Retention Payments: How Contractors Stop Losing the Last 5%

Somewhere in a main contractor's bank account is a slice of money you earned months ago, parked there on a promise. That's retention — and the uncomfortable truth of the industry is that a meaningful chunk of it is never paid out, not because anyone refuses, but because the subcontractor forgets, the paperwork drifts, or the firm holding it goes under first. The money everyone forgets is the money main contractors count on you forgetting.

How retention works

The mechanics: a contract holds back a percentage of each payment — typically 3 to 5% in the UK, 5 to 10% in the US where it's called retainage. Half is released at practical completion, when the job is signed off. The other half sits through the defects liability period, usually twelve months, and is released when that expires. That's your margin, held for a year, interest-free.

What retention really costs you

Do the arithmetic on your own book. £60,000 of contract work at 5% retention is £3,000 of your money in other people's accounts. And it carries real risk: if the main contractor becomes insolvent during the defects period, your retention usually vanishes into the creditor queue. Retention isn't a bonus that might arrive — it's a receivable with a default risk, and it should be tracked like one.

Diary the release dates

The single highest-value habit: diary the dates the day you sign. Two entries per contract — the practical completion date (first release) and the end of the defects period (second release). Contractors lose retention not in arguments but in silence; twelve months is long enough for anyone to forget, and nobody upstream is going to remind you.

Invoice for retention release

When a release date arrives, invoice for it — proactively, like any other debt. Nobody volunteers retention money. The wording is simple: 'Release of retention as per contract [reference]. Practical completion certified [date]. Amount due: £1,500.' Attach the completion certificate if you have it. Then chase it on your normal schedule; late retention is late payment, and on commercial work statutory interest applies to it like any other invoice.

Negotiate retention before you sign

Better still, negotiate before you sign. On smaller jobs, retention is often habit rather than policy, and main contractors will trade: offer a written commitment to return and fix defects within seven days' notice instead of retention; or cap retention against labour only; or halve the percentage. The moment to have this conversation is before your price is accepted — you have no leverage after.

One more angle worth knowing: retention should be shown on every application and invoice as a visible deduction line — '5% retention held: −£450'. It keeps the running total honest, reminds the client the money exists, and gives you a paper trail that adds up to exactly what you claim when release day comes.

Treat retention as what it is: your money, earned, sitting at risk in someone else's account. Diary it, invoice it, chase it. The contractors who collect their last 5% aren't luckier — they're just the ones who wrote the dates down.