Constructelligence
Overview
Free tools Pricing Demo Join the beta
Guide · retainage

Retainage in construction: how it works and how to get it back

Retainage is the share of every progress payment the owner holds back until the work is complete — typically 5% to 10%. On a $4M job at 10% it is $400,000 of earned money sitting with someone else, often for months after the work is done. This guide covers how it flows, how to get it reduced and released, and how to stop losing track of it.

Updated · 9 minute read

Key takeaways
  • Retainage is earned revenue held back — commonly 5–10% of each progress payment.
  • It flows down: owners hold it from GCs, GCs from subs.
  • Negotiate a reduction at 50% complete where the contract allows.
  • Track it by job and age since substantial completion — it does not age like a normal invoice.

How retainage works

Each pay application bills the work completed to date. The owner withholds a percentage — the retainage — and pays the rest. The general contractor usually withholds the same or a higher percentage from each subcontractor, so the risk flows down the chain.

retainage held = total completed & stored to date × retainage %
payment due = earned less retainage − previous payments

Retainage is earned revenue, not a discount. It sits on the contractor’s balance sheet as retainage receivable, and on the subcontractor side as retainage payable.

A worked example

A $4,000,000 contract at 10% retainage, reducing to 5% at 50% complete. About 60% of the work is subcontracted, and the general contractor holds 10% from its subs throughout. Figures are illustrative.

Retainage held at 50% complete = $2,000,000 × 10%$200,000
At 80% — reduction applies to new work only: $200,000 + $1,200,000 × 5%$260,000
At 80% — reduction applies to the whole balance: $3,200,000 × 5%$160,000
Retainage payable to subs at 80% = $3,200,000 × 60% × 10%$192,000
GC’s own money held back (new-work-only reading)$68,000

The two readings of the same reduction clause differ by $100,000 of cash. Agree which one the contract means before the 50% application, not after it. Note too that most of what the owner holds is the subcontractors’ money — which is why releasing retainage to subs only when you are paid yours matters.

CalculatorRetainage on a job

For more inputs, a second forecast and a shareable link: the pay application & retainage calculator →

At 50% complete$200,00080% · reduction on new work$260,000reading A80% · reduction on whole balance$160,000reading BOf that, owed to subs$192,000their moneyGC’s own money held (A)$68,000Readings A and B of the same clause are $100,000 of cash apart
The $4.0M worked example: the same “reduce to 5% at 50%” clause is worth $100,000 of cash depending on how it is read — and most of what is held is the subcontractors’ money.

Typical rates and the rules around them

Rates of 5% to 10% are common. Many US states cap retainage — especially on public work — and set deadlines for releasing it after completion, often as part of prompt-payment statutes. Private contracts vary widely. Check your state’s law and the contract itself; the contract governs where the law allows.

A common negotiated term is a reduction: retainage drops (for example from 10% to 5%) once the job reaches 50% complete with satisfactory progress.

Getting retainage released

  1. Reach substantial completion and get it certified in writing.
  2. Close the punch list quickly — it is the usual reason release stalls.
  3. Deliver closeout documents: warranties, O&M manuals, as-builts, final lien waivers.
  4. Submit a dedicated retainage billing — do not assume it will be paid automatically.
  5. Track it by job and by age, and chase it like any other receivable.

Tracking it so it is not forgotten

Retainage is easy to lose because it does not age like a normal invoice. Track retainage receivable by job and by age since substantial completion, and retainage payable to each sub, so you release theirs when you are paid yours. The AR view in the demo separates retainage from ordinary receivables.

Retainage on the WIP schedule and in cash forecasts

Retainage is billed revenue, so it counts in billings to date on the WIP schedule — excluding it would make every job look under-billed. It is not cash, though: in a 13-week cash flow forecast each progress receipt is net of retainage, and the retainage itself appears only in the week you realistically expect release.

Checklist
Retainage tracker in Excel, filled in with example rows — columns: Job, Owner, Retainage %, Completed to date, Retainage held, Substantial completion, Days since, Billed for release…
The retainage tracker as it opens in Excel: example rows in italics, calculated columns shaded.
Free template · Retainage tracker (Excel & CSV)An Excel workbook with drop-downs, validation and formulas built in — or the same columns as a CSV for Google Sheets and Numbers.
Download Excel (.xlsx)
What this template captures

Retainage per job: the rate, completed to date and retainage held, substantial completion and days since, what has been billed for release, what has been paid and the balance still held.

10 columns: 7 you fill in and 3 calculated by formula and filled down 200 rows, so nothing is worked out by hand. In the Excel version, 5 columns reject entries of the wrong type (a date column only takes dates, an amount column only numbers), the header row stays frozen with filters on it, and the workbook opens on an Instructions sheet that lists every column below.

Every column, and how it is captured
ColumnTypeWhat goes in it
JobTextJob number exactly as in your accounting system (e.g. J-1104), so rows join to job cost.
OwnerTextThe person responsible for the row.
Retainage %PercentRetainage rate held under the contract, 0–100.
Completed to dateAmount ($)Enter the amount in dollars.
Retainage heldCalculatedCalculated: [Completed to date] × [Retainage %] ÷ 100
Substantial completionDateEnter the date.
Days sinceCalculatedCalculated — days since substantial completion — the clock most retainage release terms run on (= IF([Substantial completion]=blank, blank, TODAY() − [Substantial completion]))
Billed for releaseAmount ($)Enter the amount in dollars.
PaidAmount ($)Enter the amount in dollars.
Balance heldCalculatedCalculated: [Retainage held] − [Paid]

See it on real-looking numbers

Constructelligence is a construction intelligence platform: it reads your ERP, project and field systems read-only and does this arithmetic every week, for every job. The demo runs it on a sample eight-job portfolio.

Try the demoJoin the private beta

Frequently asked questions

What is retainage in construction?

Retainage is a percentage of each progress payment — commonly 5% to 10% — that the owner holds back until the work is complete, as security for finishing the job and correcting defects. General contractors usually hold retainage from their subcontractors too.

Is retainage revenue?

Yes. Retainage is earned revenue that has been billed but not yet paid. It is recorded as retainage receivable, separately from ordinary accounts receivable, until it is released.

When is retainage released?

Usually at or after substantial completion, once the punch list and closeout documents are complete. Many states set deadlines for release on public projects; the contract sets the terms on private work where the law allows.

Can retainage be reduced during a job?

Often, if the contract allows. A common term reduces retainage, for example from 10% to 5%, once the project is 50% complete and progress is satisfactory.

What is retainage payable?

Retainage payable is the retainage a general contractor has withheld from its subcontractors and still owes them. It is a liability, usually released to each subcontractor when the owner releases the matching retainage.

Does retainage count in over- and under-billing?

Yes. Retainage is part of billings to date, so it is included when billings are compared with earned revenue on the WIP schedule. Leaving it out makes jobs look under-billed.

CI
Written by the Constructelligence teamConstruction finance and software. Worked examples use the sample demo portfolio; formulas are standard practice. Reviewed September 2026.
AIA G702 and G703: filling out a pay application, line by lineHow to fill out the AIA G702 Application and Certificate for Payment and the G703 continuation sheet: every line explained, a worked example, the math that must tie out, and common rejection reasons.The WIP schedule: over-billing, under-billing and why they matterHow a construction WIP schedule works: percentage of completion, earned revenue, over- and under-billing formulas, a worked example, and the errors lenders and sureties look for.Construction cash flow forecasting: a 13-week model that worksHow contractors forecast cash flow: the 13-week model, billing and payment timing, retainage, payroll and subcontractor payments, finding the low point, and what to do before it arrives.

More in Billing & cash

Free tools for this topic: Over/under billing calculator (WIP) · Pay application and retainage calculator · G703 continuation sheet PDF to Excel

All billing & cash resources →