Commission Restructure Proposal

[crozsa5535]

I feel that commission tiers should be amended based on how much total money is earned (among other things).
Some freelancers provide work intermittently, so it does not make much sense to assume that they will maintain a long-term contract with a single client. In addition, even though one might have several long-term clients, it might take many years to reach the 5% commission mark with a single one.  Personally, I have 6-7 clients for which I do long-term work. In these cases, I create systems for them that are efficient, scaled, and user-friendly to the point that I am almost working myself out of a job. So in order to keep more of my hourly wage, I would hypothetically need to 1) turn away most prospective clients unless they can guarantee long-term work, 2) work less efficiently in order to "milk" the client, and 3) produce output that is more or less functional, but ultimately dependent on my regular intervention (so I can charge more for labor).
I have some ideas for what I think is a better commission structure, but when I have reached out to UpWork in the past, the people I spoke to seemed to want to defend their position instead of keeping an open mind and listening to its freelancers.

Anyway...let's give it a shot...

Single Client Commissions (more intermediate steps. tiers adjust depending on lifetime earnings)

If Lifetime Earnings = $0 - $10,000
$0 - $500 = 20%
$500 - $1000 = 10%
$1000 - $3000 = 8%
$3000 - $5000 = 6%
More than $5000 = 5%

If Lifetime Earnings = $10,000 - $30,000
$0 - $500 = 15%
$500 - $1000 = 10%
$1000 - $2000 = 8%
$2000 - $4000 = 6%
More than $4000 = 5%

If Lifetime Earnings = $30,000 - $50,000
$0 - $1000 = 10%
$1000 - $2000 = 8%
$2000 - $3000 = 6%
More than $3000 = 5%

If Lifetime Earnings = $50,000+
$0 - $1000 = 10%
$1000 - $2500 = 8%
More than $2500 = 5%

[geri_kol]

James, your proposal is well thought out and very reasonable, and I agree very much that there ought to be a more fair-handed and common sense way to how Upwork sets its fees. Indeed, there are many freelancers who are professionals in their fields outside of Upwork, work with external clients independently of Upwork, and only take on occasional projects on this platform to complement their earnings or because the projects require very specific domain knowledge or skills that they have (as is my case). I can picture several other cases where the current logic behind Upwork´s commission structure can discourage rather than encourage professionals to consider it as a serious second stream of income. 

However, keep in mind that Upwork is not in the business of being fair to freelancers: it has shareholders, so its primary goal is to make a profit and pay dividends; its secondary goal is to keep clients happy and posting job ads (hence, no commissions to them for posting and no negative impact for failing to close jobs with no hire that "eat up" freelancers´ Connects, while yes to Connects for freelancers to apply for jobs, however incomplete the job posts may be). I hate using clichés, but one might easily think that "the system is rigged from the start" against freelancers. So to be honest, I don´t see the commission structure changing anytime soon. 

[crozsa5535]

Thank you for providing your time and wisdom.

I understand that Upwork is like any other publicly-traded company, in that it is beholden to its shareholders.  However, it is inevitable that another company will come along and offer something more enticing.  The only way that Upwork stays at the top over time is to incentivize long-term freelancers to take on as many clients as possible and keep them as long-term clients.  To use another cliché, "time is money", and the time that it takes to bid for a contract, converse with a potential client, etc is a waste for all parties.

My long-term clients keep me on contract indefinitely, so every email/text that I read/write, schema that I create, or call that I take is billed.  Unfortunately, I have had to turn away more than 90% of offers because the type of project or the industry that they inhabit is likely to provide only sparse work at best.  Furthermore, if I had to choose between spending an hour for the opportunity to acquire a new client at 20% and continuing work with a current client at 10% or 5%, I would pass on the new prospect.  I have no way of knowing the statistics (although Upwork could probaby conjure them), but I will bet that several of the prospects that are turned away end up with someone who is not top-rated.  Out of that group, I wonder how many had an experience that was terrible enough to turn them off to Upwork for good.  Ultimately, I would be willing to take a chance on certain clients if I knew that it would lead to a better rate structure.

[tlbp]

---

James R wrote:

I feel that commission tiers should be amended based on how much total money is earned (among other things).
Some freelancers provide work intermittently, so it does not make much sense to assume that they will maintain a long-term contract with a single client. In addition, even though one might have several long-term clients, it might take many years to reach the 5% commission mark with a single one.  Personally, I have 6-7 clients for which I do long-term work. In these cases, I create systems for them that are efficient, scaled, and user-friendly to the point that I am almost working myself out of a job. So in order to keep more of my hourly wage, I would hypothetically need to 1) turn away most prospective clients unless they can guarantee long-term work, 2) work less efficiently in order to "milk" the client, and 3) produce output that is more or less functional, but ultimately dependent on my regular intervention (so I can charge more for labor).
I have some ideas for what I think is a better commission structure, but when I have reached out to UpWork in the past, the people I spoke to seemed to want to defend their position instead of keeping an open mind and listening to its freelancers.

Anyway...let's give it a shot...

Single Client Commissions (more intermediate steps. tiers adjust depending on lifetime earnings)

If Lifetime Earnings = $0 - $10,000
$0 - $500 = 20%
$500 - $1000 = 10%
$1000 - $3000 = 8%
$3000 - $5000 = 6%
More than $5000 = 5%

If Lifetime Earnings = $10,000 - $30,000
$0 - $500 = 15%
$500 - $1000 = 10%
$1000 - $2000 = 8%
$2000 - $4000 = 6%
More than $4000 = 5%

If Lifetime Earnings = $30,000 - $50,000
$0 - $1000 = 10%
$1000 - $2000 = 8%
$2000 - $3000 = 6%
More than $3000 = 5%

If Lifetime Earnings = $50,000+
$0 - $1000 = 10%
$1000 - $2500 = 8%
More than $2500 = 5%

---

Upwork's fee structure is designed to reward the behavior it wants and that it most profitable for the platform. Until there are not qualified freelancers available to fill the supply pipeline, Upwork has no incentive to reduce its income to please freelancers. And, the freelancers who have achieved high earnings on the platform are less concerned with commissions because most have incorporated these costs into their pricing strategy. 

[crozsa5535]

Thank you for adding to the conversation.

You make an excellent point about pricing strategy.  I've had to up my rate to counteract the fact that I only take home 40-45% of everything I make (after commission and taxes).  My CPA has told me that I can avoid some tax liability by incorporating and then electing to become an s-corp, but only if I can project to earn on the low end of $100K each year (my full-time job as a teacher hardly allows me to freelance, so this goal is unrealistic).  If Upwork is looking to amass a large, loyal group of top-rated freelancers that maintain long-term clients, they should consider adopting some sort of commission to take total earnings into account.  Otherwise, it is only a matter of time before another freelance service comes along to offer something better.

[tlbp]

Tbh, I think you've grossly underestimated the number of Top Rated freelancers who are available on the platform. Particularly in the current economic climate, it is a buyers' market for all but the most skilled freelancers.