As someone who has earned over $500,000 on the Upwork platform, one of the questions I am asked most often is: “But what about those Upwork fees!?”
Upwork’s fee structure seems to be one of the biggest hangups for freelancers interested in signing up for the platform.
But as you can see from my profile, I haven’t let the fee structure get in the way of the ability to earn a small fortune on Upwork.
In this article, I am going to discuss the Upwork fee structure, how to reduce your fees and how, in select cases, the fee can be avoided altogether.
And here’s the best news – this is all on the “up and up”!
All of this advice is perfectly in line with Upwork’s current Terms of Service.
But first, let’s get some of the basics out of the way.
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Do you pay for Upwork?
Upwork’s base service is free, but freelancers are given optional ways to upgrade and enhance their experience for an additional charge.
The free way to use Upwork (Freelancer Basic)
Upwork asks their freelancers to use something called “Connects” to bid on jobs.
I like to think of Connects as a type of digital currency.
At the time of this writing, new freelancers are given 40 free Connects when they successfully register on the Upwork platform, and another 40 free Connects when they pass the Upwork Readiness Test (for a total of 80 Connects to start).
Freelancer Basic accounts (Upwork’s free base service) will receive an additional 10 Connects each month with the ability to rollover up to 200 unused Connects at the end of each month.
Freelancers may also earn an additional 10 free Connects by winning and responding to interviews (10 per invite, with a limit of 50 weekly).
Job bidding, depending on the size of the project, will require a freelancer to “pay” anywhere from 1-6 Connects.
This means that new Upworkers, with a starter set of 80 Connects, will be able to bid on anywhere from 1-13 jobs during their first month on the platform for free.
The problem lies in the fact that landing your first job on Upwork can be quite difficult.
I personally applied for ten jobs before finally getting a nibble on the 11th attempt. So it’s quite likely that you will need to purchase a few extra Connects to land that first job.
Additional Connects can be purchased on an as-needed basis for $0.15 each (plus tax).
And here’s the best part – you will become less dependent on Connects over time.
Connects are not required to reply to job invitations. Top-Rated freelancers generally receive so many invites that they never even bother to look at the Upwork Job Feed.
Top-Rated freelancers usually get plenty of work without the feed and find that clients who send us invites are generally more eager to work with us (and make for better clients in general).
As an Expert-Vetted freelancer on the platform with a 100% Job Success Score (JSS) I never use Connects anymore and haven’t had to buy Connects in over a year.
The paid way to use Upwork (Freelancer Plus)
In addition to paying $0.15 for additional Connects as needed, Freelancers may also opt to upgrade to a Freelancer Plus account.
With a Freelancer Plus account, Freelancers are given 80 Connects each month (versus 10 with the Freelancer Basic account).
Freelancer Plus accounts also come with a variety of other benefits:
- Your profile will not be hidden due to inactivity
- Keeping your earnings confidential (but not recommended)
- Seeing competitor bids on any job
- Customizing your profile URL
- Accessing extended reports and an improved overall UX experience
My advice – The Freelancer Plus account isn’t worth it
I actually don’t recommend signing up for a Freelancer Plus account.
Quite frankly, it’s just not a great value for your money.
And y’all, that’s a strong statement coming from me, because I am a pretty big Upwork fan girl.
But here’s my rationale (and I hope Upwork is listening).
Currently, the Freelancer Plus account is $14.99 per month, and the most valuable part of the subscription is the extra 70 Connects per month. (Remember, you get 10 free each month with Freelancer Basic, and 80 each month with Freelancer Plus).
Instead, you could just buy 70 Connects at $0.15 each without upgrading (Roughly $10.50 plus tax).
And from my personal experience, I wasn’t impressed by the other benefits offered in the upgraded account.
I’ve held a Freelancer Plus account in the past and never used the other features.
So, in my humble opinion, the upgrade needs improved features, more Connects, or a price reduction (perhaps $9.99) to be a better value for the money.
On a personal note, I also think that the “extended reports and functionality, including grouping and sorting” should be free for everyone. I don’t believe customers should ever have to pay for a better UX. But I digress.
Honestly, I think most talented freelancers would probably be able to get away with spending $20 on extra Connects upon signup, which roughly equates to an extra 133 Connects on top of the starter 80.
That’s likely more than enough Connects to start finding steady work (and steady invites which require no Connects to reply) on the platform without having to rely on the Job Feed.
Freeing yourself from a reliance on the Job Feed is the name of the game for Top-Rated freelancers on Upwork.
What fees does Upwork charge?
And then we have the dreaded Upwork “fee”.
Upwork charges a sliding fee based on your billings with each unique non-Enterprise client.
Those fees are as follows:
- $0-$500: 20%
- $500.01-$10,000: 10%
- $10,000.01 or more: 5%
The fee is automatically taken out of your billable hours.
It is important to note that the above fees are client-based, not contract-based.
For instance, if your client employs you under three separate contracts but uses the same login, your service fee is the same across each contract and based on lifetime billings with the client instead of individual billings on each contract.
That’s an important distinction to make because I’ve had to walk more than one client through how to create a second contract in lieu of a second account to keep my service fees low.
Does Upwork charge fees to clients?
Yes, Upwork also charges the client a 3% service fee for payment processing.
This is fairly standard practice in the credit card industry with the typical credit card processing fee ranging from 1.3% to 3.5%.
The only difference here is that the processing fee is charged to the client whereas most vendors (the vendor would be Upwork in this case) would normally eat that fee as an expense.
How can I reduce my Upwork fees?
So now we’ve gotten to the most important question, how do you reduce your Upwork fee the legitimate way without getting in trouble on the platform?
Over the course of my time on Upwork, my fee has reduced from an average of 15.12% in my first year to just 8.02% in 2020.
A chart of my earnings (billed) versus my fees can be found below.
In 2021, at the time of this writing, I am currently tracking at just 6.78%.
As you can see, with a platform like Upwork, it’s all about scale.
Here’s a more detailed breakdown of my earnings over the years:
- 2017: $18,848 billed, $2,849 fees paid
- 2018: $102,801 billed, $10,463 fees paid
- 2019: $157,842 billed, $12,142 fees paid
- 2020: $185,887 billed, $14,903 fees paid
Below are a few of the strategies that I used to reduce my average overall Upwork fees from 15% to just 6% in four years:
1. Focusing on large, ongoing long-term contracts
Focusing primarily on long-term, ongoing contracts on Upwork will naturally reduce your fees over time.
As we mentioned earlier, the Upwork fee structure is client-based. This means that the moment you hit the $500.01 mark in lifetime billable, your fee is automatically reduced to just 10%.
The fee is reduced again once you hit the $10,000.01 mark to just 5%.
And if you’re currently thinking: “I will never hit the $10,000 mark – that’s crazy!” It’s genuinely not that difficult to accomplish. It just takes some time.
I’ve personally achieved the $10,000.01 mark with several clients since I almost exclusively focus on long-term client contracts.
2. Applying for Enterprise Client jobs
Enterprise Client fees are a bit of a “double-edged sword”.
Enterprise-level accounts are basically upgraded client accounts. Upwork charges these upgraded accounts an additional fee in exchange for making it easier for that client to discover Top-Rated talent on the platform.
And here’s the good news for freelancers – you only pay a 10% fee on Enterprise jobs from the start.
By default, most of these Enterprise-level jobs aren’t posted to the Job Feed – although there are exceptions to that rule (so keep your eyes peeled).
Most Enterprise-level jobs are invite only, but it’s a great way to quickly bypass that pesky $500/20% threshold.
But here’s the bad news, at the time of this writing, the 10% rate will not change regardless of the project duration or earnings.
This means that if you go over the $10,000 threshold, instead of receiving another fee reduction, your fee will remain at 10%.
Personally, I’m not a fan of this rule, and it’s something I’d really like to see Upwork change because it penalizes the best performers on the platform.
After the $10,000 mark, we actually have less incentive to work with Enterprise-level clients (who are paying for access to Top-Rated talent) than we do non-Enterprise accounts.
Do you build the fees into your rate?
There are two ways to look the fees I’ve paid to Upwork over the years:
- Wow, I’ve paid over $40,000 in fees – that’s awful!
- Wow, a 94% profit margin – that’s amazing!
I’ve always treated my freelance career as a business. And all businesses have expenses.
Honesty, I wish Upwork would start marketing their fee structure a bit differently as well. “Fee” is such an ugly word. “Profit margin” sounds so much better.
When people ask me if I “build my fees in” to my Upwork rate, I usually answer: “I build all of my expenses into my rate.”
My monthly expenses generally include subcontractors, stock subscriptions, Internet service, cloud storage, software subscriptions and more.
For clients I obtain without the assistance of freelance platforms like Upwork, I have the added cost of executing contracts (via RocketLawyer) and managing my own invoicing (via And.Co).
Those services aren’t free either.
So yes, I build all of my expenses into my rates.
You shouldn’t feel the need to explain this concept to your clients unless they press the subject (and good clients won’t). This just makes the average client feel nickel and dimed.
It would be like going to Walmart and having their cashier explain how the cost of electricity was built into their prices.
How can I avoid Upwork fees altogether?
There are also two ways to avoid Upwork fees altogether.
1. Use the ‘Bring your Own Client to Upwork’ program
Top-Rated freelancers can ask customer service for a personal “Bring Your Own Client” referral link.
Using this link, you can bring your own clients (or clients who were referred to you by your other Upwork clients) to the platform and wipe out the fee in its entirety.
After your client successfully signs up for a new account and invites you to the job, upon your acceptance, simply email [email protected] with the contract number. Upwork customer service will handle the rest.
I do this all the time to take advantage of all the benefits that Upwork offers (like payment protection) without any of the cost.
2. Take your clients off the platform (after two years)
I almost never do this since I genuinely enjoy the benefits Upwork has to offer.
In fact, on the rare occasion I’ve taken a long-term client off of the platform, it’s always been at the client’s insistence after I try to talk them out of it.
And there have been plenty of occasions in which I’ve regretted doing so.
Clients who always paid on time while on Upwork, without the convenience of the Upwork time tracker and automated payments, became slow to respond to invoices and seemed agitated with the extra paperwork.
Be warned, if you attempt to take a client off platform before the two year mark, Upwork retains the right to issue a suspension from the platform. In many cases, this suspension becomes permanent.
Don’t ever cheat the platform by biting the hand that feeds. A short-term gain (getting out of a small fee for a couple of years) isn’t worth losing the long-term potential earnings on such a large and powerful platform.
Does this change the way you think about Upwork fees? Has the fee structure prevented you from trying Upwork in the past? Let me know in the comments and don’t forget to connect with me on social using the links below.