There should be a picture of a man dangling from a leg snare and wrapped in a net – right here. Because that’s what merchant fees feel like – on top of taxes.
(I couldn’t find any Public Domain images fitting that description.)
As a contractor, there is readily available information about all the challenges of running your own shop. You should apparently cultivate a high level of fear and suspicion, because everyone IS out to get you. Your clients will try to shaft you, your contractors (if you have any) will never do work on time or with any quality, and all your vendors will try to subtly upgrade their fees.
Is it paranoia if there ARE some people out to get you?
I do freelance editing on Upwork and PeopleperHour. These are relatively good online work platforms, but Upwork just covered itself in infamy by creating a new ‘tiered work system’ that only really works out well for people who do large contracts. In other words, Upwork has done the same thing as Wal-Mart did years ago: shift from catering to regular penny-pinching Joes to target upper middle-class shoppers who don’t even think about coupons.
Tiers For Fears
Upwork’s new system means that contractors/freelancers are penalized for getting new clients at the beginning of the relationship. The contractor takes a 20% hit before the client has billed $500, then the percentage moves down to 10%, and after the $10,000 mark (who hits that? eBay?), finally the contractor only pays 5%.
Ostensibly, this is supposed to cover administrative hassles and the benefits offered by the platforms in attracting clients, but it feels more like a love slap. It’s supposed to be reassuring, but who wants to be slapped with higher fees? How on earth is it a good thing, as a contractor, to tell NEW clients that they have to pay more on the front end?
Charges on Both Sides
The client also has to pay some fees. As a contractor, I didn’t know what these were – until a client asked about them. “I’ll find out,” I said.
Here’s the link: https://support.upwork.com/hc/en-us/articles/218375638
So, the client pays normal merchant fees (2.75%) for processing – about the same as PayPal and Freshbooks. If the client is paying out over $910 in payments every month – so a little less than $12,000 per year – there’s a flat $25 fee. You’d have to be paying $1,000 per month to actually reap any savings benefit, because 2.75% x $910 IS $25 and a few cents. (At this point, most clients would mutter, “What a bunch of $*#!” because it feels like, yet again, a well-marketed ‘savings’ just means “you barely scrape even or a little better than what you had before.”
Oh, and the flat-fee charge only applies if you have a European, Australian, or North American bank account linked to Upwork. Not cool for overseas clients in China or Russia. Guess which clients make up most of my target market? Californians and overseas clients in countries other than Europe. What a win.
Rules of Avoidance
However, freelancers are supposed to be nimble and flexible – and optimistic above all! These seemingly endless fees are just the irritation fuel that I need to create a spreadsheet with my clients’ contact information: website, email, phone, etc. If I can find or create a way to funnel contracting clients to a better system or platform, one that will not charge us the earth and then say, “It’s because you need our genius help desk system,” I’m going to find it!