In the last few years, we have seen the freelancing landscape change a lot. And to keep it real with you, these changes haven’t always been positive for freelancers. One of these changes we’ve noticed in the last few years is a subtle increase in platform fees across the board.
We know for most of these companies, it is another avenue for revenue generation, but I’m sure many freelancers may not quite see it in this light, which is why we’d focus on this today.
While many freelancers focus on their hourly rates or project fees, the reality is that various platform charges significantly diminish your actual take-home pay. So let’s dive deep into understanding these costs and explore how Workstedi’s innovative approach is changing the game.
The Hidden Costs of Traditional Freelancing Platform Fees
Initial Access Fees
Most established freelancing platforms operate on a multi-tiered fee structure that begins before you even land your first client. These initial barriers may include:
– Monthly subscription fees ranging from $10-50 for “premium” access: This package always has certain “special” benefits, with common ones including access to important tools, choice position on job applications, badges signifying proficiency, etc.
– Proposal credits or virtual money that cost $0.15-2 per unit: Some sites also sell virtual currency, with freelancers using this currency for all their transactions on the platform.
– Profile verification and badge fees.
– Portfolio showcase fees: Some platforms also require fees (mostly one-time payments) from freelancers for their portfolios to improve visibility.
Ongoing Platform Commissions
Once you successfully land a project, platforms typically take a percentage of your earnings:
– Commission rates ranging from 5% to 20% of project value: Depending on the platform in question and the value of the project, commission rates can be as high as 20% of the total project value.
– Higher fees for first-time clients.
– Additional charges for payment processing (2-3%): Another frustrating thing freelancers have come to accept, it’s interesting to think about it. You pay a percentage of your project value… and still have to part with a percent of those earnings to withdraw your funds.
– Currency conversion fees (1-2%).
With all of these fees frantically clutching at your wallet, now let’s zoom out and look at the bigger picture.
The Compound Effect
Let’s break down a potential scenario for a freelancer trying to establish themselves:
Monthly Costs:
– Basic subscription: #25
– 50 proposal submissions: #50 (let’s work with #1 per proposal)
– Platform commission on #2000 worth of work (20%): #400
– Payment processing fees (2.5%): #50
Total Monthly Platform Costs: #525
This means a freelancer earning #2000 on a project is actually taking home only #1,475 – a 26.25% reduction in actual earnings.
And that’s not accounting for time, resources, and other materials invested during project execution.
Now to the next question… why do “traditional” platforms adopt this model with seemingly so many platform fees?
Why Traditional Platforms Use This Model
Understanding why platforms implement these fee structures can help us put things within the right context:
- Quality Control
– Proposal fees supposedly discourage spam applications: A belief that’s super contentious in the freelancing world, some people (read clients) believe that a higher entry barrier will translate to improved quality of freelancers. But on the flip side, we’ve seen certain platforms hike fees to discourage spam applications. Yet months after these hikes, we’re yet to notice any significant impact on the quality of applications or freelancers.
– Subscription models aim to ensure serious participants: It’s a general belief that people only value what they pay for… and it’s true. But the thing is, with freelance platforms, isn’t it better for people to get something of value first before getting them to commit to regular payments?
– Commission structures support platform maintenance and development: Pretty self-explanatory, to keep tools and functionalities working fine, platforms need to generate money.
- Platform Sustainability
– Regular revenue streams from subscriptions.
– Risk mitigation through commission-based earnings.
– Investment in platform features and security: No platform is perfect (not even ours!), if you think about it carefully, there’s always a particular feature that can improve the usability and functionality. Investing in these features will not only improve UX, but it can also increase product adoption and all-around efficiency. For most platforms, they can only provide these features with the right type of resources and investment from users.
- Market Position
– Premium pricing creates perceived value: We live in a world where perception matters–a lot. And for some of these platforms, the belief is that “the higher the fees, the higher quality”, is this true? Well… I’ll leave you to figure this out.
– Tiered systems encourage platform loyalty: A tiered system means there’s something for everyone, freelancer, agency, big corp, whichever category you are in. This can improve platform loyalty, as every category feels catered to in some way.
– Revenue model supports marketing and growth.
Now we know why most platforms operate this way, but how can this affect freelancers (new and old)?
The Real Impact Of Platform Fees on Freelancers
These fee structures create several challenges for freelancers:
Financial Barriers to Entry
– New freelancers must invest before earning (or like we call it “pay to play”).
– Limited ability to test different platforms: Platform fees in one place can be uncomfortable, but platform fees across 3-4 different platforms can put a hole in your pocket, limiting your ability to try different platforms.
Cash Flow Challenges
– Upfront costs impact working capital: Almost like you’re starting your business out in the negative already, and need to win bids and secure projects to get back in the green.
– Delayed earnings due to payment processing times.
– Unpredictable success rates of paid proposals: I know this point may seem a bit contentious, but think about it this way, when last did you run a random internet search and click on any of the first 3 or 4 paid ad results? Let me guess… ages ago right? You see, most people tend to have a negative perception of paid ads on search engines and this also spills into paid proposals. That’s why the success rates are not as predictable as some of us would like.
Competition Pressure
– Need to factor fees into pricing strategy.
– Difficulty maintaining competitive rates.
– Reduced ability to negotiate with clients.
But here’s how we’re working to change this…
Workstedi’s Revolutionary Approach
Workstedi has studied the freelance marketplace and developed a platform with a focus on success on all fronts… clients and freelancers. Our focus on freelancer success looks like this:
Zero Upfront Costs
– No proposal fees or subscription requirements.
– Free profile creation and portfolio showcase.
Transparent Fee Structure
– Single, clear commission rate (within the 5-10% range per project depending on project size).
– No hidden charges or additional fees.
– Predictable earnings calculation.
Merit-Based System
– Focus on skills and experience.
– Quality matching algorithms.
– Direct client communication.
Maximizing Your Earnings on Workstedi
To make the most of Workstedi’s freelancer-friendly model:
- Strategic Profile Building
– Comprehensive skill documentation.
– Detailed portfolio presentation.
– Clear value proposition.
- Targeted Proposals
– Quality over quantity approach.
– Customized project applications.
– Focus on opportunities relevant to your niche.
- Client Relationship Management
– Direct communication channels.
– Long-term relationship building.
– Repeat business opportunities.
Calculating Your Potential Savings
Now that we see how Workstedi works, let’s try a quick comparison:
Traditional Platform (Monthly):
– Gross Earnings: #2000
– Platform Fees: -#525
– Net Earnings: #1,475
Workstedi:
– Gross Earnings: #2000
– Simple Commission: -#200 (10% example rate)
– Net Earnings: #1,800
Making the Transition
If you’re ready to make the switch to Workstedi:
- Preparation Steps
– Complete profile setup.
– Transfer portfolio materials.
– Update professional credentials.
- Client Communication
– Inform existing clients.
– Highlight benefits of Workstedi.
– Maintain professional relationships.
- Building Momentum
– Start with smaller projects.
– Build platform reputation.
– Gradually increase project scope.
Workstedi’s innovative approach maintains platform quality and sustainability while helping freelancers find their feet with fewer hurdles in the way. By choosing a platform that prioritizes freelancer success, you can focus on what matters most – delivering value to clients and growing your business.
Make the switch today and sign up to experience the difference a freelancer-first platform can make in your professional journey.
