Glossary / Retainage · Also called Retention, Holdback

How it works

Retainage is set by the contract, and in many places by law. The customer pays each progress invoice minus the retained share, and pays the accumulated retainage at the end, after inspection or a set period.

For the contractor, retainage receivable should be tracked apart from ordinary receivables. It is not overdue in the usual sense, so mixing it in makes the ageing report look worse than it is. It also needs to be released and billed deliberately, or it can be forgotten.

Worked example: 10% retainage on a $50,000 progress invoice

A subcontractor bills a general contractor $50,000 for work completed this month. The contract has 10% retainage.

The general contractor pays $45,000 now. The other $5,000 is retainage receivable. After three such invoices, $15,000 is held. When the project is accepted, the subcontractor bills the $15,000 release and is paid it.

In the US and in Canada

In the United States

Retainage limits and release timing are set by state law and by the contract. Many states cap retainage on public projects, often at 5% or 10%.

In Canada

In Canada the usual term is holdback. Provincial construction and prompt payment laws, such as Ontario's Construction Act, set a statutory holdback, 10% in Ontario, and rules for releasing it.

In AcboBooks

In AcboBooks, retainage on a job's receivable is held as a separate balance per job and released to bill when the work is accepted.

Related terms

Related on this site

Sources

Ontario Construction Act (holdback provisions)

Updated October 25, 2026. General information, not tax, legal or accounting advice. Rules and rates change; check with the IRS, the CRA, your state or province, or your accountant.

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Retainage