. Upwork’s client-side fees will remain the same, with the only addition being a one-time contract initiation fee of $4.95 (minimal) that will come into effect after April 26.
I have existing contracts at the 5% level. Will I now get 10% fees instead?
Existing contracts at the 5% fee level will be “grandfathered in” and will not have the 10% fee structure immediately. All 5%-level contracts will remain at the 5% level until the end of 2023.
See the FAQ below about raising your rate!
What will Upwork’s new flat 10% fee structure change for freelancers?
Upwork’s new flat fee structure will likely have a few impacts:
1. Transparency for freelancers: “10% flat fee” is a far easier calculation than the previous sliding-scale approach starting at 20%
2. Increased earnings for most freelancers: All contracts under $11,000 will see a benefit.
3. Clearer pricing: Previously, the Upwork Proposal UI showed a potentially misleading “Net Earnings” figure for hourly contracts (which make up a tremendous proportion of Upwork contracts), which would not apply once a freelancer had exceeded the $500 earnings threshold. This change eliminates that.
Who benefits the most from the shift to a flat 10% fee structure?
Two groups will definitely see a big benefit:
1. New freelancers will keep more of their earnings early on in their freelance journey.
2. Freelancers whose projects are under the $10,000 price point will earn more
(If you’re new or thinking of starting freelancing on Upwork, you should check out our Upwork Starter Kit)
I do Upwork projects under $10,000. How much more will I earn?
Under Upwork’s previous sliding-scale fee structure, a $500 project would incur a 20% fee ($100), resulting in net freelancer earnings of $400 for the contract. According to the new 10% flat fee on all Upwork contracts, that same $500 project would incur only a 10% fee ($50). This will result in net freelancer earnings of $450, or 12.5% more earnings on a $500 project.
Will 10% Upwork fees affect freelancer pricing?
Probably, yes. We expect freelancer pricing to evolve according to that freelancer’s average project size:
–Projects under $500: These freelancers will be able to earn more on the same projects, and have the opportunity to lower their price due to increased overall earnings, but we don’t expect they’ll do that. No change expected.
-Projects $500-$10,000: These freelancers will earn marginally more – no significant change expected.
-Projects $10,000+: Freelancers who previously enjoyed 5% fees on earnings above $10,000 with a single client would theoretically lose under a flat 10% fee structure. However, expert freelancers typically have such pricing power that a small rate increase is likely quite easy. We expect hourly rates – and commensurately, overall fixed-project fees – on large projects to immediately shift to account for the new 10% flat-fee structure, likely in advance of the change.
Why did Upwork change to a flat 10% fee structure?
We see a few key reasons for shifting to a flat 10% fee structure, a significant departure from Upwork’s previous sliding-scale fees: transparency, simplicity and inflation.
In general, a flat 10% fee on all freelancer earnings is much easier to understand than the complicated calculations required to determine net earnings under a staggered 20%-10%-5% model. A flat-fee approach also eliminates the need to “adjust the 20% bar to $1,000” to account for increases in average Upwork project size due to inflation.
Will 10% flat fees mean any changes for Upwork?
In our opinion, 10% flat fees are a move in the right direction.
Most freelancers will benefit from increased earnings at the lower price brackets. The fewer freelancers at 5% level (which includes us) won’t really be affected because of a built-in ability to readily raise prices.
Versus other platforms…
Upwork’s fee structure, payment terms & accessibility now make it the definitive winner versus all other platforms. Upwork’s fees are now industry-low versus any other competing platform, with a tremendous client base of over 800,000 active clients spending an average of over $5,000 per project, which give Upwork the most compelling value proposition to attract the best freelancers in the world.
The most important moment for a client is their first contract through Upwork. With Upwork’s best-in-class value proposition, it will likely attract the best freelancers who give clients the best customer experience in their work.
Happy clients who trust Upwork means growing spend, and repeat spend – which is good for clients, freelancers and Upwork.
Most of my work is on long-term contracts at the 5% level. What do I do?
Upwork just gave you a GIFT – it’s the perfect excuse to ask for a rate increase (and probably by more than 5%, mind you).
If you’re at the 5% level on your contracts, here’s a message you use right now:
Hello [CLIENT’S NAME], I hope all is well with you. I regularly review my rates to keep up with inflation, the new skills I am adding to deliver more value to you and my other clients, and fees charged on my side by the platforms I work through.
Since we started working together, I have strived to deliver increased value to you, by… [EXAMPLES OF THINGS YOU’VE DONE THAT GO ABOVE & BEYOND]. I hope this has brought meaningful additional value to you and your business, and are as pleased with our ongoing work as I am.
Separately, it has just been announced that Upwork is increasing its fees, which will effectively double the fees on my net earnings.
Although other providers comparable to me are charging [HIGHER RATE] per hour and I have raised my fees on new contracts to reflect that new level. However, I value our relationship and would love to keep working together – and I want to give you a break :) I would suggest [NEW RATE] – would you be OK with that?
If I raise my rate, won’t my clients just press End Contract?
Sure, some might – but most won’t. It depends on you.
When asking for a raise, clients might leave you if…
1. You’re just doing the same work, day in & day out
2. The level of your work quality is the exact same as the day you started working with your client
3. Your skills haven’t changed or improved whatsoever since accepting the contract
4. You’re not growing at all – and have no intention of growing
5. You’re comfortable staying where you are, and just letting things happen to you
6. Your work quality has decreased and you’re less communicative
7. You have no relationship with your client whatsoever
Clients will happily stay with you if…
1. You’re offering more value
2. You’re always learning new skills
3. You’re getting better at working with your client
4. You’ve formed a relationship
5. You make it EASY for them to work with you – and are always looking for ways to make it easier
6. You’ve gotten faster and more efficient at the work you do
7. The quality of your deliverables has noticeably increased
8. You approach the conversation in the right way
9. Their budget permits (yes, even if it’s tight)
10. You’re always looking for ways to get your client a better end result from the work you do
Why wouldn’t I take all my 5%, longer-than-2-year contracts off Upwork through Contract Conversion?
You could. There’s Pros and Cons to each side of the Contract Conversion argument, with one big one that speaks to “why Upwork exists in the first place”…
Pros to Contract Conversion after 2 years
1. You have an existing relationship
2. They’ve been paying you & want to keep working together
3. Your fees were 5%, now they’re 10%
4. By going through Contract Conversion, in theory you’d save up to 10% (assuming Venmo / Zelle)
Cons to Contract Conversion
1. If you don’t have a system & method of payment, you’ll have to set it up. Typically costs money – but not much.
2. If you have a payment system, most of the time it won’t be free. Clients don’t want to constantly pay via Venmo or Zelle. ACH can be done for relatively cheap (Wave, for example), but most clients want credit cards. Stripe fees are typically ~2.9%. Wires are extremely burdensome for most.
3. THE BIG ONE: You lose Upwork Payment Protection. Collecting on invoices as a small business owner isn’t always easy, and clients sometimes run into payment issues. Losses from late or non-payment can easily exceed 8.1% (the difference between 10% Upwork fee and 2.9% on credit cards) or even more, especially if it’s a big invoice that goes unpaid or refused
4. Unpaid invoices are tough for most to fight in court (think about it: will you spend time & money trying to sue someone in Small Claims court, who doesn’t have money?)
Here’s What We Think
We think this isn’t just great, it’s awesome. New freelancers earn more. Pro freelancers largely unaffected. Upwork attracts best freelancers. Clients are more happy (with the exception of de minimis $4.95 one-time fees), trust Upwork, spend more.
It’s a win pretty much all around – and there’s never been a better time for beginners to get started on Upwork, and for existing freelancers to lean in heavily and up your game.
The future’s looking bright!
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