Cancellation fee and kill fee: what each means and how they differ

When work passes through several layers, a brand, an agency, a production company and the freelancers, a project can die for reasons no single layer controls. A brand changes strategy, a budget is cut, a launch moves by a quarter. Each layer cancels the one below it, and the freelancers at the end discover that the weeks they held, and the jobs they turned down to hold them, are worth nothing on paper. This is especially true in advertising film production.

A cancellation fee or a kill fee is how those held days get paid for.

Cancellation fee or kill fee?

They work the same way and protect against different events.

• A cancellation fee applies when the client cancels the project for its own reasons (anything other than a material breach by the freelancer).
• A kill fee applies when the project is killed upstream, by the client's own client or agency, and the client cancels the freelancer as a result.

Why have both? Because they are often priced differently. A client cancelling of its own accord can usually accept a higher minimum; a production company caught by a brand's decision will negotiate the kill fee harder. Agreeing both up front means neither event becomes a negotiation after the fact.

How either fee is worked out

1. Fee compensation: the greater of
   • all fees for work completed up to the cancellation or kill date, or
   • the agreed cancellation or kill fee (the minimum).
2. Minus fee payments the freelancer has already received, such as an advance. Nothing is refunded: an advance above the minimum stays with the freelancer, because it paid for time they committed.
3. Plus pre-approved expenses actually incurred, in full and separately. They are never absorbed into the minimum.

Example (fictional). Arjun, a DoP, is booked for an ad film with a kill fee in his agreement and has received an advance. The brand pulls the campaign before the shoot. He has done only the recce and prep, worth less than the kill fee, so he is owed the kill fee minus his advance, plus the recce travel he had pre-approved.

Example (fictional). Ira, a content creator, is booked by an agency for three sponsored reels for a phone launch, with a kill fee in her agreement. The brand cancels the launch and the agency cancels her after she has scripted the reels. The scripting is worth less than the kill fee, so she is owed the kill fee, minus any advance, plus her pre-approved expenses.

When the fee becomes payable

The freelancer invoices the net amount, and it falls due within the same payment timeline as any other payment under the agreement, counted from when the client receives the invoice.

"We haven't been paid by the brand either"

This is the most common reason a kill fee goes unpaid. A strong kill fee clause says plainly that the client's obligation does not depend on the client recovering anything from its own client or agency. The freelancer's agreement is with the client, not with the brand.

Valuing work in progress

If a milestone was half done when the project died, how much of it counts as "work completed"? Agree that completed milestones count in full and that a milestone in progress counts for the share completed, agreed in writing or, failing that, decided by an arbitrator.

Who needs this most

• Crew booked by the day: DoPs, gaffers, focus pullers, sound, art department, hair and make-up.
• Directors and production designers: weeks of prep before a single shoot day.
• Composers and editors on campaigns: work that only exists for one launch date.
• Content creators and influencers booked for a campaign: posting dates held, and other brand deals turned down to keep them.
• Anyone who turns down other work to hold dates.
• Production companies and agencies: a minimum agreed up front is a known cost if a brand pulls a campaign, instead of a dispute with the crew afterwards.

How The Goodwill Network handles it

Our agreement has a cancellation fee (13.3) and a kill fee (13.4), and either or both can be switched on. Each pays the greater of the work done and the minimum set in the agreement, minus fee payments already made, plus pre-approved expenses in full; an advance above the minimum is not refunded; and the kill fee does not depend on the client recovering anything upstream. If the client ends the agreement for convenience, the freelancer is never paid less than the cancellation fee, where one is set. When it happens, the freelancer creates the fee document from the agreement, says what the payment is for, and the right document follows (an invoice when it pays for work done or is a set price for cancelling, a settlement note when it is compensation for the cancelled engagement). How our agreement handles cancellation and kill fees →