Why You Should Transition Your Freelancers Off of Upwork
If your company relies on freelance workers, it’s time to have a direct relationship.
When you’re just getting started with engaging freelancers, consultants, and vendors, the first step is figuring out how to source them. For most organizations, that means asking for references and referrals or using a talent marketplace like Upwork or Fiverr — or a premium talent marketplace like FlexTeam. That’s a great start. The various freelance platforms are excellent for sourcing when you have one-off needs, enabling you to find the right skill sets quickly.
Here’s why it’s time to move off of Upwork.
Direct Relationship Benefits
We power the liquid workforce.
Developing a trusted on-demand talent workforce that your company can tap when needed has many benefits. And working directly with your freelancers helps you further strengthen the relationships.
Customize Your Terms
Each platform’s Terms of Service largely govern the relationships with freelancers through marketplace platforms. For example, Upwork’s Terms of Service include default non-disclosure terms. You can request that a freelancer sign your company’s NDA as part of the job terms, but Upwork won’t enforce the agreement.
The contracts for each project are more like Work Orders (WO) or Statements of Work (SOW) than Master Service Agreements (MSA). Each contract breaks down all the specifics for the particular project, like project milestones.
When you enter a direct relationship with a freelancer, you can execute a Master Services Agreement. The terms of this contractual agreement will cover all projects for the duration of the contract. Each project will have its own detailed WO or SOW. Liquid makes it easy to set up MSAs and WOs with freelancers — whether you want to use custom contracts, NDAs, etc., or use our templates.
And when executing direct contracts with freelancers, your company defines how any disputes are handled as part of the contractual terms. When working through Upwork, the resolution process is defined and managed by Upwork.
Each freelance marketplace platform has its own pricing model. Upwork charges a fee to both the client and the freelancer. Clients pay a 3% processing fee on payments, plus there are additional monthly subscription costs to access advanced features and premium support. Freelancers will pay a sliding service fee of 5-20% of their earnings (depending on total billings with the client). Many freelancers will build this cost into their pricing.
If you are working with a freelancer regularly, working directly can save money over time. Freelancers and vendors can use Liquid for free — there is no percentage fee for their billings. As a client, Liquid is your complete contractor management system for managing everything related to your on-demand workforce. There is no platform fee at the Starter level, and transaction fees are low — $3 per ACH or 5% for credit card payments to US vendors or $8 per ACH for payments to international vendors.
Manage Expense Timing
For businesses, setting payment terms with vendors is an essential lever in managing financials and cash flow. When working directly with freelancers and contractors, you can negotiate mutually agreeable terms. For example, net 30 days is a common payment term used by many companies with their vendors.
For projects through Upwork, the payment timing is predetermined. Upwork collects the money upfront for fixed-cost projects and holds it in escrow until the project is delivered. For hourly rate projects, Upwork automatically bills your default billing method once a week for the prior week’s work.
With direct relationships, you have complete control to establish payment terms and manage expense timing. And as you scale your on-demand workforce, optimizing payment timing has more benefits.
How to Move Your Freelancer Relationship Off of Upwork
Upwork’s Terms of Service require that payments must be made and received through Upwork for two years from the date clients and freelancers first meet. If the relationship started outside Upwork or you’ve paid the freelancer through Upwork for 24 months, there’s no conversion fee charged. Otherwise, you’ll need to pay a conversion fee. The conversion fee varies for each freelancer.
Note that contract regulations differ depending upon your tier with Upwork – ‘Business’ and ‘Enterprise’ clients are advised to connect with their account manager for help with a freelancer conversion.
Calculating the Conversion Fee
Upwork calculates the conversion fee by taking 12% of the freelancers’ estimated earnings over a twelve-month period. The earnings are estimated by multiplying the projected hourly rate x 52 weeks x 40 hours. The freelancer’s hourly rate is the highest of the following:
- Freelancer earned hourly rate on any hourly project
- Freelancer proposed hourly rate for any hourly contract on Upwork
- Freelancer profile hourly rate
Either the client company or the freelancer must pay the conversion in one payment to Upwork. Usually, the client company pays the fee. The company and the freelancer can share the costs, but you must arrange this outside of Upwork.
Clients initiate the process by choosing the Move Outside Upwork button for any particular contract. Freelancers can also trigger the process by contacting firstname.lastname@example.org.
Upwork will then review the request and determine the conversion fee. Once the client and freelancer have confirmed that the work will move outside Upwork, the payment for the conversion fee will be charged and processed. The fee must be paid before work and payments with the freelancer can begin outside of Upwork.
Once the conversion fee payment has been processed, you can begin working directly with the freelancer. Set up your onboarding workflow on Liquid — once you’re set-up, inviting new freelancers and vendors takes less than a minute!
Build Your On-Demand Workforce
With Liquid, your company has an all-in-one contractor management system that will save you time and money. When you use Liquid, you gain smart onboarding that includes templates and customization, flexible Work Order options, simple and intuitive invoice management and processing, and secure global payments — these are just a few of our users’ favorite features. Plus, Liquid helps you with independent contractor compliance, protecting your company. Ready to embrace the future of work?
Ready to transition off of Upwork? Try Liquid today.
Updated: June 1, 2021
Quick note: This is not to be taken as tax advice or legal advice or payroll advice. Since tax rules and laws change over time and can vary by location and industry, consult a CPA / tax advisor and/or attorney for specific guidance.