Hourly vs. Fixed-price

Hourly vs. Fixed-price on Upwork – Which one is better?

Discover the pros and cons of taking both fixed-price gigs and hourly contracts on Upwork.

In a previous article, I’ve explored the pros and cons of using Upwork and selling on Fiverr. A fundamental difference between the two platforms is Upwork’s ability to propose two different remuneration structures:

  • On one hand, you can work on an hourly basis. Basically, you get paid based on the number of hours you’ve worked for a client multiplied by an agreed hourly rate.
  • On the other, you can work on a fixed-price basis. You get paid based on agreed milestones to be delivered at specific deadlines.

Upwork shares this feature with PeoplerPerHour.com and Freelancer.com, two other freelancing platforms that are far less popular.

However, what makes it great on Upwork (and not so great on the two aforementioned platforms) is not just the fact that it’s ‘technically possible’, but that the two models come with two separate ‘philosophies’. You can also ready Upwork’s article about it.

Let’s explore together the pros and cons of using each model.

About fixed-price gigs on Upwork

Fixed-price gigs are probably the most (and lowest) common denominator that there is between Upwork and basically every other platform.

Fixed-price gigs could also be called ‘micro-services’. A micro-service is a very specific service that’s provided by a freelancer at a fixed price, independently of how long it takes him to deliver it.

Pros of fixed-price gigs on Upwork

Easier to land

Fixed-price gigs are generally the most common workaround to make some money on Upwork at the very beginning. Competition is ruthless on Upwork, and you have to face other freelancers with more Upwork history.

Fixed-price gigs usually don’t require you to be an *expert* in your field (at least not a big Upwork experience), and clients are more flexible when sourcing freelancers for fixed-price gigs.

This happens mostly because a fixed-price gig is usually a ‘part’ of a bigger, more all-encompassing project. For example, let’s imagine a project about brand marketing. A fixed-price gig could be things such as logo design, banner creation, single ad copies, etc.

It makes sense that these gigs don’t require as much expertise and project management skills than more substantial projects. And that’s a great way to build your Upwork history at the beginning.

Faster delivery

The temporary nature of fixed-price gigs also means that they have a faster turnaround. You can usually stack 3-4 gigs in a week, or even more if they’re not too big.

Most of the time, deadlines range from a few days to a few weeks. Theoretically, that’s a great thing. The faster you deliver, the faster you get paid, after all.

The best way to utilize fixed-price gigs is to find a way to be *faster* than average without it affecting your work quality. Really, there’s no reason to be slow with fixed-price gigs.

Fast withdrawal of your earnings

One of the frustrating aspects of being an online freelancer is that things are usually delayed when it comes to earnings and withdrawals. In some cases, such as on Fiverr, things can be even crazier and take up to 17-20 days.

On Upwork, things are much different since it takes only *5 days* between the client approval and the ability to withdraw the earnings. For example, if you submit your deliverable on Monday and if it gets approved on Tuesday, you’ll be able to withdraw your earnings on the next Monday.

I know that it may sound a little bit superficial and not so important because you’re a self-employed *company* and shouldn’t care about these things. However, being able to access your earnings is highly motivating, and especially when you’re just getting started.

A good remedy to review scarcity

One thing that I’ve mentioned in my previous articles is what I call ‘review scarcity‘.

The idea behind review scarcity is that since clients/contracts rotate a lot less on Upwork, and since they’re more prone to long-term relationships, it means that you end up with fewer reviews than on other platforms.

It can quickly become an issue if your competition consists mostly of Upwork freelancers who’ve been on the platform for years. That means that they’ll have dozens of positive reviews, while you’ll have close to none.

Fixed-price gigs are a good way to fix the problem altogether by stacking up positive reviews. If you’re good with a fast turnaround, you can quickly get 10-20 reviews over the course of a few weeks. Past that point and you won’t need to ‘farm’ for reviews anymore.

Great potential for growth

Fixed-price gigs are an incredible way to gain experience and learn new skills along the way without too much risk.

Think of it this way: if you were to take a long-term contract for something you only *partially* master, there’s a huge risk that you’ll not only fail at delivering, but also get a terrible review.

Since fixed-price gigs are only ‘parts’ of a bigger project, it’s easier for you to focus on that small part, improve your skills, and properly deliver.

As long as you don’t feel comfortable saying that you’re an ‘expert’ (whatever that means) in your field of expertise, feel free to accept small side gigs to refine your core competencies.

Cons of taking fixed-price gigs on Upwork

Negative reviews can escalate quickly

By definition, when you get started on Upwork, you have no review whatsoever. Your profile history is blank when it comes to reviews, and there’s nothing to show.

Each new review you get will be seen and scrutinized by prospective clients who are looking at your profile. They’ll look at every single review that is added to your freshly created profile. If you were a baby chicken, getting a first bad review would be the equivalent of getting killed in the egg, basically.

It makes sense that there’s always a ‘review risk’ associated with any new contract. However, the main thing here is that it can escalate quickly and dramatically since they’re rotating faster than long-term contracts.

Fixed-price reviews generally affect your ‘Job Success Score‘ a lot less than long-term contracts, but they’re visually appalling (when negative).

A mismatch between money and requirements

A big con to accepting fixed-price gigs is related to money. Or the lack of it, to be more specific.

Whenever clients publish a fixed-price gig, they have something very specific in mind. They are looking for someone to complete a task within the boundaries of a budget they set for the gig.

I’ve always found it too funny when clients define a ‘price’ before even knowing what it takes to complete the gig, how long it takes and if it’s doable at all.

Most clients have no clue about what they’re asking for, and it makes sense to first talk to freelancers, let them do some prior research and then establish a cost estimate based on the task.

What clients do with fixed-price gigs is the equivalent of telling a construction company: “I have $100,000. Build me a mansion with a swimming pool“, even though you have no freaking clue about the construction business.

You’ll work more for less

There’s almost no way you can mathematically win in a situation where you accept a fixed-price gig.

Freelancing is fundamentally ‘transactional’ at its very core. It involves two parties:

  • A client on one hand. That’s a person who needs a service or a deliverable with specific requirements.
  • A freelancer on the other hand. That’s a person who can perform a service or deliver a deliverable according to the client’s requirements.

During this transaction, there are really two things that are traded between the main protagonists:

  • Money. That’s what the client has and the currency that’s used to compensate the service provider.
  • Time and expertise. That’s what the freelancer has that’s traded for money.

A win-win situation is essentially a situation where there’s a perfect match between these two traded items. On one hand, the client gets what he wants for the price he wanted. And on the other hand, the freelancer gets paid what he wanted for the service delivered.

As you can guess, it doesn’t happen that way most of the time, and even less so with fixed-price gigs. Most of the time, the amount that the client is willing to pay you doesn’t match at all with the equivalent number of hours (multiplied by your hourly rate) that it would take you to complete it.

You can be subject to abuse

While it’s strictly forbidden by Upwork’s ToS for clients to be aggressive and abusive, it’s a very common situation for beginning freelancers who need to make their first dollars.

Fixed-price gigs work on a deliverable ‘milestone’-basis on Upwork. Concretely speaking, it means that the client will ‘fund’ the milestone through the escrow system. The money is frozen and will only become available once you submit the milestone (and the client approves it).

While it’s a great way to make sure that you always get paid for your work (which Upwork calls ‘payment protection’), it can quickly turn into a nightmare.

Indeed, if the nature of the work is subject to opinion and tastes, a client may very well say that your deliverable is not on part with his expectations, and ask you for an endless cycle of modifications.

He may also ask you for additional work and withhold the funds until you comply with his request. In this kind of situation, you can contact Upwork’s support, but the process won’t be pleasant either way.

The fees are higher

When you work hard for something, you may not like the idea of a share being taken away from you. However, that’s what freelancing platforms’ fees are about. And remember that we are not even talking about income taxes here, but really pre-tax fees.

In case you don’t already know Upwork’s fees structure, here’s a visual breakdown that can be found here:

As you can guess, most fixed-price gigs belong to the first bracket ($0-500). That means that you end up giving 20% away to Upwork for most fixed-price gigs.

The fees can become quite substantial if you stack fixed-price gigs on top of one another. For instance, if you complete 10 gigs at $250 each ($2,500 in total), you would end up giving $500 away to Upwork.

Now, if you were to make this money through an hourly-rate gig, you would end up paying 20% on the first $500, then 10% on the remaining $2,000 (so $100 + $200 = $300) in total. That’s almost half the fixed-price fees.

About hourly contracts

Upwork’s hourly-rate system is what makes the platform so great in the first place.

The concept is quite simple. Basically, you work a specific number of hours for a client, multiplied by the pre-agreed hourly rate. For example, if you agreed to be paid $40/hour and work 20 hours in a week, you get $800 (minus the Upwork fees). Easy.

This system is at the intersection between ‘real-life’ jobs and online freelancing. In both cases, your number of hours is monitored, and you get paid accordingly.

Pros of taking hourly contracts

More interesting projects

From my experience, there’s no way you can thrive as a freelancer if you find what you’re doing boring. Doing boring and repetitive tasks is usually a cause of severe burn-out for freelancers, and that’s not what you want.

As I mentioned earlier, one of the main cons of fixed-price gigs is that it was almost always a small ‘part’ of a more substantial project. As its mirror, hourly-rate gigs are usually the ‘bigger’ part of these projects. In some cases, it’s even the ‘whole’ project.

Unless you are really at the very bottom of the freelancing scale (doing stuff such as virtual assistance transcriptions, customer support, etc.), an hourly contract almost always means some kind of fun.

The fact that the contract is ‘recurrent’ also helps with making it more pleasant. The client is generally not in a hurry and you get paid for your work time. No more. No less.

Ability to build long-term relationships with clients

As humans, we generally do not trust strangers at all. There’s no reason to do so, and we are probably right about it. Trust is something that develops over time, and hourly contracts are an excellent way to build it between your client and yourself.

If you’ve ever been on the dating scene, you know how annoying things can become when you have to introduce yourself again, over and over, to new people. Well, that’s basically the same with clients.

Once you start working for a client, you start getting to know each other. And for that matter, you may even become *friends* at some point. It’s a good remedy against solitude (which most freelancers are prone to feel).

Sustainability is important

One thing that’s often overlooked about online freelancing is sustainability.

It’s easy to get started with new things in life. After all, there are tons of online platforms and e-learning courses that you can take and go all over the place.

A hard thing, however, is to make things sustainable. No matter the career path that you choose, it has to be sustainable in the long term if you want to make it, both financially and psychologically.

I’ve worked as an online freelancer for years and years, and if there’s one thing that I can tell you, it’s that it’s not easy at all (especially psychologically).

When you have a day job, you just go to your job every day, do your 9-5 and get back home. You collect your paycheck at the end of the month and that’s about it.

When you’re a freelancer, you have to keep a constant stream of new clients and new contracts in order to make the two ends meet. It can quickly escalate and become very pressuring, and especially if you have bills to pay.

That’s why hourly contracts and long-term relationships with clients are so great. They’re a real workaround to this sustainability obstacle, and they can make your freelancing life a lot easier. In other words, it’s better to work with 3 long-term clients than 30 short-term clients.

Upselling additional services

That’s one of the great things that’s almost not possible when you perform fixed-price gigs.

By design, long-term hourly contracts will let you work with a client for a few months or even years in some cases. It means that at some point, you’ll master your craft with this specific client to such a point that it will make sense to upsell new services.

Usually, this materializes by an increase in the workload and the number of allocated hours that you can work for this client. For instance, if you agreed on a 10 hours/week contract with your client, he may accept 15 or even 20 hours/week provided that you do additional stuff for him.

After all, the maximal number of hours that you can log onto Upwork is really one click away. It’s so easy for a client to lift the limit that there’s no good reason not to ask for it after some time.

Cons of hourly-rate Upwork contracts

The application process takes a lot longer

One of the most noticeable issues with hourly contracts is that it literally takes forever to land them.

Most of the time, clients who publish hourly contracts on Upwork will wait until they have at least 15-20 proposals before even considering potential candidates for the gig.

They will start initiating discussions with some of the applicants (generally more than 5) and the process can take from a couple of hours to a couple of days (or even weeks in some cases).

It can be very discouraging, and especially if it’s the kind of clients who likes to ask for a portfolio, past references and theoretical questions about what you’re the best fit for the gig and why they should hire you.

You don’t know the whole story

With fixed-price gigs, the client has usually a solid idea of what he’s looking for. It’s usually a clear deliverable with specific requirements.

He writes down these requirements in the gig description itself, and you know exactly what it’s about. At most, you may end up asking for additional questions such as a website URL, but that’s about it.

With hourly contracts, it’s usually hard to know beforehand what you are dealing with. You usually end up with two extremes:

  • On one hand, you have HR people copypasting *offline* job descriptions on Upwork. These descriptions are usually unreadable walls of text that tell you that you must have 25 years of experience in a field that’s only 10 years old.
  • On the other hand, you have regular clients who stay very minimalist in terms of describing the actual substance of the contract and what it’s all about.

Most of the time, you’ll be disappointed. You think that the contract is about something, and it’s not. You think that the contract is at a certain hourly-rate, and it’s not. The list can go on and on.

A mismatch between hourly-rate and expertise

This con mirrors a similar issue that we’ve found with fixed-price gigs.

If you remember, I told you that with fixed-price gigs, what happens is that clients want to pay you for an amount that’s below average when considering time spent.

Here, we have a similar issue. On Upwork, clients can assign three different levels of expertise to their hourly contracts:

  • Entry-level ($). That’s supposedly for beginners but as you can guess, no client ever hires ‘beginners’ to do something that could be done by more experienced freelancers.
  • Intermediate ($$). That’s the one clients use to trick you with below-average hourly-rates. After all, they’re looking for an expert, right?
  • Expert ($$$). That one is the most hilarious. You’ll see dozens and dozens of clients saying that they’re looking for an expert with a remuneration matching the worst entry-level gigs on Fiverr.

Since it’s up to clients to define the level of expertise they’re looking for (with absolutely zero safeguards), it’s usually a mix of bullshit and nonsense on the client’s part.

However, that’s not something you can simply ignore. If you want to find the best gigs on Upwork, you’ll have to use the experience level filter at some point down the line, no matter how many bullshit jobs there are.

That will then be up to you to differentiate between interesting and non-interesting offers.

Screen monitoring gives an Orwellian vibe

Unlike fixed-price gigs, Upwork permits clients to request freelancers to use their ‘desktop app‘ to perform a contract.

It means that, rather than being able to log your hours manually, you’ll have to install this app on your desktop. It will capture a screenshot of your screen every 10 minutes and automatically update your work diary accordingly. You can erase any screenshot from your work diary but it will also erase the 10-minutes chunk during which you work.

The concept can be both great or underserving depending on the kind of work you do and how you do it:

  • Good case scenario. You do a job where it’s beneficial to be monitored such as copywriting. You get paid for every second you spend on the contract.
  • Bad case scenario. You do a job that requires creativity, trial and error, and a non-linear process. You don’t get paid for the most *valuable* part of your job.

All in all, it depends on each and everyone’s personal tastes. But I generally refuse its usage for most of my contracts.

One bad review can kill your profile

On Upwork, there’s a specific algorithm that calculates your ‘Job Success Score’. This score is publicly displayed to everyone, and it’s also used in case you are trying to become Top-Rated (it should be above 90%).

The algorithm uses multiple factors to calculate your Job Success Score such as your public and private reviews, your earnings and if you’re usually on time with your deadlines.

Not all contracts are equal when it comes to reviews, and a lot more weight will be given to contracts for which you worked a lot more hours (and earned a lot more money). While we don’t know the exact details of the calculation, we know that the more you make with a client, the more his review matters.

If you make thousands of dollars with a client and only hundreds of dollars with all your other clients, a lot more weight will be given to the former. So, if he happens to give you a bad review, it can literally sink your profile instantly.

That’s why I usually recommend partitioning your contracts evenly in a way that makes this kind of situation impossible. For example, if you are available 40 hours/week, I recommend splitting it into 4 contracts (10 hours/week each), rather than a big 40 hours/week contact).

Conclusion

The truth is that at the beginning of your Upwork journey, you’ll be so hungry that you’ll try to eat everything you can.

Your typical Upwork journey will look something like this:

  1. You’ll take a couple of fixed-price gigs and accumulate a few reviews.
  2. You’ll get your first hourly contract (entry or intermediate level).
  3. You’ll start to get better-remunerated fixed-price gigs.
  4. You’ll then get better-remunerated hourly contracts (intermediate or expert level).

Once you reach step 4, things will become a lot easier for you and the cons of both scenarios won’t be as bad as they’re when you’re just getting started.