Documents · Compared
Retainer against fixed fee
A retainer is a recurring fee that buys a block of time or availability each month, whether or not it is used. A fixed fee buys a defined deliverable for one price, whatever it takes to produce. The first suits ongoing work with unpredictable shape; the second suits work whose shape is known before it starts.
The pricing model quietly decides what both sides optimise for, which is why the argument at the end of an engagement is usually really an argument about the model.
Nuwan Madhusanka · Co-founder
3 min read · Published
| Retainer | Fixed fee | |
|---|---|---|
| You are buying | Availability and a block of time | A defined deliverable |
| Suits | Ongoing, unpredictable work | Scoped, known work |
| Risk sits with | The buyer, if hours go unused | The supplier, if it takes longer |
| Key clause | Rollover and notice | Scope and change control |
| Fails when | Nobody tracks what was used | The scope was never written down |
The rollover clause decides everything
A retainer without a rollover rule creates an argument every month. State plainly whether unused hours expire at the end of the month, roll into the next one, or accumulate up to a cap. Expiry is the cleanest and the most common; unlimited rollover turns into a large balance nobody can staff. Whichever you choose, report the balance monthly, because a retainer that is not reported on stops feeling like value.
Fixed fee lives or dies on the scope
With a fixed fee the supplier carries the overrun risk, which is fine as long as everybody agrees what is in. That means named deliverables, an acceptance process and a change control clause, because the request that arrives in week six is not a scope question, it is a pricing question. A fixed fee with a vague scope is a time and materials engagement where only one party knows it yet.
Notice periods and the quiet month
Retainers need a notice period, usually a month or three, and the reason is staffing rather than revenue: somebody is holding capacity for you. The corresponding obligation on the supplier is to be honest in a month where little was used. A retainer that silently bills a quiet month without a conversation is the one that gets cancelled the month after.
Questions people ask
Should unused retainer hours roll over?
Usually not, or only for one month and capped. Unlimited rollover builds a balance that cannot be staffed and turns into a refund argument on cancellation. Expiry is simpler and honest, provided you say so clearly at the start and report the balance each month.
What happens if a fixed fee project runs long?
The supplier absorbs it, unless the overrun is caused by something in the assumptions that turned out to be false, or by a change request. That is exactly why the assumptions and the change control clause matter more in a fixed fee than anywhere else.
Can I mix the two?
Commonly, yes: a retainer for ongoing work plus fixed fee projects for anything discrete. Keep them as separate documents so the hours and the deliverables never blur, because the failure mode is a project quietly eating the retainer and neither party noticing until the invoice.
How do I price a retainer?
From the hours it actually reserves, at a rate that reflects the certainty you are getting. A discount against your hourly rate is normal, because a retainer smooths your revenue and reduces selling. What it should never be is a number picked to match what the client can afford, since that is the retainer that gets squeezed first.
Which is better for the client?
A fixed fee is better where the work is genuinely known, because the price is the price. A retainer is better where the work is continuous and unpredictable, because it buys responsiveness. The mistake is a retainer used to fund a project, which gives neither party what they wanted.
Make one with documents
The button opens the generator with this use case already described. Change the wording to match your own.
Create a document with OneCraftRelated questions
- SOW against MSA: statement of work and master agreementA master agreement carries the legal terms once. A statement of work carries one piece of work: scope, deliverables, acceptance and price.
- Quote against invoice against proformaA quote offers a price, an invoice demands payment for work done, a proforma looks like an invoice but is not one. What each commits you to.
- Purchase order against invoiceA purchase order is written by the buyer to order goods. An invoice is written by the seller to be paid. The order they happen in is the whole point.
- What clauses does an NDA need?Six clauses carry an NDA: definition, permitted use, exclusions, who may see it, how long it lasts, and what happens at the end. The rest is padding.
Written and checked by the OneCraft team. Last checked .