Kill fee guidelines provide additional security in volatile industries. However, unlike contractual damage, they are not required by law. To be legally enforceable, they must be mutually agreed in a written document.
Freelancers and self-employed without killing fees were hit hard by the first wave of closures. According to veteran attorney Becca Brennen, there is always the potential for sudden cancellations in the entertainment industry, especially when Covid is still a factor. However, she also claims that it is never too late to create your own contract to protect yourself in the future. Plus, you’ll never have to wonder again if you’re entitled to compensation if months of expected income are lost overnight.
A kill fee is a fee for canceling a posted job. It reflects the work rejected and the loss of income resulting from your commitment to the project. Usually it is a sliding scale based on the time of termination. According to Becca Brennen, a deal memo is not an adequate substitute for a kill fee and must state both the cancellation fee and the minimum payment amounts.
They will not be protected without a written agreement and, in most cases, written terms protecting your interests must be provided by you. A good kill fee provision includes a fee schedule (usually one percent of the total expected value) and payment terms and late penalties for those fees, just as you would include as part of your normal rate or bid list.
You are in the best position to know what would be fair if you were to quit, but ideally you should work with an attorney who can help you develop language that reflects your ideal terms. This doesn’t have to be a significant or ongoing investment.
A good lawyer will help you make money. And someone who specializes in these types of contracts should be able to help you create a contract and guide you through the contract efficiently so you don’t get billed for more than a few hours. The beauty of a properly designed legal template is that it can be easily customized from project to project or from client to client.
When creating your own agreement, keep in mind that a good contract is fair and equitable for both parties. Becca Brennen finds that people find it more convenient to present contracts to their clients when they know the terms they are requesting and can confidently defend their terms or negotiate if necessary.
She suggests that individuals have their own contracts; However, this doesn’t mean they have to force it or present it to every client for every project. She claims that the way you use it depends on a case-by-case risk analysis based on a number of factors including your relationship with the customer and the value of the job in terms of expected income.
“It is unfortunate but understandable that many freelancers, even those with years of experience, fear that a hint of formality will scare a customer and burn bridges both near and far. In an industry largely based on word of mouth, your reputation precedes you. I wish everyone could understand that transparency is valued in the first place and will help everyone involved in the long term. The reality, however, is that with uneven performance dynamics, this is simply not the case. Because of this, I clarify the difference between creating your own policies and actually presenting and enforcing those contracts when faced with setbacks or discomfort in drafting a contract. “
It is entirely possible to set a precedent without immediately enforcing it. It can even help your position by presenting your standard terms right away but offering to waive them for a specific project or period of time. This shows professionalism and flexibility while allowing you leverage when your worth is proven.
You can even use the situation to ensure future work by offering to credit your killing fees for future projects. This not only reduces the current loss, but also shows goodwill towards the customer. You can also offer to reduce or waive your killing fee if you have the right of first refusal on the client’s future projects within a limited period of time.
“Of course you can assess the situation and decide that it is not worth it. that the relationship is too new or that a potential loss is not great enough. But now that you know what your ideal agreement is, you can critically examine any contract a customer presents to you and raise concerns with a clear view of preferable alternatives. If a customer’s Deal Memo relates to cancellation fees or minimum payments but doesn’t specify them, this is the perfect opportunity to showcase your terms. Not only are they protecting themselves, but they are now helping to tighten their agreement. “
In short, design your own contract and kill the fee terms. How you use it depends on the situation and involves risk analysis and a balancing act. Even knowing what protection looks like can help your position and mitigate the financial impact during these volatile times.