12 min read

Retainer Agreement | Free Templates

Working as a consultant or independent contractor is an exciting and rewarding job, but there are some risks that you should consider regarding the legalities of day-to-day business agreements. You are forced to navigate the legal waters without the benefit of an employerโ€™s support for risk management, insurance, or proper compensation.

At the same time, you are responsible for your clientโ€™s success and failure while ensuring that you get fair compensation for your work. A good way of keeping a freelancing relationship stable and solid is to negotiate a retainer agreement with your clients. The idea of the retainer is to avoid the risk of misunderstandings and disagreements that may occur when parties agree to work independently without any clear-cut agreement.

Understanding what a retainer agreement is, what it means for your business, and how you can best benefit from it can help you establish an accurate plan for any freelance work you undertake. This article discusses everything you may need to know regarding retainer agreements and retainer agreement templates.

What is a Retainer Agreement?

A retainer is an agreement that allows an independent contractor to receive a certain amount of money upfront (the retainer fee) in exchange for later providing a certain level of professional services (the retainer services).

The retainer agreement is usually signed by the independent contractor and their client and stipulates each partyโ€™s obligations in the business agreement. In simpler terms, a retainer agreement is a pre-payment schedule outlining what services the contractor will provide during a determined period and at what price.

The agreement also provides the terms under which the contractor must perform the specified tasks (i.e., the scope of work and schedule), a payment schedule, and any special requirements or stipulations to which each party must adhere. Typically, the retainer agreementโ€™s terms are discussed together before the execution of the agreement.

Typically, there are three types of retainer agreements: fixed-term agreements, periodic agreements, and project-based agreements. Fixed-term agreements set a specific length of time for the retainer services. This implies that the service provider is only required to provide the client with specified services until the agreementโ€™s expiration date.

Periodic agreements are the most common contract form for long-term relationships between clients and contractors. The contract is structured to provide regular payments or services that must be completed every predetermined period (usually monthly). Periodic agreements are more common for service providers like attorneys, accountants, and consultants.

Lastly, project-based retainer agreements are usually formalized before or at the projectโ€™s outset. The agreement stipulates that the contractor will perform certain services or work on a project in exchange for compensation.

What is a Monthly Retainer?

A monthly retainer, sometimes referred to as pay for access retainer, is a contractual agreement that stipulates that the client will pay the contractor a given amount every month in exchange for continued availability.

The retainer can be considered a subscription-based agreement since it usually stipulates an automatic payment and a predetermined list of services that must be provided to ensure its continuance. It is popular with high-end clients and service providers who continuously need the contractorโ€™s services.

Types

A freelancer can negotiate two main retainer agreements: the pay for work retainer and access retainer. The decision on how to structure the contract depends on various factors, such as the nature of the services required, the contractorโ€™s level of expertise, the relationship between the contractor and the client, and how long they have been working together.

The two types of retainers are discussed below:

Pay for work

The pay-for-work retainer is the primary form of the retainer agreement. It allows the contractor to receive payment for services offered to the client, with a specific amount paid after every completed task. This model is standard among freelancers who have started new relationships with clients or are in the process of establishing solid working relationships. However, it requires the independent contractor to agree on a specific schedule that must be followed for the payment to be received.

Under the pay for work retainer, although the freelancer is paid monthly, they usually get paid for the hours of work rendered. The payment structure under this type of agreement may vary depending on the services offered and the contractorโ€™s level of expertise in the particular field.

Pay for access

Under the second type of retainer, the pay-for-access, freelancers receive payment from clients in exchange for the clientโ€™s access to their expertise and knowledge continuously. Unlike the pay-for-work model, the pay-for-access retainer does not consider the time it may take to complete a specific task. The fee is usually paid on an ongoing basis, regardless of the hours of work completed.

The pay-for-access model is common among freelancers who have already established long-term relationships with their clients, such as lawyers, accountants, and consultants. Furthermore, it is common in situations with high trust among the parties involved.

Advantages and Disadvantages of a Retainer Agreement

Working on retainer is a concept that is gaining popularity in all areas of business, from start-ups and technology to law and accounting. It often appeals to clients for its convenience and flexibility. It is a viable option for a contractor who would like to turn their expertise into a steady flow of income. However, while there are some great things about retainer agreements, there are also some downsides that clients and contractors should consider.

Benefits/advantages of a retainer agreement

The benefits of a retainer agreement include the following:

  • Access to expert services: A retainer agreement allows a client to access specific expertise on an ongoing basis. The payment of the monthly retainer fee ensures that the client has access to professional services whenever needed. This helps to streamline work processes, reduce the stress of searching for and hiring freelancers every time, and helps ensure that certain tasks are always completed on time.
  • Creates a stable and consistent income: Retainers may be an ideal solution for freelancers looking to increase their revenue stream by developing a steady paycheck from their clients. For example, a client may agree to pay the contractor a specified amount every month, either as a flat fee or in exchange for the contractorโ€™s expertise and knowledge on an ongoing basis. This can be particularly beneficial when freelancers have to maintain their day-to-day expenses.
  • Ability to predict the cash flow: A regular monthly payment stream is an excellent way for contractors to ensure that their cash flow is predictable. This allows them to plan and save for the future, including vacation, car/house purchase, or other financial goals. In addition, this is a safer way of doing business as it helps avoid potential financial issues that may arise from fluctuations in the cash flow due to a lack of business.
  • Improves client-contractor relationships: Retainers help to strengthen client-contractor relationships. It presents a win-win situation for all the involved parties. The contract ensures that the client continues to receive services from the contractor, and it gives the contractor an extended time to work on a particular project, thus allowing them to produce higher quality results.
  • Reduces time selling services: Time is money, and contractors who have to sell services to new clients face the challenge of convincing them of the value of their services. This can be very difficult, especially if the client has no prior experience or knowledge of the services provided by the contractor. The monthly retainer is a great way for contractors to ensure that their services are always in demand, alleviating the burden of finding new clients. This way, they can focus their energy on providing high-quality services to their existing customers.

Disadvantages of a retainer agreement

The following are some drawbacks to working on a retainer agreement:

  • Contractors are tied to a client and may lose opportunities: A retainer contract is an agreement that outlines the specific services that a contractor must provide to their client and the duration of the contractual services. This means that the contractor is tied to one contract and may not be able to take on other projects if they conflict with the scope of work specified in the retainer contract. Hence, they may lose out on lucrative opportunities such as more projects or higher-paying clients to maintain a single clientโ€™s business.
  • Scheduling conflicts may occur:  A common problem with the pay-for-access retainer model is that the contractor may be tied to one client and unable to work on other projects at a similar time. If two clients require different services, the contractor may choose between working on one project or the other. This can cause scheduling conflicts, leading to lost time, low productivity, or the contractorโ€™s risk of overstretching resources.
  • Less pay: Most clients who agree to work on retainers expect a slight discount for purchasing a contractorโ€™s services in bulk. As a result, contractors get less than they would have received if they worked on a per-task basis without the retainer.
  • Clients run the risk of paying for unused services: In cases where the client agrees to a retainer contract to ensure that certain services, such as legal representation, are provided continuously, they may end up paying for services not utilized. This typically happens when there are minimal to no legal disputes needing representation. This can lead to a waste of money, especially if the retainer fee is higher.

How Does It Work?

Setting up a retainer agreement with a client is a matter of mutual interest and agreement. However, before signing any contractual terms, both parties must understand the terms of the agreement.

Once this is done, take the following steps into account to ensure a favorable retainer agreement is signed:

Negotiate the compensation

Both parties must be clear on the expected compensation for the retainer agreement. Discussing the hourly rate, contingency retainer amount, and termination ahead of time and reaching a mutual understanding can help avoid misunderstandings and potential conflicts in the future.

In the negotiation phase, contractors can use several strategies to make their bids more attractive. They include:

  • Proving their value: Generally, contractorsโ€™ bids should align with their expertise and experience. Providing evidence of achievements, testimonials, and reference letters from current or past clients can help build a strong argument for negotiation.
  • Offering a retainer discount: Since most clients expect a slight discount on the cost of services offered in bulk, contractors can agree to offer clients incentives, such as discounts or bonuses, to make their bids more attractive. For example, a contractor may offer a 10% discount for an annual retainer fee of $300 than an on-demand rate of $350 per hour.
  • Pitching their retainer services: How the contractor pitches their retainer proposal is crucial in determining whether they will secure the agreement. To increase their chances of securing an agreement, they should prepare an effective sales pitch based on compelling facts such as overall cost efficiency that permanent retainer clients can enjoy, added value, and business continuity.
  • Aim for a time-bound retainer: Clients are often more willing to commit to retainer agreements that are non-recurring and time-bound. A time-bound retainer is an agreement that specifies the length of the retainer agreement and any limits on the scope of work, such as renewal terms. Clients are more likely to agree to this if they can evaluate the benefits they will enjoy at a lower rate over a shorter period than a permanent retainer with unlimited access.

Choose the type of retainer

After negotiating the terms of the retainer agreement, both parties should choose the type of retainer most suitable for their situation and needs. This can be done by assessing the benefits and drawbacks of each agreement type.

There are two retainer agreement types to choose from:

  1. A pay for work retainer is a model where clients pay a fixed amount in exchange for specific work outputs. For example, a client agrees to pay a digital media consultant $500 to produce and market an online video over a 30-day period.
  2. A pay for access retainer is a model where clients pay a recurring fee to the contractor to enjoy unlimited access to their services. For example, a client pays a retainer fee of $5000 per month to access a full-time SEO consultantโ€™s services for one year.

Sign the retainer agreement

Immediately after both parties agree on the terms of the retainer, they can sign the retainer agreement to make it legally binding. This can assure both parties about their obligations and avoid confusion in case a dispute requires legal action.

Get paid

After signing the agreement and formalizing the business arrangement, the client is expected to pay the retainer fee upfront for retainer services to commence.

Essential Parts of a Retainer Agreement

Retainer agreements can be tailored to suit the specific needs of both parties. Nonetheless, the agreement must incorporate some fundamental parts vital to a successful retainer relationship.

This includes:

Scope/nature of work

The scope of work defines what services will be provided as part of the retainer agreement. This includes the type of work to be performed, limits on the amount of work, and the duration of service. Therefore, it is significant that each party clearly understands what they agree to so they can accurately evaluate their needs and choose a retainer agreement that best suits their situation.

For example, a client can decide to engage a contractor for legal services. The scope of work may define the nature and description of legal services to be provided by the contractor, such as drafting and filing lawsuits, advising on ongoing disputes, and providing legal counsel in general terms.

Retainer fee

The retainer fee is the amount of money paid to the contractor by the client for providing services. The retainer fee should be decided based on the total scope of work, cost of services, including the contractorโ€™s expertise and experience, the nature of the professional relationship, including the length and fees customarily paid for similar services within the clientโ€™s locality.

Depending on the nature of services provided, retainer fees may be charged as a contingency, hourly, or flat fee:

  • Contingency fee: A contingency fee is a retainer agreement that requires the contractor to be paid only if specified parameters are met, such as winning a case or completing a project successfully.
  • Hourly rate: An hourly rate retainer agreement is based on the number of hours a contractor works and is usually paid based on the work completed. Like contingency fees, they can be either one-time or time-bound.
  • Flat fee: Flat fees are paid in full regardless of the contractorโ€™s actual nature and scope of work.

Client expenses

A retainer agreement may require the client to pay for certain expenses or out-of-pocket expenses incurred by the contractor in providing service regardless of the business agreementโ€™s outcome. These expenses include travel, filing-related expenses, legal consultation, and other miscellaneous costs. The expenses to be paid by the client should be specified upfront in the retainer to avoid any misunderstandings and disputes.

Retainer Agreement Template

"Free MS Word Retainer Agreement Template"

    Basic Contents of a Retainer Agreement Template

    When using a template to draft your retainer agreement, carefully review its contents to ensure it includes all the essential details. The following are the essential contents that must be incorporated in a standard retainer agreement template:

    Basic information relating to the retainer and the parties involved

    The first item in a standard retainer agreement template is the basic information on the retainer and the client. This should include a brief line introducing the type of the retainer agreement and the date both parties agree. It should also include the name, street address, city, state, and contact details of both parties and specify each partyโ€™s role in the retainer agreement (i.e., client and service provider).

    Service description

    The second element of a typical retainer agreement template lists the services to be provided by the service provider. It should specify the type of services to be provided, the nature and scope of work to be performed, and any limitations on the scope or performance of service.

    Retainer period

    This part of a retainer agreement template specifies the duration of the agreement for providing services. This can be specified as either a specific time (e.g., one year) or a date on which the contract will automatically expire (e.g., May 1, 2015). The agreement may also be structured in a manner that it is an ongoing arrangement until one or both parties decide to terminate.

    Pay rate or manner of compensation

    This section of the retainer agreement requires the parties involved to specify the rate or manner in which the contractor will be paid in exchange for providing the sought-after services. It should specify whether the fee is to be charged hourly, per job/project, on a contingency basis, or if a flat fee is to be paid for the services.

    Discuss the payment and retainer further

    Standard retainer agreement templates also include a further section detailing the payment and retainer. This generally provides further information on the payment schedule, specific payment requirements, such as a contingency fee,  and the acceptable means of payment. It may also include instructions on how the retainer fees are to be used for services and additional costs that may be incurred.

    Required expenses for the project

    Some retainer agreements require that the client pays for some expenses the service provider may encounter while providing services. Others may state that the service provider will be reimbursed in full or partially for the expenses incurred. In either case, the retainer agreement template should specify what expenses are covered under the agreement, how expenses are to be calculated, and who will bear the expenses.

    Necessary information to handle disputes

    Additional terms can be incorporated in a retainer agreement template to include any additional clauses pertinent to the agreement. For example, it may include an arbitration clause to resolve disputes between the parties amicably or a non-disclosure agreement (NDA) to prevent any unauthorized use or disclosure of sensitive information by either party. The section might also include instructions on submitting disputes to arbitration or other collective, private laws for resolution.

    Governing law

    This section lets the parties know the jurisdiction that will apply to all the terms and conditions of the agreement. This should include the state or province in which the parties agreed to the agreement.

    For example:

    This agreement is governed by and construed following the laws of [California].

    All agreed upon-obligations

    This critically important section explains the terms and conditions under which both parties agreed to enter the retainer agreement. It should lay out every term and condition of the agreement, state what each party is obligated to do, and list each partyโ€™s rights. Additionally, it can also include any other relevant conditions or clauses.

    Signatures of both the client and service provider

    The consent of both parties to the terms and conditions of a retainer agreement determines its validity. This is usually done by signing the document. Therefore, the client and the service provider must affix their signatures to indicate that they have agreed to all the terms stated. The calendar date on which each signature is affixed should also be provided in this section of the retainer agreement template.

    Retainer Agreement Types

    Accounting retainer agreement template

    "Downloadable Retainer Agreement in MS Word"

      Advertising agency retainer agreement template

      Advertising Agency Retainer Agreement in ms word fre download

        Business consultant agreement template

        "Free Retainer Agreement Template Download"

          Consulting agreement template

          "Editable Retainer Agreement in MS Word"

            Expert witness retainer agreement template

            "Sample Retainer Agreement Word Document"

              Freelance retainer agreement template

              "MS Word Retainer Agreement Form"

                Graphic design consultant agreement

                "Legal Retainer Contract Free Download"

                  Interior design retainer agreement temla

                  "Attorney Retainer Agreement Word Template"

                    Legal services retainer agreement template

                    "Consultant Retainer Agreement in MS Word"

                      Public relations consultant agreement template

                      "Client Retainer Agreement Template Free"

                        Real estate consultant agreement template

                        "Professional Services Retainer Template Word"

                          Web development consultant agreement template

                          "Word Document for Retainer Agreement"

                            Frequently Asked Questions

                            Is a retainer agreement required?

                            A retainer agreement is not legally required for every service provider and client. However, it is a standard business arrangement to ensure that all parties involved are on the same side and have the same idea of what they expect from the arrangement. Besides, it is a valuable tool for the client and service provider to clarify the terms and conditions of their working relationship.

                            Who uses retainer agreements?

                            Service providers who go into business for themselves or individuals working as independent contractors, such as IT consultants, accounting consultants, web designers, writers, and real estate agents, are most likely to use retainer agreements. Clients looking to commit to legal relationships with attorneys for services such as legal advice, estate planning, property management, and real estate transactions may also use retainer agreements.

                            Keep reading