Upwork Direct Contracts: 3 pros and cons, what you need to know


Disclosure: This site is sponsored by affiliate programs. We may earn money from the companies mentioned in this post. As an Amazon affiliate partner we may earn from qualifying purchases.

Are you a current Upwork freelancer who works with clients both on and off the Upwork platform?

Are you looking for a way to bring your off-site clients to the Upwork platform without making the sign-up for an account?

If so, Upwork Direct Contracts might be the perfect solution.

Upwork Direct Contracts are a great way to:

  • Work with non-Upwork clients who don’t want an Upwork account.
  • Enjoy Upwork benefits like Payment Protection on every project.

But be warned, they are not a way to:

  • Cheat the system by asking an existing Upwork client to instead use a Direct Contract to get out of paying freelancer service fees (this is considered circumvention and is against Upwork’s Terms of Service).
  • Artificially enhance your Upwork metrics.

More on those bullet points later.

First, let’s talk about Direct Contracts. Namely, what they are and how they work.

Read Also: Can you make good money on Upwork? How I made $600,000 in 5 years

A snapshot of my Upwork profile
A snapshot of my Upwork profile. At the time of this writing, I’ve earned over $600k on the platform with a 100% Job Success Score.

What are Direct Contracts on Upwork?

Direct Contracts on Upwork allow freelancers to work with clients who do not have an Upwork account but still want to enjoy the benefits of escrow services, simple contract management, faster payments and dispute assistance.

Freelancers who wish to create a Direct Contract can log in to their account and click on the paper airplane icon located in the upper right-hand corner of the screen and click the Create a Contract button.

A pop-up will prompt the freelancer for the client’s e-mail address, a contract name, and a description of the project.

Next, you will be asked to choose between Hourly and Fixed Price.

When you’re done, your client will receive an email confirmation from Upwork. Tell them to open the confirmation email, review the contract terms and follow the prompts.

A screenshot of the Direct Contracts creation popup
A screenshot of the Direct Contracts creation popup

How do you get paid from a Direct Contract on Upwork?

There are two contract types for Direct Contracts: Fixed Price and Hourly.

Hourly Direct Contracts

If you choose Hourly Contract, you’ll be prompted for additional information including your hourly rate and weekly limit. Upwork will then calculate a required initial deposit from your client to ensure Upwork Payment Protection. That deposit is calculated with the following equation:

(Hourly Rate) * (Weekly Limit) = (Initial Deposit)

All hourly time must be manually logged on Direct Contracts. The Upwork Time Tracker is not an option with Direct Contracts.

On hourly contracts, the work week ends at midnight each Monday (UTC) at which point the client is billed for hours worked during the previous week.

One important note: Dispute assistance is only available on Fixed Price Direct Contracts and not Hourly Direct Contracts. If you think you may require dispute assistance, opt for Fixed Price instead.

Fixed Price Direct Contracts

If you select Fixed Price Contract, you will be asked to create a series of milestones and deliverables for the project. Your client will be prompted to fund those milestones before each part of the project begins. Milestones are a great way of breaking a large project up into smaller steps.

To request payment for a milestone to go My Jobs > Direct Contracts and find the contract. From there you will see an option to Request Payment.

Funds on Fixed Price projects are not subject to a security period like traditional Upwork contracts. Once the client approves the milestone, the money is immediately released.

Direct Contracts Fees & Cancellations

Upwork takes a flat 3.4% processing fee on the total contract amount from the freelancer no matter which option you choose.

Client fees depend on their preferred payment methods.

Clients pay a 3% processing fee if they pay with a credit card or PayPal. They pay a flat $0.50 for each transaction if they use a checking account.

Both clients and freelancers alike have the option to cancel the contract at any time before funds are released. If the contract is canceled, funds in escrow are returned to the client within seven business days using their original form of payment.

a woman looks happy with her palms held out
(photo by Roman Samborskyi/shutterstock.com)

Upwork Direct Contract Pros

1. Lower fees

As we all know, Upwork charges a sliding scale 5-20% fee for all on-platform contracts – which, if it weren’t for Direct Contracts and the Bring Your Own Client (BYO) programs, would naturally deter freelancers from encouraging their off-site clients to join the platform.

When you send Direct Contracts to your off-site clients, those freelancer fees are lessened to a flat 3.4%.

Pro-Tip: Top Rated freelancers can also invite their clients to sign up for Upwork via the Bring Your Own Client to Upwork program and pay a 0% fee. But unlike Direct Contracts, the freelancer has to be Top Rated, and the client has to create an Upwork account.

2. Faster payments

Another big benefit of Direct Contracts is faster payment.

If you’re working on a Fixed Price Direct Contract, you won’t be subject to the standard 5-day security period that you encounter on regular on-platform jobs.

3. Dispute assistance

And finally, we have my favorite benefit – dispute assistance.

This means, that if any conflict arises during the course of a Fixed Price Direct contract, you can file a formal dispute directly from the contract page by clicking on the button with the three ellipses (…), then Get Help > Contact Us.

But please note, and I will get into this a bit more in-depth in the “cons” section – dispute assistance is not available on Hourly Direct Contracts. So if you’re using the Direct Contracts service solely for the dispute assistance benefit, you may want to consider avoiding Hourly.

a woman looks sad with her hands in the air
(photo by Roman Samborskyi/shutterstock.com)

Upwork Direct Contract Cons

1. Direct Contracts won’t improve your Upwork stats

Technically this could be a good thing or a bad thing – but Direct Contracts do not impact your Upwork reputation metrics either positively, or negatively.

They have no impact on your Job Success Score or your Top-Rated status. Direct Contract clients can’t leave reviews on your Upwork profile. And Direct Contracts don’t impact your total earnings metric.

So if you’re looking for a quick way to boost your stats – this isn’t it.

2. The BYO program is still better

Look, I get it. There are some clients who simply don’t want to sign up for yet another service or platform. And for those clients, Direct Contracts is definitely the way to go.

But I still prefer using the Bring Your Own Client (BYO) to Upwork program.

The Bring Your Own Client to Upwork program is exclusive to Top Rated, Top Rated Plus and Expert Vetted talent. But the benefits are huge.

When you Bring Your Own Client to Upwork, you pay no services fees – that’s right a 0% fee – for the entirety of your relationship with that client. You still get to enjoy all the benefits Upwork has to offer like Payment Protection, dispute resolution and access Upwork tools like the messenger and the time tracker.

Plus, unlike Direct Contracts, BYO clients are allowed to leave reviews and contracts executed under this program can positively impact your Upwork metrics.

To invite your own client to Upwork, send an email to [email protected] and ask for a special referral link. Send that link to your client and tell them to sign up for an account and send you an offer.

Accept the offer, then email [email protected] once again, and request the service fees be reduced to 0%.

3. No dispute assistance on hourly

Finally, the much-touted dispute assistance benefit isn’t available on Hourly Direct Contracts.

To be honest, I really hope Upwork changes this policy as I think dispute assistance is one of the biggest benefits of this program and I struggle to see why it would be that hard to offer the benefit on both Hourly and Fixed Price contracts.

I also think Upwork does a fairly poor job of explaining this when creating Direct Contracts as it is not immediately evident in the contract creation process.

To be clear, they still offer a form of Payment Protection with hourly in that the client’s initial deposit is held in escrow. But should a conflict arise, you’re out of luck.

Have you ever used a Direct Contract on Upwork? Let me know in the comments below and don’t forget to connect with me on social media.

Leave a Comment