A retainer fee is an upfront payment to secure the services of a lawyer, consultant, freelancer, 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 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 that 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 reflect the final cost of a service. If the cost of a case is greater than your retainer, you may end up owing a balance.
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.
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.
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 pretrial 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 that 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 United States?
Retainer fees vary by specialty, ranging from hundreds to thousands of dollars, depending on what they are retained for.
Can Retainer Fees Be Refunded?
Lawyers are ethically bound to return any unused portion of a client’s retainer fees. If you are unsure if your retainer is exhausted, you can ask your lawyer for an itemized invoice listing all of the work that they have performed. Each state has different rules for handling unused retainers, so if you suspect you are owed a refund, you should consult your local bar association to determine the correct procedures.
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.
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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.
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.
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.
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.
Generally, a consultant calculates a retainer fee by multiplying their hourly rate by the number of hours they predict a project will take them. That said, retainer fees vary from industry to industry and consultant to consultant.
The amount serves as a guarantee by the client to pay the attorney upon completion of the agreed work. The attorney cannot claim the retainer fee until he has completed the work and invoiced the client. Any remaining retainer fee after paying the hourly attorney fees should be returned to the client.
Do you ever get your retainer fee back? Yes, you should receive a refund of any and all of the unearned retainer after your attorney invoices all work that was performed on your case. If the work performed exceeds the amount of money that you had in trust, you may have a balance due to your attorney.
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.
Retainers provide regular lawyer access to clients but can be cost-prohibitive for some legal situations. Contingency fees enable more clients to pursue valid claims by deferring payment until case resolution.
With a retainer agreement, the client agrees to pay upfront for ongoing services. In other words, your client pays your agency a monthly fee to secure your professional services on a continuous basis.
They can easily lead to unintentional underservicing or over servicing of clients, with your company producing either less than a client expects, or more than you've anticipated.
A retainer fee can be used to guarantee that the lawyer will be available to take a particular case. With this type of agreement, the client would be billed additionally for the legal work that is done.
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.
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.
A retainer is a fee paid to a lawyer or law firm in advance of services being rendered, and the law firm should hold it in a trust account until the services are provided. It gets booked to the balance sheet as a prepaid expense (which is an asset).
Be flexible. 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.
The retainer fee ensures that the hired service provider reserves time for the client in the future when there is a need for their services. Unlike a one-time contract, a retainer agreement is a long-term work-for-hire contract and thus can retain ongoing services.
Introduction: My name is Pres. Carey Rath, I am a faithful, funny, vast, joyous, lively, brave, glamorous person who loves writing and wants to share my knowledge and understanding with you.
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