Race To The Bottom: How To Fight Wage Dumping On Freelance Platforms

What are the options for IT specialists who don’t want to face wage dumping — but remain faithful to freelance?

Freelance market nowadays

The times of ubiquitous onsite full-time have passed. Gone are the days when you had to necessarily sit in the office from 9 to 5 because your employer owns all the working tools (i.e., modern PCs and fast Internet connection for the programmers). Modern IT specialists often abstain from the 9-to-5 office routine: with a fast, omnipresent connection and a brand new personal laptop allowing you to work virtually from any corner around the globe, this option doesn’t seem so winning anymore. Technical progress and the emergence of the gig economy opened the doors of the freelance market ajar for everyone.

Nowadays, in some industries, freelancers still possess an aura of risky heroes: they have (almost) no social guarantees, no insurance, no paid holidays, and reasonably big chances of being blanked by employers. Nevertheless, in the IT branch, the freelance work segment has grown in leaps and bounds — and its peak still seems far from reach. Here, freelance specialists aren’t necessarily defenseless and insecure. Marketplaces, the cornerstones of the IT freelance, do shield the registered developers — although different types of these venues cope with this task differently, and sometimes you’re still prone to scammers’ tricks despite any protection.

We’ve already written about bidding and vetting marketplaces for freelancers in general, covered the topic of self-selling opportunities on both types — and now it’s high time to analyze the issue of wage dumping (again, in relation to bidding and vetting principles).

We will do it with the following plan. First of all, we will analyze the situation in the freelance market. Next, we’ll try to answer the general question of why people dump their wages on bidding freelance marketplaces and how you can secure your rates. Then, we will turn our eye to the vetting platforms and examine if they are suitable for wage dumping.

Let’s roll.

Money and rates on the freelance market

Since the freelance market is open and unrestricted, new freelancers enter it every hour. The overall number of the potential employers increases just as quickly: a tremendous volume of cheap workforce lures startup owners in need of one-time contractors, recruiters hunting for cold contacts, and business people fishing in the troubled waters hoping to catch the unprotected non-specialists who don’t know their fundamental labor rights.

All the participants generate a lot of money. Successful freelancers who luck out potentially can bag thousands of dollars. The ill-starred and hapless ones are frequently down and out. For the first category, the unregulated price policy is a blessing. For the second, it’s a curse. Those who manage to find people ready to pay the desired price of their work are the lucky few. Why so?

Reverse auction of the bidding marketplaces

First and foremost, typical bidding freelance marketplaces (Upwork, Fiverr, and the likes) are highly prone to price dumping. How do they work?

Bidding marketplaces’ working principle is that of a reverse auction. Why is it called so?

During the regular auction, sellers offer goods and services, and buyers offer their prices (doing bids), competing to win. The one who provides the most considerable cost wins the lot. At the freelance bidding marketplaces, sellers (professionals) offer their services, competing to win the bid, — and the buyers (entrepreneurs) choose the most appropriate candidate. The reverse working scheme changes the function of price and money: here, the smaller price you offer, the higher your chances of winning. If you price your services lower than your competitors in the segment, you’ll probably win the bid — making entrepreneurs less likely to pay more the next time. 

NB. In the long-term perspective, your behavior is harmful not only to your colleagues. Your next more expensive bid will lose because entrepreneurs will know that they can find cheaper variants. 

That’s what dumping is about. However, winning cheap bids is still a bit counter-intuitive: if the rates on bidding marketplaces are subject to collective regulation, why not elevate them collectively? Perhaps, some other major reasons can explain the dumping strategy?  

Why dump?

Let’s analyze two other possible backgrounds for price dumping on bidding marketplaces.

Cost of living

Let’s call it unintentional dumping. Suppose you’re a freelance specialist from a first-world country. It’s almost 100% certain that your prices and bids will be much higher than those of a programmer from India or Pakistan. The average cost of living in the two mentioned countries is several times less than in your home country. Indian or Pakistani coders won’t dump intentionally: their rates are enough to supply them well at home.  Not every specialist from a relatively cheap country will dare to list a USA rate. 

Lack of experience

Suppose you’re a junior coder wishing to gain more experience. For that, bidding marketplaces are the best venue. First of all, there’s no initial skills/proficiency triage: everybody is wanted since demand is several times higher than supply. You just need to find your niche. For inexperienced coders, the niche is simple: they look for relatively easy tasks from different fields. These tasks will help them decide what they can do best and in which areas they will develop their proficiency to grow into confident Middles.

Such coders can’t make expensive bids because they won’t stand the competition with more experienced developers. They frequently dump the average price and use every opportunity to grow, adding an extra CV/portfolio line. 

How to avoid rate dumping?

Now that we’ve covered the most frequent rate dumping reasons, it’s time to answer the question of how to secure yourself from dumping and earn decent money on bidding marketplaces. Find our five recommendations below.

• Pass proficiency tests and certify your skills

Certified skills, proficiency badges, and high results of the acknowledged tests prove your professionality. Add them to your profile and mention them in the bid proposals. Many entrepreneurs are craving skill proof — especially on the bidding marketplaces where there’s no pre-vetting mechanism. They won’t accept Tom, Dick, and Harry’s bids and are ready to pay more.

• Look for businesses correlating low price with low quality

Often, tech- and market-savvy startup owners treat low prices rather suspiciously. They know that the only free cheese is in the mousetrap and neglect cheap bids. That’s your chance! Just prove your rate by experience and skills — and the deal is done.

• Define your target clients ready to pay more and catch them first

The abundance of clients at the bidding marketplaces is a blessing if you know how to sort them and find yours. Treating the client world as an unknown realm with no distinct rules, you won’t reveal logic in their behavior and won’t recognize those ready to pay you more. Describe the desired clients who will pay your price.

Who are they? Where do they live? What is their daily schedule? When are they most active on the website? 

Answer these questions and start monitoring the marketplace in the designated time frame to be the first who sends the bid. Less is more for you: don’t carpet the web; find your aims and work at them.

• Write a winning bid

Nobody likes boring templates. Do your best to convince a future employer of your proficiency. Read the job description carefully, underline the pain points and address them.

• Filter your clients by country of origin

Remember what we told you above? Find the clients from the more affluent countries valuing decent work, they will surely pay you more. You’ll get extra points if you know foreign languages and write your bids in their native language.

Well, that’s all by far. However, I should mention one more important caveat. All the mentioned above is valid for the bidding marketplaces. For vetting marketplaces, the reality and routine are entirely different.

Is it possible to dump on nonbidding marketplaces?

A brief answer: mostly, no.

The working scheme of non-bidding (vetting) marketplaces is entirely different from the bidding ones. Whereas the admission is unrestricted for bidding marketplaces, vetting marketplaces sell only previously tested developers of Middle and Senior proficiency levels. Furthermore, the developers don’t compete here: after a client asks for an engineer, Matching and Recruiting department specialists analyze the database of available candidates and pick the most suitable ones with the appropriate stack, needed extra skills, and a winning CV. 

If you don’t compete with other developers, you won’t dump and aren’t afraid of dumping. Vetting marketplaces take care of their developers and respect their rates — thus, you get the exact sum you request. If your appetites are too much and the marketplace specialists understand they won’t sell you at such rates, they will promptly warn you. 

One of the iconic examples of the vetting marketplaces for web developers is Lemon.io connecting European devs with Western startups since 2015. We’ve already composed our textual selfie — read it and learn about all our bonuses. (For those craving more, we also have material about our top stacks and rates, check it out!)

If you’ve read it all, tried it all, but still feel the dumping press on the bidding marketplaces — try vetting. Try Lemon.io.

Still some questions left? Read our concise FAQ!

• Why are freelance websites causing wage dumping? 

  Let’s start with a clarification of the question. Not all websites for freelancers cause wage dumping. How so? There are two main types of them; only one is dumping-prone due to its key working principle. If you use Upwork, Freelancer, Gigster, or 99Designs — yes, you’re trying to earn on the bidding marketplaces that’re extremely open to wage dumping. If you’re working via Lemon.io, Turing.com, or other non-bidding space, you can’t dump because the inner mechanism won’t allow you to. On bidding places, you compete with others — basically, you should win the client’s bid, offering the least possible money, so why not dump? On vetting ones, you offer your rate, and the Sales or Matching department specialists advise you on its suitability for their target audience. If it’s unsuitable, you can still keep up with it — although we don’t promise you big earnings.
  

• How to use the race to the top approach? 

  Using this approach is more promising, and here’s why.
  Unfortunately, the freelancers of a type unwilling to work for peanuts are just a tiny minority in the vast ocean of (un)skilled workers who don’t care about their rate, just wishing to earn at least something. Some clients are still not interested in the quality of the delivered work (their primary wish is to pay less) — and this kind of client becomes a promising category for dumping amateurs. What’s acceptable for one type is completely brutal and unprofessional for another one. The twain shall never meet, although the dumping one will always bother the professional one.