How to calculate retainage on a pay application, with a 10% example
Retainage is the share of each payment held back until the work is substantially complete, set by the contract and commonly 10%. On the G702, Line 5a is the rate times completed work (Column D + E), Line 5b the rate times stored material (Column F), and Line 5 = 5a + 5b. At 10% on $450,000 completed and $35,000 stored, Line 5 is $48,500.
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The math on the form
With a fixed contract rate, 5a applies that rate to completed work: the D + E base across the schedule. 5b applies it to materials presently stored: the F base. Line 5 is their sum. Line 6 is total completed and stored (Line 4) minus Line 5. Line 8 is Line 6 minus what was already certified (Line 7). Every step is checkable arithmetic with no judgment involved, and the bases tie back to the G703’s columns. Reducing retainage (10% to 5% or 0% after 50% completion) and statutory caps on public work change the rate, never the arithmetic. That dependency cuts both ways. When the sum of Column G does not equal Line 4, the schedule and the certificate disagree about the base itself, so start with what to do when the certificate and continuation sheet do not tie at all: a retainage rate applied to a disputed base cannot be verified.
Worked at 10%: Column D is $290,000 and Column E is $160,000, so completed work is $450,000 and 5a is $45,000. Column F holds $35,000 of stored material, so 5b is $3,500 and Line 5 is $48,500. Line 4 is $485,000 and Line 6 is $436,500. With $350,000 certified before on Line 7, the payment due on Line 8 is $86,500. The free retainage calculator opens on these same figures: change the rate or a column total and every line below it is worked out again.
Where it gets less simple
Contracts vary the rate three ways: reducing retainage, per-line retainage on some custom forms, and different rates for work versus stored materials. Reducing retainage means 10% until the project is 50% complete, then 5% or zero on further work. Many states cap retainage on public work by statute. The form’s arithmetic holds whichever regime applies. The contract decides only the rate and the bases.
Where it goes wrong on real pay apps
The failures receivers actually see:
- The rate applied to the wrong base: this period’s work only, instead of the cumulative base.
- Stored materials skipped in 5b.
- The reduction applied to the whole base when the contract steps it only for later work.
- A stale percentage carried over from last month’s spreadsheet.
- 5a + 5b not equaling Line 5.
Each one shifts Line 8, the check, by the same dollar amount. That is why a reviewer’s checklist re-computes the whole chain instead of trusting any single line, and why retainage is one of the classic rejection causes.
Checking the whole chain
Every step is deterministic, so the whole chain is verifiable. PayAppCheck recomputes 5a/5b from the declared rate and the schedule’s bases. It then checks 5a + 5b = Line 5, Line 6 = Line 4 − Line 5, and Line 8 = Line 6 − Line 7. Each mismatch is flagged with the expected figure and the dollar delta. If you bill from a spreadsheet, the free G702/G703 Excel template computes 5a and 5b from one rate cell and the schedule’s own bases, so neither can drift.
Questions people ask
How do you calculate retainage on a pay application?
Multiply the contract retainage rate by two bases from the G703 continuation sheet. Line 5a is the rate times completed work to date, Column D plus Column E, and Line 5b is the rate times materials presently stored, Column F. Line 5 is 5a plus 5b, Line 6 is Line 4 minus Line 5, and Line 8, the payment due, is Line 6 minus Line 7. At 10% on $450,000 of completed work and $35,000 stored, 5a is $45,000, 5b is $3,500 and Line 5 is $48,500.
What is a typical retainage percentage?
10% is the most common rate on private work, set by the contract rather than by the form. Many contracts reduce it to 5% or 0% once the project passes 50% completion, applying the lower rate to later work. On public work, many states cap the rate by statute, so the contract and the statute both matter. Whatever the rate, the arithmetic on the G702 is fixed: 5a = rate x completed work, 5b = rate x stored material, Line 5 = 5a + 5b.
Is retainage calculated on stored materials?
Yes, when the contract withholds on stored materials: Line 5b = rate x Column F, the materials presently stored on the continuation sheet. Some contracts set a different rate for stored material than for completed work, and some withhold nothing on it, so read the retainage clause before flagging. Skipping 5b entirely while Column F carries a balance is one of the most common retainage errors receivers see.
When is retainage released?
The contract controls release. The common patterns are a reduction at 50% completion, release at substantial completion, and final release with the closeout application, and statutes set deadlines on public work in many states. On the form, a release appears as Line 5 dropping, which raises Line 6 and flows straight into the payment due on Line 8. Check a release application the same way as any other: recompute 5a and 5b at the new rate against the same bases.
What is the most common retainage mistake on a pay application?
Applying the rate to the wrong base: this period’s work alone (Column E) instead of the cumulative completed work (Column D + E). That understates Line 5, overstates Line 6, and inflates the payment due on Line 8 by the full difference. The runner-up is skipping stored materials in 5b while Column F carries a balance. Both are caught by recomputing 5a and 5b from the declared rate and the continuation sheet’s bases.
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