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What is a Retainer Agreement?
A retainer agreement is a work-for-hire legal document or a service contract between a company or an individual and a client. It falls between a one-off-contract and a permanent employment contract . It allows clients and customers to pay in advance for professional services of a company or individual.
You can read more on retainer agreements here .
Purpose of Retainer Agreements
The purpose of the retainer agreement is to set out the duties of the parties so that all parties have an agreement on the services that will be provided, how they will be provided, when and at what cost. Retainer agreements are typically used to hire lawyers and freelancers.
The retainer fee ensures that the hired service provider reserves time for the client in the future when there is a need for their services. Unlike a one-time contract, a retainer agreement is a long-term work-for-hire contract and thus can retain ongoing services.
Here more on uses of a retainer agreement.
How Retainer Agreements Work
Retainer agreements do not work on a single formula. However, there is a basic structure followed in all retainer agreements. One party, like a contractor, agrees to provide certain number of hours each month to the client. In exchange for locking in those hours, the client pays a certain amount of fee, called the retainer fee, in advance to the contractor. Once the work is complete, the retainer fee applies to what the contractor is owed, and other hours will be billed at the contractor’s set rate.
Advantages of Retainer Agreements
Retainer agreements are gaining popularity as service industries need more income stability and try to improve client relationships. Retainer agreements are widely used for legal services, consulting services, accounting services and by freelancers. Here are some benefits of using a retainer agreement:
- Stability : A one-off contract might not bring stable income to an individual or company that is offering its services. However, a fixed retainer fee associated with a retainer agreement ensures stability.
- Time Saved on Marketing : Given that freelancers and professionals would need to look for other clients after a one-off contract ends, marketing commitments are high in a one-off contract for the professional. In a stable retainer agreement, they benefit from a stable fee from the client and a long-term relationship with the client. Thus, they do not have to spend more time marketing themselves.
- Improved relationships : A retainer agreement is a long-term professional relationship. It ensures that the professional is available when needed by the client. This ensures a long-term partnership.
- Predictable Cash flow: Since retainers use an agreed upon retainer fee over a long period of time, it also makes it easier to estimate and maintain cash flows.
- Improved Work: With a retainer agreement, a professional Is paid on a continuous basis, allowing them to focus entirely on the clients’ needs and produce high quality work.
Disadvantages of Retainer Agreements
Retainers come with multiple benefits. Most freelancers and companies would agree that its benefits outweigh the drawbacks. However, there are drawbacks to a retainer agreement for both the client and the professional. Some of them are discussed below:
- Time : A retainer agreement the professional commits to a certain number of hours to the client. This means that they are being locked into a specific schedule.
- Opportunity : Being locked into a specific schedule means that the professional might have to pass on exciting opportunities that might come their way.
- Risk : For a client, retainer agreements can pose some risks. The client pays for the services before receiving them. In months where services are not needed, the client still pays for the hours agreed upon, thus losing money.
Here more on risks and benefits of a retainer agreement.
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Who Needs a Retainer Agreement?
A retainer agreement is widely used in the legal field. It is common for people seeking legal services or anticipating needing legal services to pay a retainer fee to a lawyer who will be available when they need them. This retainer can be an advanced payment for a monthly recurring payment to the lawyer.
Retainer agreements are also used by consultants to provide services to a client over a long-period of time. Especially when the client and professional have established a relationship and the client predicts needing the consultant’s expertise, a retainer agreement provides access to the consultant’s time and services. Freelancers also find retainer agreements to be beneficial. Freelancers often struggle to find a stable source of income and a predictable cash flow. A retainer agreement is a great way to ensure that they have a stable income over a long period of time.
Are you planning to sign a retainer agreement? Here are some things you should consider .
Types of Professional Services Retainer Agreements
There are two types of retainer agreements that a company or individual can use:
- Pay-for-work retainers: Pay-for-work retainers are often used by companies and professionals that intend to receive ongoing payment on a monthly basis from their clients. This type of a retainer agreement is used when relationships with clients is slightly underway. Companies or professionals get paid for the hours of the work they provide. Pay-for-work retainers are not much different from a contract. However, unlike a one-off contract, professions under pay-for-work retainers are in a loop to deliver services to the client over a long period of time.
- Pay-for-access retainers: When companies and professionals prefer to get paid for making their expertise and knowledge available to clients, they use pay-for-access retainers. Under this, the client retains the profession on an ongoing basis when services are needed. This is generally used when the client has formed a relationship with the professional and trusts them to deliver high-quality services whenever required.
Here more on types of a retainer agreement .
Getting Help with a Retainer Agreement
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Meet some of our Retainer Agreement Lawyers
I run a small law firm in Pasadena, CA. I have been practicing for almost 10 years and the other attorneys at my firm each have 12+ years of experience. We focus on business and employment law, protecting and defending business owners. While my clients are all sizes, I particularly enjoy helping smaller companies and individuals manage their legal needs without the high price tag.
I have over 25 years' experience representing individual and company clients, large and small, in transactions such as mergers and acquisitions, private offerings of securities, commercial loans and commercial endeavors (supply contracts, manufacturing agreements, joint ventures, intellectual property licenses, etc.). My particular specialty is in complex and novel drafting.
I assist individuals and businesses across the state of Florida with contract drafting, contract interpretation, and issues that may arise because of contract terms, including demands (cease-and-desist letters) and litigation. I have experience with general service contracts, non-compete agreements, settlement agreements, and many other contracts. Please reach out if I can help you with a contract-related project!
Brianna is a well-respected attorney with a juris doctorate degree in law from Touro College Jacob D. Fuchsberg Law School and bachelor’s degree in Business Administration and Management from Dowling College. Since becoming an attorney, she has practiced in various areas including business law, real estate, employment law, estate planning, and more. Brianna has very broad and extensive business experience; She is an entrepreneur and co-owner of a manufacturing company that was built by her and her partner, where she also served as the Chief Legal Officer/General Counsel and Human Resource Manager for the company. She has been involved in business for over 15 years, thus she offers a very unique skillset to her clients; not only does she understand contractual principals and obligations from a legal perspective while drafting and negotiating agreements, but she also has the foresight and ability to ensure the agreement reflects the practical aspects of the business. Based on the client’s needs and desired outcome, she has the forethought to cover different angles that would be overlooked from a legal standpoint but be of consequence in business. She conducts risk assessments and minimizes client’s risk and exposure to potential liability. Additionally, she specializes in drafting and negotiating agreements. Negotiating is a passion of hers; in law school, she was a member of the Alternative Dispute Resolution Society and won the intraschool negotiation competition. Brianna believes in quality over quantity. She treats every client as a top priority; thus she will not take on many cases at a time because she wants to give each client the focus and attention they deserve. She has sharp attention to detail and is a forceful advocate for every client.
Experienced attorney focusing on estate planning, probate administration, business formation and counseling, and consumer bankruptcy.
I focus my practice on startups and small to mid-size businesses, because they have unique needs that mid-size and large law firms aren't well-equipped to service. In addition to practicing law, I have started and run other businesses, and have an MBA in marketing from Indiana University. I combine my business experience with my legal expertise, to provide practical advice to my clients. I am licensed in Ohio and California, and I leverage the latest in technology to provide top quality legal services to a nationwide client-base. This enables me to serve my clients in a cost-effective manner that doesn't skimp on personal service.