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Deposit vs retainer for freelance and service work
A deposit is paid up front on one job and comes off that job's final bill. A retainer is a recurring payment that reserves your time or a set amount of work each month. On a $2,400 photo shoot with a 50% deposit, the client pays $1,200 to book and $1,200 at delivery. A $600 monthly retainer might cover 8 hours of bookkeeping, with extra hours billed separately.
When should I take a deposit?
Take a deposit when you will spend money or turn away other work before the job is done: materials to order, a date to hold, a sub to book. It tells you the customer is serious, and it covers you if they cancel late. Put the amount, when it is due and how it comes off the final bill in the quote the customer accepts.
Home improvement contractors have a legal limit in some states. In California, the down payment can't be more than 10% of the contract price or $1,000, whichever is less, according to the Contractors State License Board. On a $4,000 deck that is $400; on a $12,650 roof it stops at $1,000. Freelancers and most service businesses set their own deposit terms; check your state's rules if you do home improvement work.
What should a monthly retainer cover?
Say exactly what the monthly payment buys: a number of hours, a set list of work, or first call on your calendar. A $600 bookkeeping retainer that covers 8 hours, monthly reconciliation and one call is clear. In a busy month of 11 hours, the 3 extra hours at $85 add $255 to that month's invoice.
Decide up front whether unused hours roll over and for how long, how the client sends requests, and how much notice either side gives to end it. A retainer that reserves your availability is different from one that buys a deliverable each month, so write which one it is.
Are deposits and retainers refundable?
Only on the terms you wrote down. Say when the money is earned. A deposit can become non-refundable once you have ordered materials or turned down other bookings for that date; a retainer is usually earned month by month as the period passes. Write the cancellation terms in the agreement the client sees before paying.
Freelancers Union's free contract builder treats deposits, retainers and cancellation fees as separate choices, which is a good way to make sure you have answered each one. If you work in New York City, the Freelance Isn't Free Act requires a written contract for freelance work worth $800 or more (counting all work for the same client over 120 days), stating the work, the pay and the payment date.
How do deposits and retainers show on an invoice?
For a deposit, show the full job price, the deposit already paid and the balance due: $2,400 total, $1,200 paid, $1,200 due. For a retainer, name the month it covers and list any hours over the included amount as their own line, so the client sees exactly what they are paying extra for.
If you invoice in QuickBooks, FreshBooks or Wave, record the deposit as a payment against the job so the balance stays right. Use the same invoice number in your reminders. When a job changes, update the scope and the payment schedule together; a deposit that changes with no explanation looks like a surprise charge.
Frequently asked questions
How much deposit should I ask for?
Enough to cover what you spend or risk before the job is done, such as materials you order and dates you hold. For home improvement work in California, the cap is 10% of the price or $1,000, whichever is less.
Can I use a deposit and a retainer with the same client?
Yes, when they pay for different things. A website build can take a deposit, and the monthly updates after launch can run on a retainer. Keep each on its own schedule and invoice line.
Does a retainer mean unlimited work?
Only if you wrote that, and you shouldn't. Name the hours or the work included, and the rate for anything over it, such as $85 an hour after the first 8.
Sources
- Contractors State License Board (California): What should I look for in a contract? · Checked
Down payment on a home improvement job: never more than 10% of the contract price or $1,000, whichever is less.
- NYC Department of Consumer and Worker Protection: Freelance workers' rights · Checked
Contracts worth $800 or more (including all work in a 120-day period) must be written and state the work, pay and payment date.
- Freelancers Union: Contract Creator · Checked
Deposits, milestone payments, retainers and cancellation fees as separate contract choices.
Work out the deposit and the balance
Enter the job total and the deposit as an amount or a percentage. See what is due now and what is due at the end.
Calculate my deposit