Hi Denny, retainers are very common in the advertising industry. My current client is retained by its own clients (typically large UK companies or multinationals). They in turn retain the resources of other companies using this approach as well. They both use the "use it or lose it" model explained by XLMonkey.
What tends to happen is you will negotiate time to be retained every month (eg 3 days) and you will bill for that amount - usually invoiced at end of month. If they use up their 3 days you tell them immediately and then say you will need to charge them on a t+m basis for the rest of the work that month. At the end of each month you report on how much of your time you actually spent.
Over time you will review the monthly retainer (monthly, quarterly or annually, whatever feels right) and may agree on more or less days.
Remember what you are doing is blocking out time for them and not scheduling other work so you can guarantee you are available for them. If they just want use you ad-hoc, then they will need to accept the risk that you may not be available for them.
This is a good Plan B because it provides a steady income, which makes it easier to take someone else on to do the job eventually.
Best of luck anyway. Let us know how you get on.
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Reply to: Retainer Work
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Previously on "Retainer Work"
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Originally posted by Fran View PostVery true, and I have thought the same myself. When I started contracting it was a stop gap to pay the bills whilst I built up a developement business (hense this contract and others), however, I'm really enjoying contracting. Need to make up my mind, but I don't mind the extra work and pocket money, and still haven't given up on the original plan.
It would be nice to have the plan B plus a support agreement bringing in enough to cover basic living expenses, and then the contract money I can blow on sweets whenever I want.
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Originally posted by VectraMan View PostFractions aren't a problem for my mighty Windows calculator .
So if it's £45/hr say, then that's about £200 per month for up to 5 hours. Whereas working full time at the same rate is going to be nearly £7K per month.
Is it worth it? Or am I misunderstanding what you're doing?
One thing I missed from my orginal post. Make sure you add a clause that any work over the agreed number of hours is done at your discretion and at a premium rate.
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Originally posted by VectraMan View PostFractions aren't a problem for my mighty Windows calculator .
So if it's £45/hr say, then that's about £200 per month for up to 5 hours. Whereas working full time at the same rate is going to be nearly £7K per month.
Is it worth it? Or am I misunderstanding what you're doing?
The reason I am interested in doing it is because it could lead to much better work for more realistic fees for proper work and just adds to my existing private client base. This is something I am keen to build on so I can break my ties with EBs over time. At the moment, I am still overly reliant on EB sourced contract work for my main bread and butter. Therefore, the benefits are more residual than financially beneficial for this job and only provides a useful lump of cash between assignments when no other work is available, but is a mere drop in the ocean ratewise during assignments commanding my usual daily rates which are pretty typically what an IT contractor would make at seniorish level. Therefore, it certainly isn't worth turning down proper contract work just to do this. It has to work around it, not substitute it.
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Originally posted by Fran View PostThe discount I currently give is 12.5%, sorry about the fraction but it makes a more rounded hourly rate!
So if it's £45/hr say, then that's about £200 per month for up to 5 hours. Whereas working full time at the same rate is going to be nearly £7K per month.
Is it worth it? Or am I misunderstanding what you're doing?
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I've done this occasionally in the past, on dispute resolution work (where the client wants the option to call you in to assist at short notice, but doesn't know exactly when/how often).
There are two models that I've seen:
1. Use it or lose it. A monthly/quarterly retainer that you agree in advance, and which is charged to the client irrespective of whether or not any service is actually provided. In these cases, you agree the nature of the support/advice to be provided, roughly how long you are likely to require and any limit of reasonableness (so that you aren't bound to commit excessive amounts of time), in advance. The charge is usually a bit below your normal daily rate (since you may not actually be called on to do anything at all, but you'll still get paid).
2. Payment on account. The retainer is effectively an up-front payment for services, that is called off as and when the client uses you (it saves you and them the bother of having to raise a purchase order). The charge here is usually higher than your normal daily rate (since you have to make yourself available if needed, but don't get paid if they don't use you). How much higher is at your discretion - I've charged anywhere from 20% - 100%.
The second of these two options is more common in my experience (though if you look at http://summitconsulting.com/mentor.html you'll see a wonderful example of someone making money hand over fist using the first). It may be as well to describe these two models to the client, as a way of ensuring that there isn't any confusion on either side.
Hope this helps
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Originally posted by VectraMan View PostIf you don't mind me asking, what sort of proportion of your normal hourly rate?
I'm looking at doing this (signs are pointing towards the client not keeping me on full time, but still needing me to support and maintain my projects). I'm thinking that based on my current rate and how much I'd like to get to make it worth it, I'd be saying their minimum payment buys up to 20 hours per month. But that seems like too much. If I worked on the basis of up to 5 hours per month, that would be a couple of hundred quid which I'm not sure I can be bothered with. I'd rather have one less thing to worry about (already have a plan B).
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Originally posted by DodgyAgent View PostI know this sounds as if I am getting at you again Denny, but I thought you had all the answers. It is a fairly simple contractual situation that I thought you dealt with on a day to day basis in your senior role as a contractor?
So I thought I would defer to my 'betters' on this forum who are used to working to a retainer arrangement and who could give me some advice.
Just because I know a great deal about some contracting matters, enough to write an essay on them, much to readers' dismay, when the need arises, that doesn't mean that I know everything there is to know about the running of a limited company or all of the commercial arrangements that some contractors have experienced over the years. After all, I have only had my own limited for a short time compared to some who have worked through one for longer and who are probably used to a variety of commercial arrangements beyond the usual block contract term type work we're most familiar with.
I'm not god even if I come across that way sometimes, according to some of you. I have as much to learn as everyone else on here (even if that doesn't include needing advice on recruitment issues or ir35 for which I am suitably knowledgeable to give advice instead of asking for it).
I hope that answers your question.Last edited by Denny; 10 January 2008, 15:04.
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Originally posted by Fran View PostI get paid for 5 hours work a month, again, as and when I feel like it. The money I'm paid is for the work I do. I give a discounted rate for this work as it's money the client has to pay on a monthly basis even if they don't use all the hours they have been allocated.
I'm looking at doing this (signs are pointing towards the client not keeping me on full time, but still needing me to support and maintain my projects). I'm thinking that based on my current rate and how much I'd like to get to make it worth it, I'd be saying their minimum payment buys up to 20 hours per month. But that seems like too much. If I worked on the basis of up to 5 hours per month, that would be a couple of hundred quid which I'm not sure I can be bothered with. I'd rather have one less thing to worry about (already have a plan B).
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Originally posted by Denny View PostCould someone give me some advice.
I have been given a small piece of work that I can fit around other work. However, the terms are a retainer of X sum per month. Not a huge amount (just a few hundred quid for 3 days per month). Does this mean that they are paying this retained sum just to have me available for any three days, to do it as a guaranteed undertaking, so it just covers my availability. Or should I assume that includes the fee for undertaking the actual work as well as my 3 days per month availability. The work is outside ir35 and can be done as, when and how I like from home.
Not sure about how to approach this new client to discuss without sounding a bit of a numpty about retained payment arrangements as all my private client work to date has been fixed fee or daily rate for delivery based worked.
So I would appreciate some genuinely helpful advice on this.
Many thanks.
Denny
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Denny,
For a number of years we provided ad-hoc support on a retainer for a number of previous clients.
How we approached this was to discuss their on going support requirements and the support load we expected it to generate. We then converted this into a quarterly payment which we simply invoiced.
When they reported issues we dealt with them, until such point as the amount of time had been expended. The agreement only covered investigations - it was down to us to decide whether to actually fix it within the scope of the agreement. If there were substantial problems then we negotiated a fixed price or T and M for corrections.
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Originally posted by Fran View PostI also do work on a retainer/on going basis, it's the same as maintenace and service agreements.
I get paid for 5 hours work a month, again, as and when I feel like it. The money I'm paid is for the work I do. I give a discounted rate for this work as it's money the client has to pay on a monthly basis even if they don't use all the hours they have been allocated.
I drew up the contract for mine and I would advise ensuring the following is in the contract.
No roll over of hours not used by the client - otherwise they may not have anything for you for a few months and then expect a couple of weeks work out of you.
Your time inlcludes any support phone calls and emails made by the client to you during the month - otherwise they could be calling you all the time. However, I would only use this clause if they were getting ridiculous.
Also ensure that you can cancel the contract with a decent notice period, incase something happens and you no longer have time to help them.
I'm not an accountant or anything but I understand that if work like this makes up 5% or more of your company income it helps in any IR35 assessment of your primary contract.
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I also do work on a retainer/on going basis, it's the same as maintenace and service agreements.
I get paid for 5 hours work a month, again, as and when I feel like it. The money I'm paid is for the work I do. I give a discounted rate for this work as it's money the client has to pay on a monthly basis even if they don't use all the hours they have been allocated.
I drew up the contract for mine and I would advise ensuring the following is in the contract.
No roll over of hours not used by the client - otherwise they may not have anything for you for a few months and then expect a couple of weeks work out of you.
Your time inlcludes any support phone calls and emails made by the client to you during the month - otherwise they could be calling you all the time. However, I would only use this clause if they were getting ridiculous.
Also ensure that you can cancel the contract with a decent notice period, incase something happens and you no longer have time to help them.
I'm not an accountant or anything but I understand that if work like this makes up 5% or more of your company income it helps in any IR35 assessment of your primary contract.
Leave a comment:
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