Course outline

Module 1 · The money: what you're getting into 4 minUpdated September 13, 2026

How retainage works, and what it does to your profit

Retainage is a percentage — commonly 5% to 10% — withheld from each progress payment until the project is finished. The owner holds it from the GC, and the GC holds it from you. It's usually released after substantial completion and closeout, which for a flooring sub can be months after your last day on site. Because it's taken from the whole billing, it can equal a large share of your profit.

By Michael Reddy, IntelBid

After this lesson you can

Calculate retainage and the amount due on a pay application
Explain why retainage can hold back most of a job's profit
Take the steps that get retainage released sooner

How is retainage calculated?

Retainage is withheld from the value of work completed — and from stored materials, if you bill them. Every pay application shows the running total held so far.

One pay application with 10% retainageWorked example · illustrative numbers

Contract (schedule of values): $150,000
Completed in earlier periods: $30,000
Completed this period: $50,000
Retainage rate: 10%

Total completed to date: $30,000 + $50,000 = $80,000.
Retainage held to date: 10% × $80,000 = $8,000.
Earned less retainage: $80,000 − $8,000 = $72,000.
Less what was already certified for payment ($30,000 − $3,000 retainage = $27,000): $72,000 − $27,000 = $45,000.

Payment due this period: $45,000, with $8,000 held so far. It's the same sequence as lines 4 to 8 of the AIA G702 application form.

Why does retainage hit profit so hard?

Retainage is a percentage of the whole billing — including labor and material you've already paid for. Your profit is only a slice of that billing, so the amount held back can be a large share of your profit, or more than all of it.

Job profit (after overhead)	Retainage	Share of profit held until closeout
25%	10%	40%
15%	10%	67%
10%	10%	100% — every dollar of profit
8%	10%	125% — more than the entire profit
25%	5%	20%

Put simply: even a well-priced job that keeps 25% profit has 40% of it held at 10% retainage — and on a job that was cut to 10% profit, all of it sits with the GC until the job closes out. The cash flow lesson shows what that does across a whole job.

When is retainage released?

Your subcontract sets the trigger, and state law may set limits. Common patterns:

At [substantial completion](/glossary/substantial-completion) of the whole project, sometimes keeping a smaller amount back for punch list work.
At final completion and closeout, once closeout documents, warranties, attic stock and final lien waivers are delivered.
After the owner releases retainage to the GC, with the GC paying subs within a set number of days.
Reduced partway through — for example from 10% to 5% once the project is half complete — where the contract or state law provides for it.

The catch for flooring: you're usually one of the last trades on site, but release is normally tied to the whole project finishing. You can complete your scope and still wait on other trades' punch lists and the owner's closeout.

State law varies

Many states cap retainage percentages, require reductions after a completion milestone, set deadlines for release, or add interest on late payment — and public and private projects are often treated differently. Check your state's rules and your specific subcontract. This lesson is education, not legal advice.

How do you get retainage back sooner?

Negotiate before you sign
Ask for a lower rate, a reduction at 50% complete, or release when your own scope is accepted rather than at final project completion. Some GCs agree for subs they trust, especially on early-finishing scopes.
Bill it as its own request
When your work is accepted, submit a retainage billing right away. Retainage is rarely paid automatically — nobody releases money that hasn't been requested.
Deliver closeout documents early
Warranties, maintenance instructions, attic stock transmittals and as-builts are commonly required before release. Send them the week you finish, not when someone asks.
Close your punch list fast
Open punch items are one of the most common reasons retainage sits. Finish them and get written sign-off.
Price in slow release
If a GC is known to sit on retainage for a year, the cost of that money belongs in your price for that GC.

Track retainage like the receivable it is

Retainage is money you've earned. Keep a running list of retainage held on each job, the release trigger in each subcontract and when you expect it. Across several jobs, the total is often big enough to change how much new work you can take on.

What is a typical retainage percentage?

5% to 10% is commonly seen, with 10% frequent on private work. Many states cap the percentage, especially on public projects, so check your state's rules and your contract.

When do subcontractors get their retainage back?

Usually after the project reaches substantial or final completion and closeout, depending on the subcontract. Some contracts release it when the owner releases retainage to the GC, and some states set deadlines for payment after that.

Is retainage withheld on change orders?

Usually, yes. Approved change orders are added to the contract sum and billed like base work, so retainage is typically withheld from them too unless the contract says otherwise.

Can I get retainage before the whole project is finished?

Only if your subcontract allows it, such as release on acceptance of your scope. Otherwise you can ask, but the GC generally doesn't have to pay until the contract's trigger is met — so negotiate it before signing.

Key points

Retainage comes off the whole billing, so it can equal most or all of your profit.
Release is usually tied to the whole project finishing, not your scope.
Negotiate the terms before signing, then request release the moment you're eligible.

In IntelBid · Won project → SOV tab

Retainage on every pay application

A won project's SOV tab holds your schedule of values. Each pay application bills this period's progress against it, withholds the retainage percentage you set, and shows the net amount due — the same math as above — with the option to push the invoice to QuickBooks. When your work is accepted, Bill retainage creates the release billing for everything held so far.

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About the author. Michael Reddy builds IntelBid, bid management software for commercial flooring subcontractors. These lessons come from the bid desk: how the work is priced, won and paid for.