What is retainage in construction, and how is it calculated?

Retainage (also called retention) is a percentage of each progress payment that the owner or general contractor keeps until the work is complete. It protects them against unfinished or defective work; for a subcontractor it's money earned but not yet paid.

Typical rates

Rates are set by the contract and, on many public jobs, limited by state or federal law. 5% and 10% are common, and many contracts reduce retainage (often to 5% or 0%) once the job reaches 50% complete. Always use the rate in your contract.

On the pay application

A G702-style application separates retainage on completed work (5a, on columns D + E) from retainage on stored materials (5b, on column F), because some contracts treat them differently. Column I of the continuation sheet shows retainage per line when rates vary.

Worked example

Completed work to date $100,000 at 10% = $10,000; stored materials $20,000 at 5% = $1,000. Total retainage = $11,000. Total earned less retainage = $120,000 − $11,000 = $109,000. If previous certificates were $70,000, the current payment due is $39,000.

Releasing retainage

At substantial or final completion you bill the retainage on a final application — usually by setting the rate to 0% — together with lien waivers, closeout documents and warranties as your contract requires.

Use the retainage calculator to check your numbers. This guide is general information, not legal advice; retainage rules vary by state and contract.

Last reviewed 2026-10-27. General information, not legal or accounting advice — your contract and state law decide retainage, stored-materials and change-order rules.