Is retainage the same as retention?

Yes — 'retainage' and 'retention' are used interchangeably in US construction. Both refer to the contractually withheld percentage of each progress payment, released when the work (or a defined portion of it) is complete and accepted.

Can a GC withhold more retainage from a sub than the owner withholds from the GC?

Several states prohibit it (Ohio, for example, limits primes to withholding only what the owner withholds from them), and many subcontracts mirror the prime contract's rate by reference. Outside those protections, the subcontract controls — read it before signing, not at closeout.

Does retainage earn interest?

In some states, yes: statutes in states like Tennessee, Louisiana, and Michigan require retainage in escrow or interest-bearing accounts on qualifying contracts, and several states add penalty interest (often ~1%/month) when release is late. Most private contracts elsewhere pay no interest — which is exactly why slow release costs real margin.

How do I bill for retainage release?

Typically with a final (or dedicated retainage) pay application: work columns unchanged, retainage reduced to the released amount, making 'current payment due' equal to the released retainage. Contracts often tie it to substantial completion or acceptance — calendar it, because nobody reminds you.

What is retainage in construction?

Retainage is the portion of each construction progress payment — typically 5% to 10% — that the owner or general contractor withholds until the work is complete and accepted. On a $250,000 contract with 10% retainage, a contractor who has earned $150,000 has $15,000 held back: money already earned, not yet payable. It exists to keep leverage for punch-list completion, and it is one of the largest silent drains on contractor cash flow.

How it works on a pay application

Retainage is computed on each period’s completed work (and often at a different rate on stored materials), accumulated line by line on the continuation sheet, and shown on the G702-style summary as line 5. It reduces “total earned” every month and is paid out at release — substantial completion, final acceptance, or a statutory deadline, whichever your contract and state law set. Because it compounds across periods, a small rate error in month two becomes a reconciliation problem by month six; keep it penny-exact per line.

State law caps the rate — sometimes

Retainage is regulated state by state, and the spread is wide: New Mexico prohibits retainage entirely; New Jersey caps public-project retainage at 2%; most states cap public work at 5–10%, often stepping down at 50% completion; and a growing list — New York, California, Washington, Colorado, Rhode Island among the recent movers — now caps private retainage at 5% on qualifying contracts. Federal work under FAR 52.232-5 allows up to 10% only when the contracting officer finds satisfactory progress lacking. The full table, with statutes and step-down rules, lives on our retainage calculator with 50-state law table.

Where subs lose the money

No release calendar. Step-downs at 50% completion and statutory release deadlines go unclaimed because nobody tracks them. If your state drops retainage at halfway, bill the reduction the month you cross it.
The final invoice never goes out. Retainage is released against a retainage application — an actual bill. Jobs close, crews move on, and 5% of the contract ages quietly in the GC’s liability column.
Rate drift. A hand-built spreadsheet that applies 10% one month and 10% of a slightly different base the next produces the cents-off totals that get pay apps rejected — and every rejection is another 30 days of financing the job at 60–108 day DSOs.

Managing it without a spreadsheet

Check any job’s withholding against your state cap with the free retainage calculator, and bill it monthly with the free pay application generator. BuiltSum goes further than accrual: it tracks release milestones, generates the final retainage invoice, and ages unreleased retainage so the 5% comes home.