Glossary
What is a retainer fee?
A retainer fee is money paid in advance to secure a professional's time or services. Learn how retainers work, how to bill against them and what to include.
Updated · By PayToMe Editorial
A retainer fee is an amount a client pays in advance to secure a professional’s time, availability or future services. It is common among freelancers, agencies, consultants and lawyers, and it is often charged monthly.
How it works
There are two main kinds, and the agreement should say which one you mean:
- Availability retainer. The client pays to reserve your capacity, such as 10 hours a month. The fee is yours whether or not they use all of it.
- Prepaid (advance) retainer. The client funds an account and you bill work against it. Unused money remains the client’s until you earn it.
Setting one up usually follows a few steps:
- Define the scope. What work is included, what is not and how quickly you respond.
- Set the amount and period. For example $2,000 per month for up to 20 hours.
- State the rules for extra work. Overage rates, approval needed and how it is billed.
- Decide on unused time. Rollover, expiry or refund.
- Invoice on schedule. Charge in advance each period, ideally as a recurring payment.
Retainers give you predictable income and give clients priority access. They differ from a deposit invoice, which covers one project, and from progress billing, which bills stages of a project.
Some professions are regulated. For example, rules about how lawyers hold and account for client funds are set by state bar associations, so check your own professional rules. This is general information, not legal advice.
Example
A designer has a $2,400 monthly retainer for 24 hours at $100 per hour, with extra hours billed at $120.
| Month | Hours used | Included | Extra hours | Extra charge | Invoice total |
|---|---|---|---|---|---|
| Jan | 20 | 24 | 0 | $0 | $2,400 |
| Feb | 26 | 24 | 2 | $240 | $2,640 |
| Mar | 18 | 24 | 0 | $0 | $2,400 |
Under an expiry rule, the 4 unused hours in January and 6 in March are lost. Under a rollover rule, January’s 4 unused hours would carry into February and cover part of the overage. Both rules are fine, as long as they are agreed upfront. Create the monthly invoice with the free invoice generator, and compare it with your hourly numbers in the hourly rate calculator.
Related terms
- Deposit invoice: an advance payment on one project.
- Recurring payment: a way to collect the retainer each month.
- Progress billing: staged invoices for a longer project.