Construction Retainage Calculator

Retainage (or retention) is the percentage of each progress payment held back until project completion — typically 5–10%. On a pay application it appears as Line 5, split into 5a (retainage on completed work) and 5b (retainage on stored materials), which often carry different rates. Calculate both below.

How retainage is calculated on a pay application

Line 5a = your completed-work rate × total work completed to date (Columns D + E on the continuation sheet). Line 5b = your stored-materials rate × Column F. Total retainage is 5a + 5b, and Line 6 (total earned less retainage) is Line 4 minus that total. Note the rates apply to cumulative amounts — not just this period — so retainage self-corrects each application.

Common retainage variations

Contracts frequently reduce retainage at milestones — 10% until 50% complete, then 5% or 0% on the remainder. Some states cap retainage on public work; some contracts hold no retainage on stored materials but 10% on labor. Always pull your rates from the contract, and when the rate steps down mid-project, apply the new rate to the cumulative base unless the contract says otherwise.

Retainage and your cash flow

At 10% retainage, a sub running $2M/year has roughly $200,000 of earned money locked up at any time. Billing errors compound the problem: a rejected pay application delays not only the current payment but pushes your retainage release further out. Getting the math right — and keeping applications reconciled across periods — is the cheapest cash-flow win available.