A retainer agreement is a legal contract used to hire a professional for particular work in advance. Doing business nowadays has become even riskier in terms of earning profits. You can easily transfer this risk to manage the project in your business to a person called a retainer. A retainer agreement is a blessing in disguise for freelancers as it offers a reliable income upon delivery of the promised work in a promised time frame.
A client retainer agreement governs the relationship between clients and service providers, covering subjects like payment of future projects. These payments can be done one time or regularly. A retainer agreement also entails working hours, compensation, contingency arising in the future, and any other terms associated with the services provided.
Retainers are non-refundable deposits in return for service in the future. The service provider can be an attorney, an accountant, or other professional. These are payment agreements between you and your client.
Your client pays you every month in exchange for your services within a specific time frame. You may receive the fee in advance or at the end of the month after the completion of the work. In the legal field, a professional has gained popularity as clients are likely to hire attorney services more than anything else.
A retainer agreement is a work-for-hire contract between a company or an individual and a client. It can be something between a permanent employment contract and a one-off contract. In this agreement, the client will pay you for the services you provide in the future within the time mentioned in it.
Retainer agreements are secure as your customer will pay in advance for the work you promise to deliver later. If you are a freelancer, this will work as income security.
There are two retainer agreements that can be used in specific cases:
The legal field is the one to use retainer agreements most widely. When people require legal services, they pay a retainer fee to the legal counsel who guides them and makes themselves available when in need. This is called an advance payment for a monthly recurring work to the legal counsel.
Apart from retaining legal counsel, this retainer agreement is also used by consultancy firms to provide services to their client. If both the client and consultancy share a professional relationship for an extended period, and the client predicts that they will need the consultant’s expertise soon, access to a retainer agreement will be provided.
A retainer agreement is also required by freelancers to provide themselves with a secured and stable source of income and ongoing cash flow. It is an excellent way for them to secure their service of expertise.
Security of payment. No matter how large your business is, it’s always safe to get your payments secured and not suffer the lack like other businesses do. The scale of business does not decide upon the guarantee of payment. Expenses that your business suffers do not come to an end during your awaiting payments. Therefore this agreement ensures smooth payment sailing.
Trusted client. The only thing upon which the whole retainer agreement is based is trust. This is a massive advantage because the clients to enter into such agreements will be those with whom professional relationships have already been entrusted. Once the client enters into such an agreement, the client’s probability of sticking with you for a while becomes high. The clients also place trust in you and believe that your work is dependable, and they are also willing to secure your services with them in the future.
Preferable by clients. Not all clients prefer retainers, but most do as they can easily place their trust in them. Retainers give a sense of security to their client.
Less pay. The client will expect some discount as they will be retaining your services for a prolonged period. Now, if you look at the bigger picture at the end of the delivery, money is likely to be balanced out.
Different levels of work. As a retainer, you can get hit by a lot of work once the client gets back to you with one big project and other services. Therefore, when setting a retainer agreement with your party, it is essential to write that you won’t be available for 40 hours straight for a week. Scope of services, an extension of the deadline, and other expectations need not be kept for an assumption.
Scheduling issues. Deadlines can make your blood pressure go high. The workload is also another drawback if you do not include it in a retainer agreement. Therefore terms and conditions related to the delivery of service need to be crystal clear so that you do not keep extending your delivery dates and making the clients unhappy.
Dependency problems. It is impressive that you have a set of clients that you can depend upon. But overly relying upon those clients and not balancing retainer and non-retainer is a risk you do not want to fall into.
There is no specified roadmap on how a retainer agreement works. But basic structure can be provided that all retainer agreements follow. There are two parties in this kind of agreement; one party is a contractor who agrees to give their services in a specified number of hours in a particular month to a client. In exchange for this service, the client will pay a certain amount called a retainer fee to the contractor in advance. Upon completion of the work, the retainer fee will be provided to the contractor along with extra hours as per the rates set in the agreement. These steps are followed for setting up a retainer agreement:
Step 1: Negotiate the compensation
In this agreement, a retainer must always negotiate the compensation they receive for the services provided. This will ensure the smooth completion of the agreement.
Step 2: Decide on the types of retainers
Clients must constantly decide what type of retainers they want to get their jobs done effectively.
Step 3: Sign the contract with agreed-upon terms
Upon negotiation and decision of the type of retainers, it is essential to agree to the terms of the agreement and sign the same.
Step 4: Getting paid for the project
You would expect fair pay for your efforts. Therefore, you must check the clauses for payment in the agreement very carefully.
A retainer agreement of a professional or service provider must cover the following:
The retainer agreement template must be obtained from a trusted website or an individual with the relevant authority. You are encouraged to use our lawyer-approved template to establish your business relationship successfully.
Step 1: Fill out the introductory clause
After you have arranged a retainer agreement, you start filling it out by describing the parties. The blank provided after “made effective as of” has to be filled up with the date upon which this agreement will be effective. Secondly, to fill the blank after the service provider, the name of the professional providing the service must be filled out. Other details like the mailing address must be mentioned along with the name. The other party’s details, the legal name and mailing address, also need to be filled in.
Upon introducing both the parties, you move to the next section, services, wherein you need to fill out the service providers’ responsibilities and other relevant information.
Step 2: Provide the commencement and end date of the service
Once you’re done defining the kind of services to be provided, define the time frame of that service as well. In the term clause, you need to provide information on a particular date when the service will commence. The checkbox of “On the date” also needs to be ticked, following which you need to provide the termination date of services. You will also have to fill out the details of how the termination can take place.
Step 3: Specify the method of payment
The significant clause of this agreement is the payment method. You need to fill the fourth article, “Compensation,” wearing a need to mention if the payment will be made hourly. You also need to fill out the amount which the other party will pay you for every hour of work.
Step 4: Indicate the contingency fee
The clause “Contingency” allows you to provide any additional information required for this purpose. The checkbox “there shall be a contingency fee arrangement” is to be marked if you need to enter the contingency fee percentage and its source. If you mark “there shall be no contingency fee arrangement,” you need not provide any such details.
The “Payment” clause specifies the payment frequency like weekly, monthly, or quarterly. When the client and service provider agree that payment will be made when the invoice is issued, the “client receiving an invoice from the service provider” must be checked. If the payment is made in any other manner, then the “other” checkbox must be marked. The clause “Contingency” allows you to provide any additional information required for this purpose.
The “Retainer” definition should also be considered part of this agreement. The seventh article wherein two definitions have been provided must be checked. One provides for “required to pay a retainer,” wherein the service provider must pay the exact dollar amount. If the amount is refundable, then the first checkbox will be marked.
Step 5: Describe the expenses
The project obviously will have its expenses included in the article “Expenses,” where you will have a choice of three statements. If you are “responsible for all expenses,” then go ahead with the first checkbox. If the other party will pay you back the expenses, then mark the second checkbox. If he assumes all expenses responsibility, then mark the third checkbox.
Step 6: Deliver relevant information on disputes
The “Disputes” clause describes arbitration place in case of disputes where you need to fill in the country and the state name where the dispute shall be administered. For sending a legal notice you’ll be required to provide the mailing address under “Legal notice”.
Step 7: Indicate the governing law
Fill out the state which shall have the jurisdiction of this agreement in “Governing law.”
Step 8: Include other terms and conditions
“Additional terms and conditions” allow you to include any other obligations of other parties.
Step 9: Sign the agreement
In the “Service provider signature” and “Client’s signature” the assent of both the client and the service provider is to be filled.