What Should My Consulting Termination Policy Be?

March 10, 2020

This question popped up recently in a discussion I was having with some fellow independent software consultants:

What's your termination policy?

Let's approach this from a couple of standpoints. First, what is a termination policy?

A big assumption here is that you are actively using a contract for all your freelancing or consulting engagements. If you're not, don't go any further. Get a contract in place.

The termination policy of your contract dictates the circumstances on which a contract engagement can be terminated. This covers both you and the person you are contracting for. Because of this, it is worth evaluating a couple of key aspects before deciding on what your approach should be.

And let's be honest, a whole bunch of things has to go wrong before you start considering enacting the termination policy of your contract. We're not talking about engagements that end gracefully - we're talking about toxic relationships.

Standard disclaimer: I am not a lawyer. You should talk to a lawyer. That's what I would do.

Who does the termination policy cover?

Most termination policies I've seen essentially cover both parties in an engagement. This means that the customer I'm working for should have equal rights to terminate the agreement as I do.

And this is only fair. As a consultant, you shouldn't be able to fire someone on a dime just because you feel like it. On the other hand, you wouldn't want a client to fire you on a dime just because they feel like it, right?

There is a big asterisk here. If the client doesn't pay, you should be free to terminate that agreement IMMEDIATELY. Don't stay with clients that don't pay. But your lawyer should cover that.

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How much notice would you want from a client?

In terms of the notice, this is usually a question of what kind of notice would you want to receive from a client. Depending on how many clients you have, and how long a typical engagement runs, this could be a serious blow to your income and livelihood.

It is understandable to want as much notice as possible. In most of my contracts, I have required a standard 30 days notice for the termination of any agreement. This provided me the opportunity to start looking for new work while still providing the services I was brought on for.

But it's worth noting that the client is already removed from the process at this point, so it is unlikely you'll be 100% busy during this time.

Tip: this is a great reason to do retainers versus traditional hourly billing. You could state that engagement is only as good while a retainer is paid.

How much time would you like to stick around with a toxic client?

Thirty days' notice sounds great, but what if you are dealing with a toxic client? Do you want to have to stick around with that client for 30 days?

I have learned this the hard way, and the answer is no.

Because of this, I'm working on amending my future contracts to have a 14 days termination policy. If you're lucky, the

You're going to have pain during this process, no reason to extend it out.

What if I terminate and a client doesn't pay?

This is where a good solid contract comes into play. My contract, for example, states that Client shall immediately pay to Company all amounts owed to Company....

It's worth being reasonable with accounts payable people, but you should expect your final payment within the NET payment schedule you have in the contract. (That is a completely separate discussion).

If you're not paid within that time, send a couple of reminder emails to the client but do not be afraid to invoke your lawyer. A simple letter from them could be enough to trigger payment.

Conclusion

What's your current termination policy? Do you have one at all? What factors went into your policy? Are you looking at talking to your lawyer after this post?

I would love to know! Leave a comment below or hit me up on Twitter.