What Is a Kill Fee?
A kill fee — sometimes called a cancellation fee or early termination fee — is a payment a client makes to a freelancer when the client cancels a project after work has begun.
Without a kill fee clause in your contract, a client can cancel at any time and you have no legal basis to demand payment for work already completed beyond what has already been invoiced. All the time and effort you invested, all the work that may not be usable elsewhere, and any opportunity cost from turning down other clients — gone.
The kill fee compensates you for that. It is not a penalty for the client canceling. It is compensation for the real cost you incur when a project is canceled mid-stream.
Why Clients Cancel Projects
Project cancellations happen for legitimate reasons: budget cuts, strategy changes, business pivots, the project proving less viable than expected. Most cancellations are not the result of bad faith on the client's part.
That is exactly why the kill fee conversation is not adversarial. You are not preparing for a client who intends to cheat you. You are planning for an ordinary business scenario — cancellations happen, and both parties deserve a clear understanding of what happens when they do.
How Kill Fees Are Structured
The most common kill fee structure in freelance contracts is a percentage of the remaining unpaid balance at the time of cancellation.
A typical example: if a project has a total fee of $10,000 and the client has paid $3,000 upfront, the remaining balance is $7,000. A 25% kill fee means the client owes $1,750 upon cancellation, in addition to the $3,000 already paid.
Common kill fee percentages:
- 25% of remaining balance: the most standard formulation, appropriate for most projects
- 50% of remaining balance: appropriate for projects with significant upfront investment or high opportunity cost
- 100% of remaining balance: rare, used for very short-turnaround projects or situations where the freelancer turned down other work specifically for this project
Some contracts use a flat fee rather than a percentage — for example, "one month's retainer fee" for ongoing retainer relationships.
When the Kill Fee Applies
Your contract should specify the trigger conditions. Typically, the kill fee applies:
- After a specific amount of work has been completed (e.g., after the first deliverable is submitted)
- After work has begun (any substantive work on the project)
- After a certain number of days into the project
A common and reasonable formulation: "If the client terminates this agreement after work has commenced, the client agrees to pay a cancellation fee equal to 25% of the remaining unpaid balance."
Some contracts include a grace period — for example, the client may cancel within 48 hours of signing with no cancellation fee, since no work has likely been done.
What About Work Completed But Not Yet Delivered?
The kill fee covers the remaining balance on work not yet completed. It does not replace payment for work already completed. Your contract should address both:
- Payment for all work completed to the point of cancellation, billed at your regular rate or pro-rated from the project fee
- The kill fee on the remaining portion of the project
How to Explain Kill Fees to Clients
Most clients are unfamiliar with kill fees and may push back when they first see the clause. Frame it this way: the kill fee is how this project gets prioritized on your schedule. When you commit to a project, you may turn down other work to accommodate it. If the project cancels, the kill fee compensates you for that opportunity cost — not to punish the client, but to make the commitment workable for both parties.
Reasonable clients understand this. Clients who reject the concept of any kill fee regardless of explanation are worth evaluating carefully before signing.
Including a Kill Fee in Your Contract
TermsDock's Freelance Contract Generator includes a kill fee clause automatically: if the client cancels after work has begun, a 25% kill fee on the remaining balance applies. You can adjust the percentage to match your standard practice.