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What retainage is
Retainage, or retention, is a percentage of each payment the GC holds back as security that the work gets finished and fixed. The owner usually holds it from the GC too. It adds up over the job, and on a long project it can be a large share of a sub’s profit, so it’s worth tracking closely.
How retainage is calculated on a pay app
On the G703 continuation sheet, column I shows retainage for each line: the line’s total completed and stored to date times the rate. On the G702 cover sheet it’s line 5, split in two:
- 5a, retainage on completed work: the rate times columns D + E.
- 5b, retainage on stored materials: the rate times column F.
Line 5 is the total held to date, not this month’s. Line 6 subtracts it from everything earned, and line 8, the payment due, subtracts what’s already been paid. Here’s the sample pay app from our guides: $399,440.00 of work and $26,000.00 of stored materials, at 10%.
5a · On completed work
39,944.00
10% of 399,440.00
5b · On stored materials
2,600.00
10% of 26,000.00
5 · Total retainage
42,544.00
5a + 5b
- Paid before
- $308,209.50
- Due this month
- $74,686.50
- Held as retainage
- $42,544.00
- Left to bill
- $306,960.00
Two things break most often. A line where someone typed the retainage instead of calculating it, so the rate is off. And a column I total that doesn’t match line 5 because a row was added or deleted. Both are easy for a GC to spot.
Work out retainage in seconds
The free retainage calculator gives you G702 lines 4 to 9 from your totals. Nothing leaves your browser.
Typical rates and limits
Most commercial subcontracts hold 5% or 10%. Your rate is in the payment section of your subcontract, and it often matches what the owner holds from the GC. Many states limit retainage, especially on public projects, and some require it to be reduced or paid out by certain points. If a rate looks high, check the contract and your state’s rules before the first pay app, not the last.
Retainage reductions
Many contracts reduce retainage once the work is half done, for example from 10% to 5%. Contracts handle this in two ways: the lower rate applies only to new billings, or retainage already held is released down to the new rate. The difference matters, so read the clause.
Retainage held to date, by pay app
Example on a $732,400 contract. Your contract decides whether and when retainage is reduced, and how much is released before final payment.
Either way, don’t lower the rate on your pay app until you have the GC’s written approval. A rate that drops without it is one of the things GCs send pay apps back for, and the checker flags it when you add last month’s sheet.
Billing for retainage release
When your work is done and the contract allows it, you bill for the retainage held. Usually that means:
- Finishing punch list items and getting the GC to confirm your scope is complete.
- Sending closeout documents: warranties, O&M manuals, as-builts and attic stock, whatever your contract lists.
- Submitting a final pay app with retainage released, so line 5 goes to zero and line 8 is the retainage amount.
- Sending the lien waivers the GC asks for, often a conditional final waiver with the pay app and an unconditional one once paid.
Don’t let it sit
Retainage is easy to forget once you’ve moved on to the next job. Put the release date on your calendar the day your scope is complete, and follow up in writing.
Keeping track of retainage
Keep a running total of retainage held on every job, from the pay apps the GC approved. In your books, many contractors invoice the full amount earned and move the retainage portion to a retainage receivable account, so it shows as money owed to you. If you use QuickBooks, see AIA billing with QuickBooks.