Retainage
Also known as: retention · holdback
Retainage is a percentage of each progress payment withheld by the owner or general contractor until the work is complete and accepted. Five to ten percent is commonly seen, and it is released after substantial completion and closeout.
The purpose is leverage: it gives the party above you a financial incentive for you to finish, correct punch list items, and deliver closeout documents. The effect on a subcontractor is that a meaningful share of profit on every job is unavailable for months.
Why retainage hurts subcontractors disproportionately
Retainage is withheld from the full billed amount, including the cost of materials and labour you have already paid for. On a job with a typical margin, the withheld amount can exceed the entire profit — so the profit is effectively financed by you until release.
Trades that finish late in the schedule, which frequently includes flooring, wait longest. Your retainage is typically not released until the overall project reaches substantial completion and closeout, regardless of when your own work finished.
Related terms
- Pay ApplicationA pay application is the monthly invoice a subcontractor submits for work completed during a billing period. It states the percentage complete of each schedule-of-values line item, subtracts retainage and previous payments, and arrives at the amount currently due.
- Schedule of ValuesA schedule of values is a breakdown of a subcontractor's total contract price into individual line items, each with its own dollar value. It is submitted after award and becomes the basis for monthly progress billing — you invoice the percentage complete of each line.
- Substantial CompletionSubstantial completion is the point at which a project is sufficiently finished that the owner can occupy and use it for its intended purpose, even if minor items remain. It typically starts warranty periods, ends liability for liquidated damages, and triggers the process that releases retainage.