I can see your point, but since we are a global community of freelancers, we may compare what we pay in taxes in our respective countries.
I have the "priviledge" of living in a country where taxes and VAT are high (France).
When I go to the States, I have the pleasure to see how little VAT you have to pay. To me, the cost of living in the States seem very cheap. My greatest pleasure is to invite friends to the restaurant in the States and pay with my international credit card. When I receive my bank statement, I nearly faiint with pleasure to see that I've been able to pay a meal for let's say 6 people for the price I would pay for a meal for 2 or 3 people in France.
This is why I think mentioning taxes makes sense.
@Luce N wrote:
To me, the cost of living in the States seem very cheap.
This is a little bit off topic but I'm not sure that you are fully informed about the cost of living and the taxes in the US compared to France.
Sales tax is way lover in the US. Other taxes, however, not that much.
This 6 person meal vs 3 person meal, well honestly I don't know where you have been in the US. Sure enough, if you come to the US with euros, I can understand that you find that things are cheap. But Americans are not paid in euros.
Also there are health insurance and health costs that are a real burden in the US. Also, there is a whole different welfare safety net in Europe and in France, which comes in handy when something happens and you find yourself out of resources, that Americans don't have.
On the overall, I find that Americans pay a lot of taxes for what they get in return compared to French and other Europeans. Sure, they have a lot of military. Not sure, however, if it helps that much when you're sick and unemployed.
Not criticizing, though, there are great things and ideas in the US that some European countries, France included, could steal from Americans. But the cost of living and taxes/benefits ratio, not that sure.
As far as I'm concerned the fee is 24% (almost a quarter), not 20%. That's because Upwork adds 20% VAT automatically.
Of course, I appreciate that Upwork isn't responsible for the VAT and doesn't keep it. But when I buy a TV for £240, I don't think that it really only cost me £200, or that Currys really only charged me £200. Currys charged me £240, even if they did pass on £40 of that to the VAT man, and, whoever charged me, the cost to me really was £240. That's why shops selling retail are required to include the VAT in the advertised price.
True, it's a bit different for business expenses, which can typically be advertised exclusive of VAT, and VAT-registered businesses can think of themselves as reclaiming the VAT (though they effectively pay it again when they sell their final product). But few freelancers are going to be VAT-registered, and for me paying VAT on my Upwork fees is little different from paying VAT on a TV.
Other legal hiring platforms charge 25%-40%. Uber takes 25% from their drivers. I'm quite happy to only pay 20% without the hassle of invoicing and trying to collect my money.
Preston, I agree with everything you've said here and it makes me a little crazy when freelancers blend all this in a forum post as if Upwork is somehow responsible for their tax burden (this happens, especially, among those in countries that require Upwork to withhold those taxes).
But, it is valid that freelancers are considering the tax burden along with fees in making a decision about whether Upwork is a viable platform for them, because (at least in the U.S.) most freelancers pay considerably more tax than those working in a standard employment arrangement. That probably comes as a shock to many who are transitioning from traditional jobs--for example, U.S. freelancers who earn little enough money that they owe no federal income taxes often still owe self-employment taxes (and are in a poor position to pay them when tax time rolls around).
@Preston H wrote:
Upwork DID impose the 20% fee. But they didn't think up the tax or anything. That's something that your country or state or city imposed on you.
So does it make sense to even mention that in association with comments on Upwork and its fees? I dont know...
Neither do I, Preston, that was just a thought. When I work for Upwork, some goes to Upwork, some goes to the bank when the dollars are changed into euros, some goes to the French taxes - and a little bit goes to me. I feel like I'm a very generous person.
here's what I think-
Upworks pricing and fee structure is extortion in my opinion. I mean why not? first of all, 20% is a lot of money considering the fact that there are not enough clients who wish to pay a proper amount for projects. I'm in animation and I see lots of clients who want high quality animation and want to pay really less. Now on top of this hard truth, they introduced the 'connects' system. Why oh why would you set up something this despicable ?! Each project needs 2 connects, because hey why not make them lose their connects faster so they have to buy the plus plan! And your chance of getting interviewed is always low (trust me it always is. doesnt matter how top rated you are!) so you'll just keep on bidding thinking I'll get the next job for sure! and now you got a plus plan? great! those connects will end quickly too! and everytime you buy additional connects, you cant buy less than $5 worth ?? genius! I mean do you see what's happening here ? Upwork will take your money no matter what- thats whats happening here! The 20% fee wouldnt have been an issue but we have the great connects policy grabbing our hard earned cash, the whole thing just makes me sick!
@Shams A wrote:
Upworks pricing and fee structure is extortion in my opinion.
"Extortion?" - Maybe you have no idea what the word means. Nobody is forcing you to work on Upwork.
@Shams A wrote:
And your chance of getting interviewed is always low (trust me it always is. doesnt matter how top rated you are!) so you'll just keep on bidding thinking I'll get the next job for sure! and now you got a plus plan? great! those connects will end quickly too!
Nonsense. Maybe if you used your connects more intelligently and made your proposals better, you'd be interviewed more.
Many people on the platform don't use any connects at all. Most have never bought a connect. The last time I have used a connect was in November...
@Shams A wrote:
the whole thing just makes me sick!
Well, luckily for you you don't have to work here and are free to close your profile and use another platform.
The fee is only 20% for the first $ 500 with any client, it then drops to 10% and then to 5%. So if you've built the fee into your price and rate from the start (which is what anyone with any sense does) you actually earn more after $ 500 and more again after $ 10.000.
If you are not building business costs into your prices, you may not be ready to freelance.
If your business model does not allow you to build costs into your rates, rethink your business model.
Either way, wailing and whining doesn't achieve anything.
I hate any fee that anyone imposes on me, so I'd probably be complaining even if it was 10% or 5% or 0.2%.
But here's what could help you overcome this deduction:
1. Upwork doesn't set your rates - you do. If you want to earn $13 per hour, add up the fee, add up the exchange rate or taxes, and charge the rate that leaves you with $13 after all the deductions. It's that simple.
2. If you're selling a service that no one will want to buy at your new rates, sell a different service. Take time to research the market, see what works and what doesn't, see if there are any popular, in-demand skills that you're capable of developing and specializing in. Then come back to Upwork and start selling those skills.
(It's never too late to learn something new)
3. While Upwork will take $100 out of the $500 you earn here, you'll be left with $400 that you would not have earned, at all, if it wasn't for Upwork.
Bottom line is that Upwork isn't for everyone. Some skills work here, some skills don't. So when you stop selling cheap services (and stop selling valuable services for peanuts), you'll stop caring about the fees.