Overnight Upwork rolled out a new feature called Upwork Direct Contracts. Upwork says it’s a service that lets you create and send contracts to non-Upwork clients. So what is it and how does it work? Let’s take a closer look.
What Are Upwork Direct Contracts?
According to Upwork’s community announcements, Direct Contracts help support your freelance business inside or outside of Upwork.
Direct Contracts give you the power to enter fixed-price contracts outside of Upwork while enjoying the safety and security Upwork provides.
How Do Upwork Direct Contracts Work?
Direct Contracts are similar to fixed-price contracts within Upwork.
You create contracts and send them to non-Upwork clients. The client reviews the contract and accepts the agreement. Then the client deposits money into Upwork’s escrow.
Once you deliver the work, you request payment from the client just as you would inside the platform.
How Much Does It Cost?
Upwork Direct Contracts enjoy lower fees than traditional fixed-price gigs. According to Upwork, you will pay just 3.4% transaction fees for clients you work with through this program.
That’s an enormous drop from the 20% transaction fees freelancers pay on the first $500 with clients from inside Upwork.
The question is, how long will it last?
As a new program, it makes sense for Upwork to roll out with low fees. But will they increase them over time?
Based on their past behavior, I wouldn’t be surprised.
What Are the Benefits of Upwork Direct Contracts?
The low fees are one benefit, although it could be argued that you could avoid all fees if you created and enforced your own contracts.
Still, 3.4% is a fair price for what they give you.
But does a fair price make it worth it?
I’m not convinced, so let’s look at the other benefits before we decide.
According to the Direct Contracts landing page, freelancers get instant payment when a client releases money from escrow. This is different from traditional fixed-price gigs which have a short waiting period even after a client releases payment.
Clients Don’t Need an Upwork Account
This may be the biggest actual benefit. Many clients are unfamiliar with Upwork, so it can be difficult to move them to the platform.
Personally, I don’t know why you would bring clients to Upwork unless your goal is to build social proof and credibility on the platform.
Whatever your reasons, Upwork has simplified the process so clients don’t have to waste time figuring out how to use their service.
The last benefit listed is access to Upwork’s mediation service. The idea is that you can have Upwork step in if something goes awry with your project.
I’m not convinced this is a benefit, though.
In theory, clients might lose money if you win a dispute. But this program is clearly designed to attract new clients (read new money) to the platform. That means any dispute that occurs isn’t likely to go in the freelancer’s favor. What is more likely is Upwork will suspend the freelancer’s account and return the client’s money.
Inside of Upwork freelancers have a little more leverage. Long-term clients operate their business using Upwork freelancers. If that came to an end one day it would be a real problem. Since Upwork knows this, they are less one-sided toward freelancers (but not always).
In my opinion, freelancers should avoid disputes as much as possible.
How Do You Create a Direct Contract?
First go to the top of Upwork’s website and click the little paper airplane by your photo.
Next click “Create a Contract.”
Enter the clients email, a contract name, and a description.
In the next step you’ll enter a price either for the full contract or with milestones.
Note that the calculator shows your transaction fee at the bottom.
Now you’re ready to review the contract and send it.
Who Should Use Upwork Direct Contracts?
The program is best for freelancers who want to work with clients outside of Upwork, but who don’t have the systems in place to make that a reality.
For instance, say you cold email 20 clients, and three want to work with you. How do you manage the contract and how do you collect payment?
With Upwork’s Direct Contract program you don’t have to worry about the contract at all. It takes seconds to create and send. Upwork handles payments for you too, so you don’t need any special software.
Do Freelancers Have Other Options and Should They Use Them?
That’s a tough question. Each freelancer will need to decide the answer for their self. Personally, I probably won’t use Upwork Direct Contracts in my business for several reasons.
- Why pay 3.4% when I can pay 0% fees by not using Upwork?
- What good is mediation when it might be biased in the client’s favor?
- What good is a contract that mostly favors the client?
- How am I maintaining control of my business when I rely on Upwork?
- What does Upwork offer that won’t favor me more with my own payment system, Google Docs and an Attorney?
You’ll have to make the decision to try Upwork’s new system for yourself. But the questions above are top of my list for consideration.
Ultimately, this program looks like another way for Upwork to expand its reach as a global hiring platform. They’ve streamlined the contract process and made it easy for freelancers to bring them more money.
Direct Contracts likely favor clients over freelancers, but if you don’t care much about being in control of your freelance empire then maybe it’s worth it for you.
Anyway, I want to read your thoughts. Will you use Direct Contracts for clients outside of Upwork? Or will you skip it can maintain control of your freelance business? Add your comment below to let us know!