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How retainage is calculated
Retainage is a percentage of each progress payment that the owner holds back until the work is complete. On a pay application it is calculated on the cumulative totals to date, not on the current period alone.
- Retainage on completed work = work completed to date x the retainage rate for work.
- Retainage on stored materials = materials presently stored x the retainage rate for stored materials.
- Net retainage held = the two added together, less any retainage already released.
- Total earned less retainage = total completed and stored to date - net retainage held.
- Current payment due = total earned less retainage - previous certificates for payment.
When retainage is reduced or released
Many contracts reduce retainage at a milestone, for example from 10 percent to 5 percent once the job is 50 percent complete, or release it for a completed phase. A release lowers the net retainage held, which raises the current payment due by the same amount. Enter the amount released so far in the retainage released field to see the effect.
Frequently asked questions
What is a typical retainage percentage?
Five to ten percent is common on commercial construction contracts in the United States. The rate is set by the contract, and many states cap it on public work and some on private work.
Is retainage calculated on stored materials?
Usually, yes. Stored materials are billed on the pay application and retainage is withheld on them, sometimes at a different rate from completed work.
Is retainage calculated on this period or to date?
To date. A pay application works on cumulative totals: retainage is the rate applied to everything completed and stored so far, and the amount due is found by subtracting what was certified on previous applications.