What is Retention?

Retention (or retainage) is a common practice in the construction industry where a percentage of each payment is held back by the client as security. The retained amount is released after the project is completed and any defects have been fixed.

• **How retention works:**
• Typical rate: 5% of each payment (sometimes 3% or 10%)
• First release: Usually 50% at practical completion
• Final release: Remaining 50% after defects liability period (typically 6-12 months)

Example: On a £100,000 project with 5% retention: - You invoice £100,000, receive £95,000 - £5,000 held in retention - £2,500 released at completion - £2,500 released after defects period

Problems with retention: - Cash flow pressure on subcontractors - Risk of non-payment if main contractor goes bust - Administrative burden tracking multiple retentions

Retention in your invoices: Always clearly show the retention amount on invoices. Track retention release dates carefully - this is money you've already earned.

UK developments: The 2019 Retentions Deposit Scheme proposal aimed to protect subcontractors, though implementation varies. Always secure retention terms in writing.