A Reply to an Elance Survey and What I've Learned about Freelancing

As I’ve mentioned before, I use the site Elance for finding work sometimes. It’s been going through some corporate-side changes lately, including merging with Odesk, out of which they have formed a company called Upwork. Elance still exists, but they’re aggressively trying to get Elancers to set up their profiles on the new Upwork platform, as well.

Amid all this restructuring, they’ve sent surveys out to Elance users asking for opinions about potential changes to the way they take service fees out of the amount of money clients pay freelancers for work done through the site. Currently, this service fee is 8.75% for every single job on the site, large or small. Freelancers choose how to factor the service fee into their bids (that is, swallow it, charge it to the client, or split it).

The survey proposed a new fee service plan in which the amount charged would depend on how much work you’ve done with a specific client. Different survey takers received slightly different numbers in the proposed pricing plan they were shown,* but this was mine:

A pricing plan proposed by Elance for restructuring service fees.

As you can see, it’s quite a leap from a static 8.75% for every job. When the survey offered a space in which I could explain what I did or didn’t like about the proposed plan, I used it. What resulted was a bit of a rant, sure, but it was also a manifesto on what I love about freelancing and something of an essay on some of the things I’ve learned about being a smart freelancer since I began about three years ago. I share it here in order to express all of those sides of the end result.

Why, as I told Elance, I believe this plan is "much worse" than the one we have now.

Reason #1: Although acquiring regular clients one can work with for the long term is an ideal, it is not as central an ideal to freelancing as the freedom to fire or walk away from a one-time client if the relationship or the expectations do not prove as good a match as you'd hoped. This model penalizes the freelancer who exercises that freedom by extracting double the current service fee for every first project he or she has, while rewards only come after multiple projects with a single client. Freelancers are encouraged to remain with lousy clients merely to reach that threshold, which is antithetical to one of the reasons they are likely to be freelancing in the first place.

Reason #2: Applying flat thresholds for each fee level regardless of area of work specialization disregards the sheer variety of freelancing work that individuals on the site perform. For some types of work, a $500 first threshold can be attained in one project, every time. Others can take work from the same client five or six times and still not come close. Still others will almost never have repeat clients due to the nature of their work. This isn't about overcharging or undercharging; it's about the fact that a memoir ghostwriter will have a smaller number of large-paying projects in one year, while a menu proofreader might have dozens of small ones, never from the same restaurant. Both might net $10,000 in a year through the platform, yet only one stands even a remote chance of receiving the 7.5% (or even the 10%) fee reward. Even if the precise dollar amounts or percentages were altered, the inapplicability to certain kinds of work will remain.

Reason #3: Similar to reason #2, but with respect to the types of clients different freelancers are likely to work with and not just the type of work. The $10,000 threshold, which has been proposed hypothetically as the one at which one finally manages to achieve a service charge below the current one, is unrealistic for anyone whose work is primarily with individual clients who pay out of their own pockets, as opposed to businesses that have a budget for hiring independent contractors. To my knowledge, I have never worked with such a business, and no individual is going to want to turn over 1/2 to 1/6 of their annual income to me for the kind of work I do for them (even over the course of several years). My ideal client is a PhD student who wants their dissertation edited. If all goes well, they might want journal articles edited in the future, too. But a dissertation usually averages around $1,000-$1,500 (and is often less), and such articles are likely to average around $300 or so apiece. Let's say they want two of those articles edited per year (this is an optimistic estimate) and one book manuscript around the time they’re applying for tenure, for another $2000. It will take 12.5 years of collaboration with just that one client before we reach $10K. I'm going to have many other clients during that time, most of whom I'm suffering the 18% service charge with and a few I’m “enjoying” the middle tier with until I reach the upper tier with them in the same time period. I don't think this is an unusual type of scenario for freelance editors. I understand deferred gratification, but this is ridiculous.

Reason #4: Sources on money and project management for freelancers (e.g., Sara Horowitz, Jake Poinier) are pretty much in consensus that an economically successful freelancer is one who diversifies their work portfolio, not one who puts all their eggs in one (or a few) work basket(s). That is, you want to balance one or two "big fish" with a larger number of smaller projects. You don't want to be in the situation where you're relying on a single client for an enormous chunk of your income; Poinier, for instance, suggests that 20% of one’s income coming from a single client should be a freelancer’s absolute max.** This pricing plan opposes that logic, encouraging freelancers to focus on a small number of high-paying clients rather than a large number of variably-paying clients. That is, it only rewards work with the big fish and not the medium and small fish, discouraging Elance workers from having a safety net in case one of those big fish gets fried (please excuse the mixed metaphor), or at least discouraging them from having such a safety net through Elance itself.

In sum: The pricing plan is not in the best interest of a significant number of freelancers. Very few are going to be in the position where both their work type and their usual client type will allow them to ever benefit from the structure. Even for those the plan is realistic for, it is still unwise, rewarding project selection choices that discourage flexibility, the choice to walk away from unpleasant but high-paying clients, and the maintenance of a highly varied work portfolio.


* Elance has a discussion forum called the Water Cooler that is accessible only to those with an Elance login. I learned from reading a discussion on that forum that others were shown different percentages and different thresholds from the ones shown here. Most had a lower top fee percentage, though some were apparently shown 22%. The $10,000 before reaching the final threshold, however, appeared consistent.
** He made this suggestion during a presentation he made at the 2014 Communication Central conference in Rochester, NY.