When it comes time for contract negotiations with a client, there are several clauses you should always include. Late payment penalties are the most obvious, but there are plenty more items that need to go into any good contract. One important clause you should consider is a kill fee.
A kill fee is, in a very general sense, an insurance against your work getting canned.
Sometimes, often for reasons totally beyond your control, a project may be cancelled, funding cut, or your client may simply have a change of heart and decide you don’t fit into their plans any more. Without a kill fee you could end up completely out of pocket, with nothing to show for your hard work.
A kill fee clause will mean that, even if your hard work never sees the light of day, you’ll still get at least partial payment.
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How to calculate your kill fee
Deciding how much your kill fee should be boils down to personal preference, and can be structured in any number of ways. For example, you could:
- Demand payment for the percentage of work complete at the point when the job was cancelled (this works especially well in situations where you have a staggered payment plan in place, or multiple sign-off points)
- Insist on a flat percentage of the entire project as a kill fee (figures in the region of 25% are fairly common, and more experienced freelancers are often able to negotiate for more)
- Dig your heels in and demand full settlement of your invoice (more on this in a second).
When don’t you need a kill fee?
There are some situations in which a kill fee simply won’t be needed. For example, if you’re paid on receipt of your work, rather than publication.
I hear kill fees are a bit controversial?
They sure are! There are strong arguments both for and against. The Against camp point out that if a client enters into a contract the terms of that contract should always be honoured – whether the work is cancelled or not. Your full payment should be factored into the cost of cancellation, and you should always insist on full payment.
The For camp argues that Kill Fees act as a legitimate insurance and make the canning of a project less disastrous for all involved. They also let clients know up-front that they shouldn’t be expecting to mess you around.
Kill fee clause best practice
The perfect kill fee clause will vary from client to client, but you should think about including the following details:
- Ability to reclaim all expenses up until the point the contract was killed
- Retaining ownership of copyright until applicable kill fees have been paid
- Exactly how your kill fee is calculated. Is it by hours worked, or percentage completed (if so, what estimate is that calculated on?), or a flat fee? Does it include any flat penalties?
- Payment terms for your kill fee (as project cancellation may be outside the scope of existing payment terms)
- What constitutes “killed” – the project could be cut back but not cancelled entirely, should you be compensated if you’ve already begun work on the now-cancelled work?
Whether you’re for or against kill fees, it can’t be denied that being prepared for every eventuality is better than not preparing for any of them.
Explore your options with troiublesome clients with more resources from Crunch, including dealing with late payment excuses and dealing with bad clients - along with some handy freelance invoice templates for you to clearly outline your payment terms on!