How Retainage Works on Construction Payments

Retainage (or retention) is withheld from each progress payment as security for completion. The rate and when it reduces or is released are set by your contract, and on many public and private jobs limited by state prompt-payment law — check both.

The arithmetic

Retainage on each line = work rate × (D + E) + stored rate × F. Total retainage is the sum. If retainage is reduced, the new rate applies to all work to date, so the payment due jumps — use the what-ifs to see by how much. A release (for example at substantial completion) reduces line 5 and can't exceed what's held.

The sample is fictional: application 4 from a drywall and framing subcontractor on a medical office building, 9 lines including two change orders. Original contract $266,000.00, net change orders $5,100.00, contract sum to date $271,100.00. Completed and stored to date $172,410.00; retainage $17,241.00 at 10%; total earned less retainage $155,169.00; less previous certificates $90,270.00; current payment due $64,899.00. Load the sample above to see every line.

Last reviewed 2026-11-04. General information, not legal or accounting advice.