Guide
Retainage in construction, explained for subcontractors
Retainage is often a subcontractor's entire profit on a job, sitting in someone else's bank account. Here's how it works and how to get it released sooner.
No credit card required. Then $25 per user per month (2-user minimum).
What retainage is
Retainage (also called retention) is a percentage of each progress payment that the owner or general contractor holds back until the work is finished. It gives them leverage to make sure the job is completed, the punch list is closed and closeout paperwork is delivered.
For a subcontractor working on a thin margin, it matters a lot. On a job with 10% retainage and an 8% profit margin, your whole profit can be sitting in retainage until months after you've left the site.
How retainage is calculated on a pay application
On a standard pay application, retainage is calculated on the total completed and stored to date, then subtracted from what you've earned:
| Line | Amount |
|---|---|
| Work completed to date | $70,150.00 |
| Materials presently stored | $8,400.00 |
| Retainage at 10% on both | −$7,855.00 |
| Total earned less retainage | $70,695.00 |
| Less previous payment requests | −$47,880.00 |
| Current payment due | $22,815.00 |
The free pay application template lets you set separate retainage rates for completed work and stored materials.
Reduction and release
Reduction
Release
How to get retainage paid faster
- 1Read the retainage clause before you sign. Note the rate, any reduction milestone and what triggers release. Negotiate early release for your scope if you finish early.
- 2Track retainage on every job. Know exactly how much each GC is holding. It's money owed to you, not a write-off.
- 3Start closeout early. O&M manuals, warranties, as-builts and attic stock are the most common reasons retainage gets held. Prepare them while the job is still running.
- 4Close your punch list fast and get written sign-off.
- 5Submit a retainage pay application with final lien waivers as soon as you're eligible, then follow up on a schedule.
- 6Know your state's prompt-payment rules. Many states set deadlines and interest for late retainage. Talk to a construction attorney if payment stalls.
This guide is general information, not legal advice. Retainage rules vary by contract and by state.
Frequently asked questions
What is a typical retainage percentage?
Commonly 5% to 10% of each progress payment. The rate is set by your subcontract, and many states limit retainage on public projects and some private projects. Check your contract and the law where the project is located.
When is retainage released?
Usually at substantial completion or final completion of your work, or of the whole project, depending on the contract. Release normally requires a final or retainage pay application plus closeout documents and final lien waivers.
Can retainage be reduced during the job?
Some contracts and some state laws reduce retainage after a milestone, such as 50% completion, if the work is on schedule. If your contract allows it, request the reduction in writing when you reach the milestone.
Is retainage charged on stored materials?
Usually, yes. Many contracts apply retainage to materials presently stored, sometimes at a different rate than for completed work.
Spend less time on paperwork and more time building.
Try Sub-Office free for 30 days. No credit card required, cancel anytime. Then $25 per user per month.