Many self-employed individuals will work based on what is called a retainer. The term retainer simply means that they have an agreement with a firm or another individual under which they are paid a set fee, usually monthly, though it could be weekly or yearly as well; they then will perform such work that the employer instructs during that period up to the amount dictated by the total amount of the retainer paid. Even if for some reason you do not perform work during a given period, you might still receive your retainer. There are both advantages and downsides to retainer agreements. In this article, we look at why working based upon a retainer can be both good and bad in some cases.
The Benefits of a Retainer Agreement
Talk to numerous freelance workers and they will swear by retainers. So of course, there is a benefit to this type of payment arrangement. The key is to understand how to structure them and then how to work within the context of retainers. Some of the advantages of using a retainer system include:
A Regular Paycheck
When working off of a retainer agreement, you do receive the equivalent of a steady paycheck. If you are a freelancer, you recognize that there are up and downtimes. That is to say, sometimes the money is there and it keeps coming in, and then there are other times when the well seems to have dried up. With a retainer in place, you can count on getting that money at a specified date every single month.
Caliber of Clients
Usually, retainers are issued by those clients who understand that keeping good talent and/or productive workers takes money and a regular stream of money at that. Very often, when working with retainer agreements the caliber of clients tends to be better than if you are just taking one-off jobs from random employers. Plus, those who do express an interest in putting you on retainer are frequent clients that you've worked with long term, and they have consequently come to realize your value to their organization.
Many Clients Prefer Retainers
For many employers looking to work with freelancers, a retainer offers a streamlined and less messy way to do business. In other words, they are not having to worry about you quoting every job and then having to send you money following each project. Rather, they pay you one fee at a given date for work to be determined later. It does prove more convenient for all parties involved if you understand how to make it work effectively.
The Cons of a Retainer Agreement
While it seems like retainers may represent the ideal situation for many freelance workers, keep in mind that there are downsides as well to this form of payment/work arrangement.
Conflicts with Schedules
Depending on the number of clients you have and the various demands of those clients, the timing could become a potential issue. When on retainer, you are in essence at the beck and call of that client. They may send you a project that they want to be done ASAP that you had not been aware of until that moment. If you have another project due for another client, this could throw a wrench into things for you. Also remember, that the retainer is for work to be determined at a later date, this said, that workload could change from month to month making it harder to schedule out other projects.
May Have to Charge Less
With retainers, some employers feel that you should be discounting your work as they are paying you a lump sum monthly. That means for instance if you normally charge X for a certain type of project, the client might want you to consider discounting that for them. Given that you are looking at a steady paycheck, you might be tempted to do so.
Becoming Too Dependent
When you get used to that money coming in each month because of a retainer, it could be difficult to fathom life without that check. In this way, you stand to become quite dependent on that one client and therefore limit yourself in terms of taking on new clients. You need to ask yourself if devoting so many hours per week to a single client is worth it in the long run.
Some Tips for Working on Retainer
If you do decide to enter into a retainer agreement with a client, as noted, you want to make sure that you do it the right way with a strategy in place for making it work and thus keeping all parties involved happy. Some tips for making the most of a retainer situation:
- Make sure the scope of work is well defined. Sometimes retainer agreements can get a little murky in terms especially of the amount of work required on the part of the freelancer. You want to be sure the amount of work per month is detailed as well as spelling out exactly how much you're going to be paid and how much each project is worth. The more detailed here, the better off you will be.
- Start with a trial period. There is a chance that working on a retainer might not be the best situation for you. This is why many freelance workers will often do a trial period, one month for instance. Gauge how successful that engagement was for both parties and then decide from there whether or not to proceed with this type of arrangement.
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