Many in the Community have expressed concerns with our recent efforts to simplify the display of earnings for freelancers. We’ve been listening and we’ll be making updates to address these points over the coming months; some immediate, others long-term.
One update you’ll see right away is a change we’re making to the "rate calculator." The rate calculator is used by freelancers to prepare their bids on projects.
Updates to the Rate Calculator:
We’ve removed the 10% oDesk fee line from the rate calculator. We heard from many of you that this was causing confusion in cases where rounding occurs. So, by removing this line from the calculator and giving an explanation of “Estimated” earnings, we’re hoping this will help ease any concerns about how much you’ll really earn. I’ve provided a detailed explanation of how rounding affects freelancers on hourly jobs below. We’ve also updated our Help documentation to explain this process.
Here’s what the new calculator looks like:
Two other areas of concern: adding net earnings to reports and tax implications
Another request we’ve heard is to add net earnings back into reports. We are working on this and will look to improve your earnings reports in the coming months so this information is clearer.
For those with questions regarding reporting for tax purposes, it’s important to note that your 2014 taxes are not impacted. Reports and 1099s through 2014 do not break earnings and fees into their own line items. Beginning in 2015, your reports will display gross earnings and oDesk service fees separately. For tax reporting purposes, you should report your gross earnings as income and you should claim your oDesk fees as a business expense. As always, you should speak to a tax consultant for more specific guidance.
Again, thank you for sharing your concerns. We apologize for the confusion that resulted from this update. In addition to some bugs that occurred at launch, the changes in rounding that resulted were particularly frustrating for you all. The team did not anticipate this impact on rounding and so we didn’t state it upfront. This was a miss on our part. We hope the updates announced here, and those yet to come, will provide for some peace of mind in this area.
Why am I earning less/more? A detailed outline to explain “rounding of earnings.”
With our recent change to how earnings are displayed, some of you are now seeing a subtle difference in earnings for hourly jobs, due to rounding. We’ve updated our Help documentation to provide more clarity on this situation, and here also is a more detailed description:
- Rounding differences have always existed on oDesk, but this change in display caused reports to slightly alter the timing of when the oDesk fee is calculated, leading some of you to see a difference in your earnings. In most cases, little to no rounding occurs and the earnings always match the cost you propose up front.
- With this change, we now apply the oDesk fee at the time of payment deposit, rather than on the hourly rate you state up front. This means that in some cases, you will receive slightly more money and in other cases slightly less due to mathematical rounding. The difference is typically less than 1/2 cent per hour.
- For fixed-price contracts, this is not an issue. On these contracts, the calculation happens once or per milestone and does not result in rounding: Charge - 10% Fee = Earnings.
- Here are some detailed examples of how this works:
In many cases, you earn the same as the rate calculator estimates. Say you want to earn $20 per hour, so you use the rate calculator to estimate you need to charge the client $22.22 per hour. 10% of that rounds to $2.22 per hour.
- Billed 1 hour:
- Your client is charged $22.22 (1 hour x $22.22).
- The 10% fee is $2.222 or $2.22 when rounded down.
- Your net earnings are $20.00 (same as estimated).
However, in the scenario where 12 hours are billed at this rate, you will find that your earnings are slightly less:
- Billed 12 hours:
- Your client is charged $266.64 (12 hours x $22.22).
- The 10% fee is $26.664 or $26.66 when rounded down.
- Your net earnings are $239.98 ($0.02 less than estimated, 12 x $20 = $240).
Many freelancers benefit from the rounding. Say you want to earn $25 per hour, so you use the rate calculator to estimate you need to charge the client $27.78 per hour. 10% of that rounds to $2.78 per hour.
- Billed 12 hours:
- Your client is charged $266.64 (12 hours x $27.78).
- The 10% fee is $33.336 or $33.34 when rounded down.
- Your net earnings are $300.02 ($0.02 more than estimated, 12 x $25 = $300).
I am glad to see you are addressing some of the issues, and hopefully adding Gross back in will ease some peoples mind. I also am glad to see you addressed the tax issue cause I was starting to sound like a parrot trying to explain it even though some still did not get it.
Thank you Garnor for posting this. Thank you oDesk for addressing some of this.
Garnor, first, thank you very much for your very thorough and informative post. Regarding any topics and all the replies I have ever read from oDesk support and from oDesk Managers / Moderators, your post "Updates to Rate Calculator and Follow Up on Earnings Display" is by far the best.
In fact, you should award yourself "Best Answer" somewhere in this thread!
Again, very thorough and informative. No hiding behind statements like 'we are not tax experts,' etc. Rather stating your [oDesk's] position with appropriate disclaimers.
Now, back to the post. The clients had been using the 10% fee as a deduction for business expenses. Now, starting 2015 the freelancers should take the 10% fee as a deduction for business expenses. As long as oDesk official policies and reports are established, documented, and identified (Either reports with links to the policies; or even reports alone) include all of the pertinent information, as US tax payers that's all we need.
Your explanation and fixes regarding “rounding of earnings” is very welcome. Reports with gross earnings, deductions (fees), and net earnings will serve as adequate records for US tax purposes.
Thanks, Garnor. Will the client see both fields in the future as well? Ever since the removal of the net field I've lost money on bonuses, and subsequently, so did oDesk. Say my client and I agree on a $500 bonus, I end up only getting $450 because the workflow for my client changed, and he has to go back and issue a second bonus but often gets it wrong again. Is there a reason for removing the net field from the client view?
I don't think so. That is, I don't believe we'll add this field back to the view for clients during the payment. Our initial scope of these changes was intended to achieve exactly that, one view for the client as this two different amounts caused confusion.
That said, I will definitely give your input to the team working on this area. Perhaps there are additional treatments we can consider.
I was bringing my accounts up to date using the Upwork API and just discovered that the `amount` field in the API also changed meaning! Previously, it was HOURS * EARNED_RATE. After ~Feb 10th, it became HOURS * CLIENT_RATE.
The horse has bolted on this one so nothing will change that but can I just comment on what a terrible, terrible decision that was. It's one thing to change things up on a report that humans read but to change the value given by the _same_ field in an API after an arbitrary date is a disaster. I imageine anyone else using the API to automate their accounts will have lots of fun and games trying to work out what the hell went wrong around Februrary. I know I did.
Your estimation calculator rounds down to the nearest cent while your actual rate is rounded up. This means that the calculator told me that on a $50 job, I would need to charge $55.55 to make exactly $50. When I actually got paid, I only got $49.99. I was told "this is why it's an estimation" but you need to calculate the same way every time. If you're going to round up in the actual fee, round up in the calculator. Otherwise, your estimation is false, and it gave me information that was incorrect. Please fix this.