What Is a Retainer Fee?
A retainer fee is an amount of money paid upfront to secure the services of a consultant, freelancer, lawyer, or other professional. A retainer fee is most commonly paid to third parties that the payer has engaged to perform a specific action on their behalf.
These fees, almost always paid upfront, only ensure the receiver's commitment. In addition, retainer fees usually do not represent the total final cost of the services provided.
Key Takeaways:
- A retainer fee is a payment made to a professional, often a lawyer, by a client for future services.
- Retainer fees do not guarantee an outcome or final product.
- Portions of retainer fees can be refunded if services cost less than initially planned.
Understanding Retainer Fees
A retainer fee is an advance payment a client makes to a professional, and it is considered a down payment on the future services rendered by that professional. Regardless of occupation, the retainer fee funds the initial expenses of the working relationship. For this reason, these fees usually remain separate from the hourly wages of the consultant, freelancer, or lawyer. This ensures that money is not used for personal purposes before fully performing services.
The most common form of retainer fee applies to lawyers who, in most cases, require potential clients to provide an upfront retainer fee.
Retainer fees do not guarantee an outcome or final product.
Example of a Retainer Fee
A lawyer may charge a $500 retainer fee. If the lawyer charges $100 an hour, the retainer covers all services up to the five-hour limit. The lawyer then bills the client for the cost of any additional hours they invest on behalf of the client.
So, if a trial case takes 10 hours, the lawyer charges the client an additional $500, which comes to $1,000 when including the retainer. If the client's case is resolved before reaching the five-hour limit, the lawyer refunds the remaining portion of the retainer to the client.
Earned Retainer Fees vs. Unearned Retainer Fees
An unearned retainer fee refers to the initial payment held in a retainer account before any services are provided. Retainer fees are earned once services have been fully rendered.
In the example above, the retainer is considered unearned until the court case is closed and finalized. These unearned fees do not belong to the person performing the tasks—in this case, the lawyer—until work begins. Any unearned retainer fees that are not used can be returned to the client.
Earned retainer fees are the portion of the retainer that the lawyer is entitled to after work begins. Earned retainer fees may be granted to the lawyer bit by bit, depending on the number of hours worked. Retainer fees can also be distributed based on tasks or milestones. For instance, a lawyer may receive 25% of the retainer fee after completing the pre-trial process.
How Much Should a Retainer Fee Be?
It depends on the industry of the professional you're retaining the services of and their compensation expectations. Generally, it should be close to the professional's hourly rate multiplied by the hours they expect to work.
How Do You Calculate a Retainer Fee?
Retainer fees can be calculated by estimating the hours needed to complete or maintain the project the professional is hired for and multiplying it by their hourly rate. Some professionals might charge an amount per expected service.
How Much Is a Lawyer Retainer Fee in the US?
Retainer fees vary by specialty, ranging from hundreds to thousands of dollars depending on what they are retained for.
The Bottom Line
A retainer fee is a down payment on a professional's services to ensure you have priority. Retainer fees are usually charged by lawyers, accountants, and consultants to maintain their continued services.
FAQs
A retainer fee is the upfront cost of a service before the service has been performed. In other words, it's a form of advance payment often required by a consultant, lawyer or freelance professional. For example, a lawyer charges their client a retainer fee prior to the client using their services.
What is an example of a retainer fee? ›
Example of a Retainer Agreement
Any time the attorney works on the case, he keeps track of the hours spent and invoices the client at the end of the month. For example, the attorney may project that he will spend 10 hours, at an hourly rate of $100, amounting to a $1,000 retainer fee.
How do retainer fees work? ›
Clients pay a retainer fee upfront, serving as a form of assurance for both parties: the client secures the professional's time and expertise, and the professional receives a guaranteed payment for future work.
How is a retainer used? ›
A retainer for a lawyer is a fee paid upfront by the client to secure the services of an attorney. It essentially "reserves" the time and expertise of a lawyer, making them accessible to the client for an agreed-upon time. The amount of the retainer fee can vary and may be a flat fee or an hourly rate.
What are the four types of retainer fees? ›
The four types of retainer fees are true, nonrefundable chargeable, nonrefundable nonchargeable, and refundable. A true retainer is used to ensure an attorney's availability. A nonrefundable chargeable retainer is applied to the costs of an attorney's services but is not refundable if it is not used.
Do you get money back from a retainer fee? ›
About retainer fees
If the fee agreement is a nonrefundable retainer agreement, you may not be able to get your money back, even if the lawyer does not handle your case or complete the work. A retainer fee also can mean that the lawyer is “on call” to handle the client's legal problems over a period of time.
What are the disadvantages of a retainer fee? ›
However, they also come with potential disadvantages, including limited client flexibility and the risk of complacency. To make the most of retainer agreements, both consultants and clients should understand the terms, scope of work, and pricing structure clearly.
How long is a retainer fee good for? ›
But how long is a lawyer retainer good for? Generally, a lawyer retainer is good for the duration of the legal matter for which it was paid. For example, if a client pays a retainer to handle a personal injury case, the retainer will typically cover the lawyer's fees and expenses until the case is resolved.
How do you calculate a retainer fee? ›
Multiply each team member's hourly cost by the number of hours they'll spend each week, month, or quarter on the retainer work.
Can you negotiate a retainer fee? ›
Be prepared to negotiate the terms of the retainer agreement. If the client is resistant to agreeing to a retainer, try offering a lower fee in exchange for a longer contract term. Or, propose a trial period to start off the relationship.
In a definitive sense, a retainer is a fee that is paid in advance in order to hold services (ie. a wedding or event date). While a deposit may also reserve a date, it is returned when the services have been completed. A retainer is by default non-refundable and is not returned.
How does the retainer process work? ›
For removable retainers:
- Your provider takes a dental impression of your teeth using dental putty, a soft material similar to play dough.
- They put the putty in trays, then insert the trays over your teeth. ...
- A dental laboratory uses the mold to create a plastic (or acrylic) teeth retainer.
In general, a removable wire retainer may cost approximately anywhere between $150 and $600 in the U.S. Clear plastic removable retainers tend to ring up around $400 to $800.
What are examples of retainer fees? ›
Example of a Retainer Fee
A lawyer may charge a $500 retainer fee. If the lawyer charges $100 an hour, the retainer covers all services up to the five-hour limit.
How does retainer pricing work? ›
What is a Retainer Model? A retainer is a pricing model based on the agreement that a client retains ongoing services from you. It's different from other pricing models in a way that the customer agrees to pay in advance during a set period of time for professional work to be negotiated later.
Is a retainer fee paid upfront? ›
A retainer fee is the upfront cost of a service before the service has been performed. In other words, it's a form of advance payment often required by a consultant, lawyer or freelance professional. For example, a lawyer charges their client a retainer fee prior to the client using their services.
What is an example of a retainer based pricing? ›
Example of a Retainer Fee
A lawyer may charge a $500 retainer fee. If the lawyer charges $100 an hour, the retainer covers all services up to the five-hour limit. The lawyer then bills the client for the cost of any additional hours of work on behalf of that client.
What type of payment is a retainer? ›
Retainers are structured agreements in which the client agrees to pay a specific amount of money to a business or freelancer — usually monthly — and, in return, receives a set of services during that same time period. These are typically advance payments.
How do you negotiate a retainer fee? ›
How to negotiate a retainer as a service provider
- Offer a discount. Some businesses will be happy to pre-pay. ...
- Offer a trial period. ...
- Focus on value and benefits. ...
- Negotiate the terms. ...
- Ask for a time-bound retainer. ...
- Know your worth. ...
- Be flexible.
Retainer fees can range from a few hundred dollars for relatively simple cases to several thousand dollars or more for complex matters or high-profile attorneys. There is no universally defined "highest" retainer fee for a lawyer, as it largely depends on the specific circ*mstances and context.
