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Understanding Upwork Fees in 2018 – An Ultimate Guide

If Upwork fees have you feeling frustrated and confused, this simple guide will (hopefully) shine a light through the darkness.

understanding upwork fees

Before we begin, here’s a little fun fact: If Upwork became a country today, its population would be larger than those of either Switzerland (8.4 million), Greece (11.1 million), or Belgium (11.5 million).

With 12 million registered freelancers and 5 million registered clients, it’s one of the biggest freelance markets in the world.

Can you imagine having an entire country of people applying to a job?

That’s intense (but okay, we’re exaggerating a little bit).

If you’re thinking about registering for Upwork, it’s important to be aware of the fees that the platform charges.

Both freelancers and companies will have to pay fees–let’s take a look at how they could affect you.

Some background:

A few years ago, there was no such thing as Upwork (it only started officially existing on December 18, 2013).

It used to be Elance-oDesk, a combination of the Elance platform founded in 1999 by Beerud Sheth and Srini Anumolo, and oDesk, which was founded in 2003 by Odysseas Tsatsalo and Stratis Karamanlakis.

Back then, the platform’s fee was a flat 10% on all payments made by clients.

For example, if a client paid $100, their freelancer would receive $90. 10% ($10 in this case) would go to Elance-oDesk.

That all changed in 2016, when Upwork changed their fee system. Large clients who had been registered on Elance-oDesk negotiated special terms with Upwork that grandfathered them in to the change, but they were the exception.

Everyone else was subject to the new fees.

If you’re new to Upwork or are thinking about registering, don’t worry. The new fees (explained down below) are all you need to worry about.

What fees do I pay as a freelancer?

#1 Upwork Fees (20%, 10%, or 5%)

Upwork fees work on a sliding scale, and are charged according to your lifetime billings with a client.

What are lifetime billings?

They’re the total amount that you’ve earned with a client, across all your projects with them. So if you worked on a project last year and earned $800, and get assigned a new project with the same client, then the Upwork fees will be calculated based on that $800 + your new earnings.

Here’s the breakdown. You’ll get charged:

  • 20% for lifetime billings between $0 and $500,
  • 10% for lifetime billings between $501 and $10,000,
  • And 5% for lifetime billings over $10,001.

Every time you begin a relationship with a new client, you’ll be charged an Upwork fee of 20%. This percentage is taken from the amount that the client pays you.

Let’s say Professor Oak decides to hire you for a Pokemon cataloguing project, and he agrees to pay you $100 an hour.

Once it’s time to get paid, you won’t really receive $100 an hour–Upwork will take 20% of that. That means that if you work 2 hours, you’ll receive $200 less 20% ($40), which means you’ll earn $160.

It won’t always be like this, though. Once you bill over $500 with a client, the Upwork fee will lower, from 20% to 10%. So once you earn $500 with Professor Oak, you’ll start effectively receiving $90 per hour.

What about when I sign a contract for… say, $700? Do I get charged 20% or 10%?

Quick answer: a combination.

The first $500 will be charged a 20% fee, and the remaining $200 will be charged a 10% fee.

So you’ll receive $500 less 20% ($100) = $400, plus $200 less 10% ($20) = $180, which means you will earn a grand total of $580.

Once you charge over $10,000 with a client, the Upwork fee will be reduced again–from 10% to just 5%. Upwork says this provides an incentive for freelancers to build long-term relationships with their clients.

What if I start a new contract with an old client?

Since Upwork fees are based on lifetime billings, the amount you’ve earned previously with a client will also count.

Is the fee based on how much I receive or how much the client pays?

Upwork fees are calculated based on how much the client pays. So let’s say Professor Oak pays you for five hours of a job well done. Since your rate is $100 per hour, you will earn $500. Upwork will take 20%, or $100, and you will receive $400.

Now, since your lifetime billings with Professor Oak have reached $500, you will automatically pay the lower fee of 10% on all subsequent payments.

For example: If Professor Oak pays you for another three hours of work (after the five you already did for him), you will earn $300. Upwork will take just 10%, or $30, and you will receive $270.

Do I have to pay to apply to jobs?

No. It’s free to get registered on Upwork, but you have a limited amount of Connects you can use per month. If you want to get more, you’ll have to register for Upwork Plus ($10 per month + $1 each Connect).

Is there anything else I need to know?

If you work at an office, it’s easy to get paid–you just clock in and out, and a machine automatically tallies the hours you’ve worked.

You’re paid a set wage per hour that only changes if you get a raise.

If you’re a freelancer, though, you have to set your own hours and your own wage.

Counting the hours you’ve worked isn’t always so simple. This can become an issue, because in the work-from-home world, managing your time wisely is key to getting paid what you deserve.

Now that you know all about the different Upwork fees you might face, make sure you know how much time you’re spending on your projects. That way, you can price appropriately.

The next question, though: how can you figure that out?

You could use Upwork’s desktop app (it’s still in beta, though). It takes automatic screenshots of your screen every ten minutes once you’ve started the timer, which your client can view. (That’s pretty much the only feature it offers).

If you prefer something with a little more privacy and versatility, try Toggl, which not only counts the hours, but sorts them by website and activity.

You can take a closer look at what you’re spending your time on. If a whitepaper takes you twenty hours of hard work, you probably wouldn’t want to keep charging $200 for it.

If you want to earn $20 an hour, then you should factor in the 20% that Upwork takes. To receive an effective $20 per hour, you should charge $25 per hour to your client.

Upwork will take $5 from each hour you’ve worked, and you’ll get the remaining $20.

#2 Withdrawal fees ($1)

You can choose when you want to get paid, but you have to pay a $1 fee on every disbursement. So if you have $5 in your balance, and choose to send it to your Paypal (or bank account), you will have to pay $1. That means you’ll receive just $4 in your Paypal.

Most freelancers choose to wait until the first of every month, so that they only have to pay $1 a month to get their money. Others just hoard the money until they need it, and receive it all at once (you could even choose to get paid once a year in this way).

#3 EU VAT (18-27%)

If you’re a freelancer working in the EU and you don’t have a VAT number, Upwork will automatically take a VAT fee from the payments you receive (here’s a list of VAT rates in different countries). This percentage ranges from about 18% to 27% depending on where you are working.

If you have a registered and validated VAT number, then make sure you enter it into Upwork so that you can handle the VAT fees on your own.

#4 Upwork Plus fees ($10 per month, + extras)

Upwork Plus is a service that you can pay for to get a leg up on the competition. There are a few benefits that the plan offers. For example, as a free Upwork member you get access to 60 “Connects” per month.

Every time you apply to a job, you’ll use around 1 to 5 of your Connects. With Upwork Plus, you’ll get 70 Connects each month. You’ll also gain the ability to purchase more Connects (each Connect costs $1).

These are fees that you should consider if you’re thinking about signing up for Upwork.

What fees do I pay as a client?

If you’re a client looking for freelancers to add to your team, there are some fees that you should watch out for, too.

#1 Payment processing fee (2.75%)

The payment processing fee is a flat 2.75% fee that you will pay every time you pay your freelancer. So if you’re Professor Oak and you want to pay your freelancer who charges 100$ per hour for 3 hours of work, you will pay $300 plus an additional 2.75% fee ($8.25). In all, you’ll pay $308.25.

#2 Upwork Pro fees

It’s free to list a job on Upwork, but if you’ve got a lot of cash or are pressed for time, you might consider splurging for Upwork Pro.

With this service, Upwork will help personally vet the freelancers that apply to your job, and only connect you to freelancers that have the experience you’re looking for.

This service comes with a cost–for every search you make, you’ll pay $500, plus an additional 12.75% fee on the amount of the project.

So if your project costs $1000, then you’ll pay a total of $500 (Upwork search fee) plus $1000 (project cost) plus a 12.75% fee (Upwork project fee) on $1000 ($127.5)=$1627.5.

You can see that most of these Upwork fees are charged to freelancers–Upwork’s profits mainly come from the fees they take from freelancer earnings, not from clients. It’s important to keep this in mind when deciding how much you want to charge for your time.

Manage your time wisely so that your freelance career can get started on the right foot (it would suck to calculate your earnings and find out that you’ve made a net loss for the month).

Good luck, freelancer–and feel free to let us know how your own Upwork journey is going (and how we can help).

 

By On February 28, 2018

  1. I love this post. It helps us a LOT! May want to fix a few errors:
    1. Search “but you/” have to” and take out the /”
    2. 12.75% of $1000 is $127.50, not $12.75, as you indicated in the last section.

  2. This article was extremely helpful in understanding Upworks knotted payment system. I have seen a list of other apps they offer, but now I can’t find it. My concern is that nowhere do they tell you if these apps/subscriptions are free or involve charges. For example, the desktop app has no information about cost. Some look interesting, but I don’t want a big bill at the first of the month.