How to calculate a monthly retainer fee
A retainer prices a block of your time each month. Multiply the hours you include by your normal hourly rate, then take off whatever the commitment is worth to you:
- Monthly retainer = included hours x hourly rate x (1 - discount)
- Overage = hours over the cap x overage rate
- Effective rate = (retainer + overage) / hours actually worked
Twenty hours at $95 is $1,900, and a 10% commitment discount makes it $1,710, which is an effective $85.50 an hour until the cap is passed. If the client really uses 24 hours, the four extra at $95 bring the month to $2,090, or $87.08 an hour. Those are the figures the calculator opens with, so you can change one number at a time and watch what moves.
What a retainer fee buys
The word covers three different arrangements, and the agreement should say which one you mean.
- A block of hours. The client pays for a set number of hours each month and anything past the cap is billed as overage. This is what the calculator above prices.
- A fixed scope. A set list of deliverables each month, such as four articles or a monthly site update, priced from the hours they usually take.
- Availability. The client pays to have first call on your time, and the work itself is billed separately.
Lawyers and some consultants also use "retainer" for money paid in advance and drawn down as work is done, which behaves more like a deposit. The retainer glossary entry sets out the difference.
Price the overage before you need it
The failure mode of every retainer is the same. The client uses more than the cap, nobody wants to raise it mid-month, and by the time it is raised there are three months of unbilled hours to argue about.
Setting the overage rate in the agreement removes the conversation. It is not a penalty, it is what an hour costs once the discounted block is used, and stating it up front makes going over a normal event rather than a dispute.
Do not discount the overage
The commitment discount exists because the client guaranteed the hours. Hours over the cap were never guaranteed, so they are worth your full rate. Discounting them rewards the client for going over, which is exactly backwards.
The effective rate row shows what happens when this goes wrong: a retainer that looks like $85.50 an hour at twenty hours becomes considerably less if overage is discounted and the client routinely runs to thirty.
Be honest about expected hours
The expected hours field is the one people flatter. If you know the client will use twenty-four, put twenty-four in and the page will show what you are actually earning. A retainer priced on hours nobody believes is a discount with extra steps.
To check the hourly rate itself, the freelance hourly rate calculator works it out from the income you need.
Related calculators
- Billable hours calculatorWhat is left to sell after time off and unpaid work
- Hourly invoice calculatorHours and a rate, into a total
- Setting a retainerIncluded hours, the discount, and the overage rate
Questions people ask
What is a retainer fee?
A fixed amount a client pays each month for a set block of your hours, a set scope of work, or first call on your time. It gives you predictable income and the client a guaranteed slot, which is why a small discount on the hourly rate is common.
How do I work out a monthly retainer?
Multiply the hours you will include by your hourly rate, then apply whatever discount the commitment is worth to you. Twenty hours at $95 with 10% off is $1,710 a month.
What discount should I give on a retainer?
Between 5% and 15% is common, and zero is defensible. The discount buys predictable income; if the client's guarantee does not actually make your month more predictable, it is not buying anything.
How many hours should a retainer include?
The hours the client actually uses in a typical month, based on past invoices if you have them. Set the cap below that and every month becomes an overage conversation; set it well above and the client is paying for time they do not use, which tends to end the retainer.
What should I charge for hours over the cap?
Your full undiscounted rate. The discount was for the hours the client guaranteed; hours beyond the cap were never guaranteed. Discounting them rewards going over.
Should unused hours roll over?
Usually not, and say so in the agreement. Rollover turns a retainer into a prepaid block and removes the predictability you discounted for. If you allow it, cap how many months can accumulate.
What is the effective hourly rate on a retainer?
The fee divided by the hours actually worked, including any over the cap. It is the only number that says whether the arrangement works, and it is often well below the headline rate.
What is the difference between a retainer and a deposit?
A deposit is part of the price of one job and is credited against its final invoice. A retainer is a recurring fee for time or availability each month, billed whether or not every hour is used.
How do I invoice a retainer?
One line for the retainer naming the hours it includes, and a separate line for any overage with the hours and the rate shown. The button under the result builds exactly that.