Last editedOct 20222 min read
Retainer billing is a payment model often used by freelance contractors as a means of ensuring reliable cash flow from clients who access their services on a regular basis. Under the conditions of a retainer agreement, the client and the contractor enter into a contract stating that the client has the right to access the services of the contractor when needed. By creating a stable income stream in this way, retainer billing deals with the common freelance problem of not getting paid on time.
Different types of retainer agreement
Under some retainer agreement models, the client pays the retainer on a monthly basis and continues to do so each month whether they use the services of the contractor or not. At first glance this may seem like an unnecessary expense on the part of the client, but it is a system built on the importance of the expertise which the contractor offers.
This is particularly the case if, for example, the contractor is a highly skilled operative in a specialist field such as IT or engineering. The client might need to call on the contractor’s services only once or twice a year, but the contractor’s expertise and ability to deal with problems that could otherwise spiral to cost a great deal of money mean that paying the retainer is an investment worth making.
The retainer billing system is particularly useful for contractors who provide services that aren’t time-intensive. A legal expert might spend just an hour looking over a contract and spot an unhelpful clause that would have cost the client thousands of pounds if it had remained. In this case, charging for just an hour’s work would represent a poor reward for the contractor, whereas retainer billing reflects the added value that their expertise provides for the client.
Models of retainer billing
Let’s look at some of the models that might be used when setting up a system of retainer billing:
Retained consultancy services – the client pays a specific monthly amount in return for a set number of hours access to the contractor’s services. Any unused hours in one month are rolled forward to the next, or the amount paid is adjusted in the next month to allow for the unused time.
Classic retainer billing– this works in a similar manner to retained consultancy services, except that unused time is lost rather than being rolled over. The contractor may also find themselves delivering more hours than expected, but this will only result in an extra fee if the number of extra hours is significant.
Retainer billing based on access – in some cases, as with highly experienced experts in a field such as IT or engineering, the value offered by the contractor is based on the delivery of expertise rather than time. In these cases, retainer billing will be predicated on the contractor being available to provide help when needed, rather than on a predetermined number of hours of work being provided.
Setting the charges for retainer billing
Depending upon the type of retainer agreement between a contractor and a client, the billing method used could be any of the following – or a combination of more than one:
An all-inclusive monthly payment
A retainer that guarantees availability, plus extra fees for work completed
A retainer that guarantees availability, with a call-out charge and fees for work delivered being charged in addition
A retainer for an amount that is adjusted to reflect the amount of work delivered
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