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Retainer Agreement for Freelancers: The Key to Obtaining Reliable Income

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Note: This article contains legal advice. We recommend you consult a lawyer before making legal decisions in your business.

Retainer agreements help freelancers grow recurring revenue, have more job security, and get paid more regularly. So how can you make it work and secure reliable income? The answer: use a freelance retainer.

The business landscape is constantly changing and affecting the way we get paid. Digital disruption and new technologies are not only changing industries, but also creating new ones. According to Dell Technologies’ Realize 2030 report, 85% of jobs in 2030 haven’t been invented yet.

Traditional long-term employment is slowly disappearing with the rising popularity of freelancing – especially creative industries such as marketing, design and IT.

Gig economy, short-term projects, and one-off contracts are slowly taking over and shaking the income stability of contemporary workers. While freelancing offers more independence and flexibility, it also bears a lot of risks.

Learn about what a retainer agreement is and how it can benefit you as a freelancer in the long run.

retainer agreement

What is a retainer agreement and how does it work?

As mentioned before, many freelancers work on short-term projects — but not all of them. Some freelance work falls between one-off gigs and full-time jobs, and it is usually defined by a retainer agreement.

So what is a retainer agreement? It’s a contract between you and a client, which guarantees that you will do a certain amount of work for an agreed amount of time and at an agreed rate. This amount of work can be measured in hours or tasks to be completed.

What makes this agreement compelling is that it tends to be recurring, usually on a weekly or monthly basis, which allows you to schedule your work ahead of time and obtain reliable income without having to constantly look for new projects.

When to use & not use a retainer agreement

Freelancers and creatives often struggle to maintain a consistent schedule and rely on project-to-project work. And while they can’t be certain when the next project’s gonna come up, one thing is for sure — the bills will keep coming.

That’s where a retainer agreement comes in. It enables freelancers to maintain consistency and help you secure a relatively steady income.

A retainer agreement can be used by freelancers in pretty much all creative industries, but some jobs are more suitable for this type of contract than others.

Freelance retainer agreements are especially suitable for work that you do for your clients on a regular basis, such as branding and marketing, social media management, content creation, copywriting, website design, and so on.

For example, a retainer agreement makes perfect sense for a freelance digital marketing expert, as the need for their services is constant. Clients need someone to take care of their social media accounts and write blog posts on a regular basis.

On the other hand, if a client needs a new logo, a retainer agreement might not be the best option. Designing a logo is a task that needs to be done only once every several years, so a one-off contract with a logo designer would work much better in this situation.

However, this doesn’t mean that graphic designers can’t benefit form a retainer agreement. It all boils down to the type of job that needs to be done and how often the services defined by retainer agreements are needed.

3 different ways to structure a retainer agreement

Not every retainer agreement is made the same. Different types of work require different agreement models. Generally, they could be divided into three categories — pay for time, pay for work, and pay for access.

1. Pay for time

Pay for time is the most typical retainer agreement model. Clients pay the contractor for a certain amount of time per month, for example, and if that time is not used, it is basically lost.

Alternatively, as this type of agreement can be rather inconvenient for the client, it can be modified so that the unused time is transferred to the following month — much like a rollover plan works with your cell phone.

2. Pay for work

On the other hand, pay for work retainer agreements are structured in such a way that they emphasize value over time, which means that the client has paid for a predefined end value that the freelancer will have to deliver when needed.

For example, if you’re a freelance writer, it might be more convenient to settle on a certain amount of articles per month instead of the number of hours. Also, keep in mind that although retainers contain a predefined set of deliverables, there’s always a chance of an emergency, so it’s also important to define additional costs if more work is required.

That way, if you have to write more articles than you agreed upon, you can be sure that you’ll get compensated for the additional work that you’ve done.

3. Pay for access

Finally, there’s pay for access model. This is the least common type of retainer agreement for freelancers and it can be difficult to acquire. With this model, clients are paying simply to have access to the freelancer whenever they need them, which can turn out to be unprofitable if they end up not using their services as often.

On the other hand, freelancers have the potential to generate a significant amount of passive income with little work done.

The advantages of retainer agreements

The most obvious advantage of a retainer agreement is that you can get paid regularly and have reliable income, which is something most freelancers struggle with (even the most experienced ones). This is closely connected to the fact that freelancers have to constantly chase new projects – which can be extremely challenging and exhausting.

With a retainer agreement, you don’t have to worry about finding a new gig every month, so you can focus on building a good relationship with your clients and ensure you’re fully devoted to work.

Lastly, knowing exactly how much time you have to spend on a project allows you to make a schedule and organize your time in a way that suits you the best.

Freelancers are not the only ones benefiting from this arrangement. Having a long-term relationship with a freelancer is great for clients as well.

When they work with the same freelancers over and over again, they can assure that they’re paying someone who is familiar with their business, dedicated, and able to deliver great results consistently.

Ultimately, clients can also get better prices than one-off projects, and plan their budget more precisely as their monthly costs are fixed.

The disadvantages of retainer agreements

A retainer agreement doesn’t go without disadvantages. As we previously mentioned, an unfavorable contract for a client can mean that they’re paying for the lost time if there ever happens to be a slow month (on the other hand, this can be an advantage for you, as it enables you to generate some passive income).

You can also get the short end of the stick, as you can easily overdeliver or underdeliver. Another drawback is that you’re constantly on call.

This is particularly inconvenient if your client treats you as a full-time employee, giving you additional work and last-minute tasks. In that case, it is important to clearly set the boundaries and precisely define what, when, and for how much money you work.

What to include in your retainer agreement

In fact, most of these drawbacks can be avoided if the contract is carefully compiled and covers all the bases in detail. Here are some elements that every retainer agreement should have:

  • The deliverables of your work you’ll be performing: For a graphic designer, this may be a set number of hours of work each month you’ll provide — let’s say 10 hours. So every month your client is guaranteed 10 hours at your set cost, but if they only use you for 5 hours, you still get paid for the full amount of 10.
  • The amount owed each month: Calculate the total amount you’d like to charge for the 10 hours of provided work. As this is a retainer agreement, and the client is essentially buying bulk hours every month, some freelancers like to give a slight discount (which also provides an incentive to the client). So if your rate is normally $100 an hour, you might charge $90 an hour as a discounted rate knowing it’s guaranteed hours, totaling $900 a month for this example.
  • Cost for added work: Since you set the total hours at 10 a month, include in your retainer agreement the cost for going over those allotted hours. A simple way of doing so is just charging your hourly rate for every hour over the retainer amount.
  • The payment terms: Letting your client know when you’ll be invoicing them, and when it’s due is extremely important. Whether you collect payment in advance, or upon completion of each month, lay out the details to leave no questions unanswered.
  • Terms for ending the agreement: If your client decides they no longer wish to have you on a retainer agreement, include what that entails for canceling. It could be you require a 1 month notice of cancelation, or you could charge a one-time fee for canceling right away, for example. Decide what method is best for you and include it in your retainer agreement.

Writing a retainer agreement can be a daunting task, but it is crucial for obtaining reliable income and maintaining a good relationship with your clients. Luckily, you can find online templates that can help you get started.

How to price your retainer agreement

Setting the price of your work is one of the most important elements of a retainer agreement (and possibly one of the most difficult ones). You have to decide if you’re selling value or selling hours — and there isn’t a universal answer for which one is best.

For example, if you’re writing blog posts, it’s quite easy to determine how many articles you can write within a month and how much they’re worth.

But if your tasks vary in complexity over the month (or even a longer period of time), it can be more challenging. In that case, selling value is a better way to go.

Either way, you should also clearly define the cost of additional work. If your client asks for something that’s beyond the scope of your work, make sure to get paid for it.

At the end of the day, if you still feel like you’re not being fairly compensated, don’t be afraid to renegotiate your contract and tell your client that you’d like to raise your rates.

Tips for a successful retainer agreement relationship

Having a good retainer agreement relationship shouldn’t be difficult. Remember that this arrangement exists so they can make your life easier, not harder.

So, if you ever feel unsatisfied and you feel like you’re doing too much and not getting paid enough – communicate with your client.

Chances are, they’re not aware of your situation, and maybe even not completely familiar with the difficulty and scope of your work.

Also, make sure to be fair towards your clients and keep track of your hours, so you don’t underdeliver (or overdeliver). Get to know your client, be dedicated and grow with their business. Finally, make sure to always give your best.

Over to you

When you master the basics of a retainer agreement, you will be able to balance the freedom of being a freelancer with the security of steady income and job security. Hopefully, this guide will help you on your freelancing journey.

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Written by Elaine Bennett

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Elaine Bennett is an Australian-based digital marketing specialist focused on helping startups and small businesses grow. Besides that, she's a regular contributor for Bizzmark Blog and writes hands-on articles about business and marketing, as it allows her to reach even more people and help them on their business journey.

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