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Why GCs hold back a percentage of every payment, typical rates, and how to calculate it correctly period over period.
Last updated 2026-08-17
Retainage is a percentage of each progress payment that the GC (or owner) holds back until the work is further along or fully complete. It exists to give the paying party leverage - if a sub walks off the job or leaves defective work, the withheld money is there to cover finishing or fixing it. It's normal, it's in your contract, and it's not a sign anything's wrong.
5% and 10% are the most common rates in commercial construction, but it's whatever your contract says - always check the actual number rather than assuming. Some contracts also split the rate: a different percentage for completed work versus materials stored on site. Several states cap retainage by statute or require it to reduce after 50% completion, so it's worth knowing your local rules if a GC is holding back more than seems normal.
Retainage is calculated on the total completed and stored to date for each SOV line, not just on what you're billing this period. At a flat 10% rate:
| Line item | Total completed & stored to date | Retainage (10%) | Earned less retainage |
|---|---|---|---|
| Site work | $40,000 | $4,000 | $36,000 |
| Framing | $25,000 | $2,500 | $22,500 |
Because it's calculated on the cumulative total each period, retainage isn't something you compute once and forget - it changes every time you bill more work, and the amount you actually get paid each period is this period's earned retainage-adjusted total minus what you'd already been paid before.
The AIA G702 form has separate lines for retainage on completed work and retainage on stored materials, because some contracts hold a different (often higher) rate on materials that haven't been installed yet. If your contract only specifies one rate, use the same percentage for both.
Most contracts release retainage at final completion and final payment, after punch list items are closed out. Some larger or longer projects reduce the retainage rate partway through - for example, dropping from 10% to 5% once the job hits 50% complete - which needs to be reflected correctly on every pay application from that point forward, including recalculating the retainage already held under the old rate depending on how your contract words it.
Retainage math is the single most common source of errors on a first pay application, especially once a rate changes mid-project. This tool calculates it per line, supports separate work and materials rates, and handles a rate change without you having to redo prior periods by hand.
Create your first pay application →This is a free tool, currently in development. Numbers should be accurate, but don't rely on it for anything legally binding yet. Privacy & Terms.