Retainage (also called retention) is a portion of each progress payment that the owner or general contractor withholds until the project, or your scope of it, is complete. It is typically 5 to 10 percent of each payment, held as security that the work will be finished correctly and that the contractor will close out the job. You earned the money; it is simply held back until agreed milestones are met.
For subcontractors, retainage is one of the largest and most overlooked sources of trapped cash. Five to ten percent of every dollar you bill sits in someone else's account for months, sometimes well past final completion, and it is easy to lose track of across many jobs. Understanding the rules, and tracking every held dollar, is how you actually collect it.
How retainage works
On each pay application, the owner approves the work completed for the period, then withholds the retainage percentage before paying the rest. Over the life of a job, that withheld amount accumulates into a retainage balance that is released later, either in stages or in a lump sum at the end. The mechanics usually look like this:
- You bill for work completed in the period on your pay application.
- The owner or GC withholds the retainage percentage (commonly 5 to 10 percent) from that amount.
- You are paid the balance; the withheld portion is added to your accumulated retainage.
- Retainage is released when contractual milestones are met, often at substantial completion, final completion, or after a defined period.
Typical retainage percentages
Five percent and ten percent are the most common rates. Public projects in many states cap retainage by statute, frequently at 5 percent. Private contracts vary, and the rate is negotiable. A common middle ground is to hold 10 percent until the job is roughly half complete, then stop withholding (sometimes called halving the retainage), so the held percentage on the total contract effectively drops as the job finishes.
Retainage on stored materials
Whether retainage applies to stored materials depends on the contract. Some contracts exclude properly documented and insured stored materials from retainage; others apply it to everything. This is a frequent source of pay-app disputes, so confirm the treatment in your subcontract before you bill.
The rules: what governs retainage
Two things govern retainage: your contract and the law of the state where the project sits. They interact, and the stricter rule usually wins.
Your contract
The subcontract sets the percentage, what it applies to, when it is reduced, and the conditions for release (for example, substantial completion, punch-list signoff, and required closeout documents). Read these clauses before you sign, because they determine how long your money is held.
State retainage law
Many states regulate retainage, especially on public work. Statutes can cap the percentage, require retainage to be released within a set number of days after completion or acceptance, and sometimes require interest on amounts held in escrow. Prompt-payment statutes often set deadlines for releasing retainage once the triggering event occurs. Because these rules vary widely by state and by public-versus-private status, confirm the specifics for your jurisdiction.
How to get retainage released
Retainage rarely shows up on its own. Releasing it is an active process: you have to know the balance, meet the contract's release conditions, submit a clean request with the required documents, and follow up. A practical playbook:
- Track the held balance per job from day one, so you always know exactly what is owed and on which project.
- Know the release trigger in your contract: substantial completion, final completion, punch-list signoff, or a fixed number of days after acceptance.
- Close out the punch list and document it, since open punch items are the most common reason release stalls.
- Submit a retainage release request (often a final pay application for the retainage amount) with every required closeout document.
- Provide final lien waivers and any required certifications, warranties, or as-builts the contract calls for.
- Follow up on the contractual or statutory deadline; if the date passes, escalate in writing and reference the prompt-payment timeline.
Common reasons retainage release stalls
- Open punch-list items, or punch work that was completed but never documented as closed.
- Missing closeout documents: final waivers, warranties, O&M manuals, or as-builts.
- Retainage from lower-tier subs or suppliers that has not been resolved.
- The GC waiting on the owner to release before releasing to subs, especially under pay-when-paid terms.
- No one actively tracking the balance, so the request is simply never made.
This last point is where a lot of money is lost. On a busy subcontractor's books, retainage from a job that wrapped months ago is easy to forget. Keeping a live retainage ledger per project, and triggering the release request the moment conditions are met, is the difference between collecting it and writing it off.
Auteri tracks retainage on every job for the specialty contractors we run payment operations for, maintains a per-project ledger of held amounts, and files release requests with the right closeout documents the moment each job qualifies, so held cash does not quietly age out.