Gig workers and freelancers earned $1.6 trillion in the United States in 2020. There are dozens of platforms that freelancers and their clients use to conduct all of this business, and Upwork is one of the largest.
When you choose to freelance through a third-party app, getting your slice of that 1.6 trillion dollar pie can seem daunting. If the client is paying the platform, the platform must be responsible for paying the freelancers. This has advantages and disadvantages and we will discuss those below.
Deciding whether or not to use a third party app like Upwork to find clients is a decision only you can make. Deciding between Upwork and Freelancer can also be a tough decision but if you do decide on going the Upwork route we hope this guide helps you better understand how you get paid.
So how does Upwork pay freelancers?
There are two different types of Upwork contracts: fixed-price and hourly. Fixed-price projects are a flat rate for a specific task or project, no matter how long it takes the freelancer to complete it. The client puts the total amount due into escrow, and Upwork releases the funds to the freelancer on a set schedule.
For these projects, the client and freelancer agree on milestones. As the freelancer meets the milestones and the client approves the work, Upwork releases the funds. This process continues until the end of the project. It takes about 5 business days from when the client approves the milestone to when the funds become available.
The second type of contract Upwork uses is an hourly contract. For these projects, freelancers log their time on Upwork’s desktop app. These contracts operate on a three-week cycle.
The first week is when the freelancer does the job and logs their hours. The second week is a review period for the client. After the review week, it takes another week for Upwork to make the funds available. But due to Covid-19 situation, Upwork pay earlier freelancers with Top Rated and Top Rated Plus badges.
It’s hard enough to figure out your finances when you freelance without a third-party vendor involved. Add in the long wait times between doing the work and getting paid for it, and you may what the upside to the Upwork payment process is. Wouldn’t it be easier for the client to pay you directly? Sure, in a perfect world.
Since this world isn’t perfect, Upwork has a payment protection system in place. Upwork uses an escrow system to protect freelancers from flakey clients. Upwork makes sure that if you do the work you agreed to do, you’ll get paid for it, whether you’re doing hourly projects or fixed-price work.
Once Upwork makes your payments available, the next step is getting the money out of Upwork and into your pocket. Upwork lets you withdraw money into your bank account via ACH or wire transfer or into Paypal, Payoneer, or M-Pesa (Kenya only). Once you’ve chosen your transfer method, you can choose to be paid automatically on a set schedule, or you can withdraw your funds at will.
There are Upwork fees for bank transactions, and you’re responsible for any fees that your bank or Paypal charges. Wire transfers are the most expensive at $30 per transaction. The only free transfer option is an ACH to your bank.
These transfer fees are in addition to the fees that Upwork takes out of your payments before they even hit your account. The Upwork pricing model is a sliding scale based on how much money you’ve earned from a particular client. Upwork takes 20% from the first $500, and 10% of payments up to $10,000 and 5% of anything above that. They use this scale for each client, so if you have a lot of smaller projects with multiple clients, the fees Upwork takes from your earnings will be higher.
So, how does Upwork pay freelancers? Slowly, but carefully. There are a lot of fees to contend with, but you can rest assured that you’ll definitely get paid for your work. If you want to figure out how to build your freelance career outside of a place like Upwork, we can help. Join the School for Freelancers to learn how to reach your full earning potential.