Retainer Fee: How Retainer Fees Work

A retainer fee is an upfront amount of money clients pay for professional legal services or freelance work. A retainer agreement serves as a down payment to ensure the completion of a particular task.

People traditionally associate retainers with a law firm's attorney’s fees, but today these advance payments are part of various business-client relationships, especially in the increasingly popular gig economy. Paralegals, consultants, freelancers, and advisers often request retainer fees.

Retainer fees can be for an hourly rate. The paid person will determine how many hours they expect a project to take. In the case of legal professionals, the firm calculates predicted lawyer charges over a certain period. If the work exceeds the anticipated hours, the consultant requests more money; if the job takes less time, they pay the money back or put it toward future services.

The two main types of retainers are access retainers and work retainers:

1. 1. Access retainers: With an access retainer, the consultant bills for specific hours and receives payment only for those hours. This guarantees a set schedule for the consultant and a firm payment due from the client.
2. 2. Work retainers: With a work retainer, the consultant charges for specific tasks they agree upon for service with the client. In work retainers, clients pay consultants at different project milestones until the project’s completion.

A retainer fee is an agreed-upon, upfront payment guaranteeing the freelancer or legal representative fulfills the desired work. This arrangement benefits both clients and consultants. The client knows the going rate and can pay the money immediately, and the worker knows to complete the job within that window.

A retainer fee agreement ensures consultants receive payment for the hours the person expects the project to take. Clients can save money by not paying the consultant’s insurance and benefits. Many clients and consultants build a trusting working relationship based on general retainers. For legal cases, the client approves of the consultant’s lawyer fees and work ethic, and in return they receive sound legal advice.

Generally, a consultant calculates a retainer fee by multiplying their hourly rate by the number of hours they predict a project will take them. That said, retainer fees vary from industry to industry and consultant to consultant.

In the law world, years of experience, company size, and geographic market are all factors that can influence a firm’s legal fees. The same factors can apply to freelancers, such as copywriters, graphic designers, or human resources professionals who are assisting with a project.

A retainer fee usually reflects the number of hours the consultant predicts it will take them to complete a project. Suppose an attorney charges $200 per hour and tells a client they need forty hours to prepare a court case. The retainer fee for the work will come to $8,000, and the client pays that to the attorney as an upfront cost.

As the consultant comes to the end of their work, they might find it took them only thirty-eight hours to complete, so they repay the client two hours’ worth of work ($400). Later, the attorney presents the case but loses. In this hypothetical scenario, the attorney still keeps the money because of the labor that was involved, regardless of the case outcome.

Earned retainer fees specify a certain amount of working hours. The earned fee translates to the consultant’s income, or what they expect to receive based on the agreed number of hours. This payment comes after the consultant completes the work and fills the hours, hence the term “earned.”

An unearned retainer fee is an upfront payment before the consultant completes the work. For this reason, the money is “unearned.” If the consultant finishes the job in less time than they expected, they will repay the certain hours’ worth of money or bank the hours for a future project.

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