Latest / Freelance Careers with Fexingo: Independent Work, Consulting, and Self-Employment / How Freelancers Can Negotiate a Termination Clause
Transcript
- Lucas: Let's talk about something most freelancers avoid until it's too late: the termination clause in their contract. The thing that says what happens if the client — or you — wants to walk away before the project is done. Luna: And by 'too late' you mean after they've done three weeks of work and the client ghosts them? Lucas: Exactly. I was looking at a survey from the Freelancers Union — it's a few years old but the numbers haven't changed much — and something like 40 percent of freelancers said they'd experienced non-payment or late payment for completed work. A solid termination clause wouldn't prevent all of that, but it would give you a legal and relational framework the minute things go sideways. Lucas: And I want to be clear: this isn't just about protection from bad clients. A good termination clause signals professionalism. It tells the client you've thought about the relationship beyond just the deliverable. Luna: So it's almost like a prenup for a project. Uncomfortable to discuss upfront, but way less messy than trying to sort it out after things fall apart. Lucas: That's the perfect analogy. And just like a prenup, if you bring it up in the right way, it can actually build trust rather than undermine it. Luna: Speaking of building trust — and I want to tie this directly to what we do here — we keep this show completely ad-free. No sponsor segments, no mid-roll interruptions. And the only reason we can do that is because listeners who find value in it choose to support us. If you've ever gotten a useful tip from this podcast, there's a link: buy me a coffee dot com slash fexingo. It's a simple way to keep this independent. Lucas: Yeah, and we mean that — it genuinely makes a difference. A lot of podcasts take ad money and it changes the incentives. We don't want that. So if you appreciate the no-ads approach, that's the place. Luna: Right. Okay, back to termination clauses. So what are the actual components that a freelancer should have in there? Lucas: Three things. First, a notice period — typically 14 to 30 days. That gives both sides time to wrap up or transition. Second, a definition of what 'completed work' means for payment purposes. And third, a kill fee — a percentage of the remaining project value that gets paid if the client cancels after you've already started. Luna: Can you give a concrete example? I think that helps. Lucas: Sure. Let's say you're a freelance graphic designer. You have a contract with a startup to design their entire brand identity — logo, color palette, typography — for ten thousand dollars. You've done the initial mood boards, presented two logo concepts, and the client loves them. Then they hit a funding snag and want to cancel. Without a termination clause, you might get zero for those two weeks of work. With a clause that says a 50 percent kill fee on work completed beyond the first milestone, you'd get at least five thousand. Luna: And I imagine the notice period protects the client too, right? If you decide to bail, you can't just disappear. Lucas: Absolutely. It's a two-way street. A 30-day notice means you have to finish what you've committed to, or at least hand over all working files so the client can continue without you. That's fair. And it actually makes you look more reliable. Luna: What about new freelancers who feel like they have no leverage? If you're just starting out, asking for a kill fee might scare off a client. Lucas: That's a real concern. I'd suggest a tiered approach. For a first-time client, you might skip the kill fee but include a clear 'payment for work performed to date' clause. That's non-negotiable — you should always get paid for the hours you've already logged. Once you've done a couple of projects with someone, then you can introduce a kill fee as you renew the contract. Luna: So start with the baseline — get paid for what you've done — and build up to a more protective structure as the relationship matures. Lucas: Exactly. And here's a specific number to anchor on: the Freelancers Union's model contract suggests a kill fee between 25 and 50 percent of the remaining project value, depending on how much work has been completed. If you're halfway through, 50 percent is standard. If you've only done the kickoff call, maybe 25 percent. Luna: That's helpful. But what about the language itself? How do you actually phrase this in a contract without sounding like you're expecting the worst? Lucas: I like to frame it as a 'mutual off-ramp.' You say something like: 'Either party may terminate this agreement with 30 days' written notice. In the event of termination, the client shall pay the freelancer for all work completed up to the termination date, at the hourly or milestone rate specified in this agreement. Additionally, if the client terminates after the first deliverable has been submitted, a cancellation fee equal to 50 percent of the remaining project value shall be due.' Luna: I notice you said 'may' — not 'will.' That gives some flexibility. Lucas: Right. And if you're worried about scaring off a client, you can even say 'may be negotiated' — but in practice, most professional clients expect this. They have similar clauses in their own vendor contracts. Luna: So the resistance is often more in the freelancer's head than in the client's. Lucas: I think so. And look, the worst-case scenario is you lose a client who was never going to pay you properly anyway. That's a win in disguise. Luna: Let's talk about the flip side — what if you as the freelancer need to terminate? Maybe a client is toxic, or the scope keeps creeping, or they're just not paying on time. How do you exit gracefully without burning a reference? Lucas: That's where the notice period is key. Give 30 days, finish any critical deliverables, offer to transition files. And if the client is truly toxic, you can still use the clause to leave — but you might choose to forfeit the kill fee just to get out clean. The clause gives you the structure; you can always be more generous than the contract requires. Luna: So it's a floor, not a ceiling. Lucas: Exactly. And one more thing: include a clause about work product ownership upon termination. If you've created something, who owns it if the project ends early? You don't want a client using your designs without paying for them. I recommend that the client only gets full ownership of deliverables that have been paid for. Anything unpaid remains your intellectual property. Luna: That's a great point. I've heard horror stories of freelancers handing over source files only to have the client walk away and use them for free. Lucas: Yeah. So to summarize: three pillars — notice period, payment for completed work, and a kill fee. And the IP clause as a bonus. If you get those in writing, you're way ahead of most freelancers. Luna: And if you're thinking 'I don't have a contract at all' — that's the first problem. Even a simple one-page agreement is better than a handshake. Lucas: Absolutely. There are great templates out there — Freelancers Union, AND CO, even some legal design firms have made them free. But don't just copy-paste. Tailor the notice period and kill fee to your typical project size and timeline. A one-week project probably doesn't need a 30-day notice. Luna: So the key takeaway: have the uncomfortable conversation early, put it in writing, and you protect both your income and the relationship. Lucas: Right. And the best part is, once it's in the contract, you don't have to think about it again unless something goes wrong. And if it does, you'll be glad you did. Luna: I think we should do a follow-up episode on how to actually enforce those clauses when a client doesn't pay. There's a whole other layer there. Lucas: That's a great idea — small claims court, demand letters, collection agencies. We'll get into that soon. For now, if you're a freelancer and your current contract doesn't have a termination clause, that's your homework this week. Update it. Even if you never use it, the peace of mind is worth the hour it takes. Luna: And if you want to support more deep dives like this, you know where to find us. Thanks for listening.