Freelancers’ Questions: Am I due full pay if my retainer is cancelled?
Freelancers' Question: A client I work for direct on a retainer basis (four days each month) emailed me to say they no longer need my services. This was the third week of their month and they requested that I invoice them for work completed to date.
But my ‘Statement of Work’ states that the contract is a retainer agreement so I billed for the full four days. They then requested a breakdown of hours spent this month. I said that as I’m on a retainer basis, I have been unable to allocate the time to other clients for this final month and therefore intend to charge accordingly. After all, they have given me no notice whatsoever.
The client claims they want to keep working with me in the future but must justify the time I spend. What should I do? Is this typical with retainers? Not only has this retainer come to an end but they clearly don’t want to pay me for the full month. Please advise.
Expert’s Answer: Unfortunately, it’s not unusual for clients to start requesting breakdowns when they’re preparing to query or dispute an invoice. And this case sounds like no exception!
As such, the first thing is to check what your ‘Statement of Work says in respect of termination. If there is nothing in writing on the subject of notice periods, cancellation and final payments, then it is debatable who exactly is ‘in the right’ here.
Assuming nothing is in writing about termination, our view is that you essentially have two options:
- Supply the client with the requested breakdown and be prepared to negotiate a suitable settlement payment for the final month, or,
- 'Stick to your guns' in pursuit of full payment and be prepared to escalate your claim if necessary.
Of the two, option one is -- in our view as credit managers -- likely to be the most cost-effective. Negotiation is almost always easier, quicker and cheaper than getting into a protracted commercial dispute and nine times out of ten, parties reach an acceptable compromise. You can also negotiate first and then if that is unsuccessful, ‘up the ante’ by pursuing the full balance as per the original invoice.
To start with, we would suggest you supply the requested breakdown for the month and make a ‘without prejudice’ offer of settlement of, say, 75-80% of the invoice value. If you can agree a figure with your client, you can at least then maintain some of the goodwill you have built up to date and you may be able to recoup some of the ‘discounted’ amount by upping your rate, in the event this client does request additional work in future.
If your without prejudice settlement offers aren’t accepted, or if you do decide to keep demanding payment for the full four days, you should be prepared to have to chase it and reiterate that you have allocated this time as agreed -- and expect to be paid for it.
You will no doubt still have to provide a breakdown as requested. This would be an ideal time to highlight any previous occasions when you may have gone above and beyond for this client, or provided works in excess of the agreement.
Be polite but firm and ensure the client knows that you remain available for the full four days if necessary. That way you aren’t asking them to pay for time that they are unable to use.
If they are completely unwilling to pay, your only real recourse is the issue of a small claim in the County Court (for amounts under £10,000). However, this is likely to kill any remaining goodwill between you and the client and makes it unlikely you will get work from them in the future.
In addition, it can be a time-consuming experience for litigants in person and you may need to attend a hearing at a county court local to your debtor -- at your own costs. If you’re some distance from your reluctant client, these costs could mount rapidly and are generally unrecoverable even if you win the claim.
We deal with disputed and queried accounts with some regularity and it is almost always much better to try to negotiate an amicable exit in situations like this. Besides which, one of the conditions of being able to issue a legal claim, as set out in the pre-action protocols (1.c), is that parties must first try to resolve disputes without litigation wherever possible. Good luck!
9th January 2019