It has been clear for some time that the world of work was changing. Talk about the ‘gig economy’ is nothing new. However, this development has only been possible alongside the growth of online marketplaces for talent and projects. These have allowed businesses to connect with freelancers and agencies, and find talent for projects in a comparatively risk-free way.
Upwork, formerly Elance-oDesk, claims to be the largest marketplaces in the world for freelance and remote talent. Upwork was formed from a merger between two of the earliest online marketplaces Elance, founded in 1998, and oDesk, founded in 2003. Both were online marketplaces bringing together businesses and remote workers. Their 2013 merger was rebranded as Upwork in 2015. Upwork revenue for 2019 was reported as over $300 million with a gross services volume of over $2 billion.
Upwork continues to serve both sides of the transaction
Like other freelance marketplaces, Upwork has a ‘dual website’, with sections for both freelancers and businesses wanting to hire. Businesses can post jobs, and then identify and approach suitably qualified freelancers. Upwork’s algorithm will suggest matches, and provide a shortlist of likely candidates. Freelancers can set up a profile and portfolio, and then ‘bid’ for projects for which they are qualified. The businesses screen proposals and decide who to employ.
Upwork provides tools to support contracting and coordination of work
For example, video, text and email messaging functions within Upwork facilitate the contracting process as well as being available within the project for progress-checking or managing any queries. Upwork also provides a dedicated shared workspace for each project. This can be used to share and upload files—meaning that nobody has to share email addresses. The site also operates a secure escrow system for payments, giving confidence to both parties.
Upwork operates four models for businesses, with different charges
The ‘Basic’ model is free and simply provides access to the freelance pool, collaboration tools, and ability to post jobs. ‘Plus’ costs $49.99 per month, and gives improved project tracking and collaboration tools, access to an account manager, and tailored search results. The ‘Business’ package costs $849 per month, and provides consolidated billing, access to a team of advisors and detailed reporting. Finally, there is a fully tailored option, with variable costs, which is likely to be used only by businesses doing a huge amount of work via Upwork.
Upwork also considers freelancers to be its clients, and charges them fees
As well as monetising businesses, Upwork also makes money from its freelance clients. Freelancers are charged fees, which are taken out of their earnings on the site. The percentage depends on the amount of work they have done with a particular client: the first $500 per client is charged at 20%, which drops to 10% for anything up to $10,000, and 5% for anything over that. This provides an incentive to do more work for each client, which of course is good for encouraging quality and ongoing client relationships—both of which enhance the site’s reputation as a quality-based rather than transactional marketplace.
Demand for freelancers is set to increase ad Upwork is ready
There is growing evidence that businesses are laying off staff as they try to manage the impact of COVID-19. A contraction in the economy generally means less work available—but in previous recessions, many businesses turned to freelancers to fill gaps in their workforce. This suggests that demand for freelancers and agencies is likely to grow in the near future—which is certainly supported by recent research by Upwork, and can only be a good thing for freelance marketplaces.
The long view
The pandemic may also have long-lasting changes for freelancers and those who use them. Around the world, many Governments’ pandemic support packages have included a provision for freelancers and self-employed people—often the first time that this group has been included in benefits packages. Some commentators have suggested that this should become more normal in the future. If this change is broadly accepted, it is likely to have long-lasting effects for both freelancers and freelance marketplaces like Upwork, not least because it will bring the costs of using freelancers in line with employment costs. This will, therefore, negate some of the perceived advantages for businesses.