The definition for retainer agreement: work for hire contract that provides a client with a fixed number of work-hours from freelancers or lawyers. Even a real estate lawyer uses this type of contract. A retainer agreement is usually paid in advance, but recurring (monthly) payments are not unusual. This agreement is signed between a client and a professional before any work is completed. The professional agrees to make himself available according to a schedule within a period of time.
Retainer agreements provide benefits for both parties involved, and it’s a way to secure funds, given the fact that most are not full-time employees. It reduces risks on the one hand but brings along some disadvantages on the other hand. As part of the closing procedure, a real estate lawyer would sign a retainer agreement, also known as an engagement letter. Every service and every fee (refundable or nonrefundable) must be written down.
For example, a client hires a real estate lawyer to work for him 10 hours every month. If the lawyer needs 12 hours to complete his client’s tasks, the client will have to pay 2 more hours. If the lawyer works only 8 hours to fulfill the tasks, the client still has to pay for 10 hours of work. They only break even when the lawyer works exactly 10 hours. Every real estate lawyer must adequately define the scope of his engagement with his clients.
Freelancers and lawyers usually charge by the hour. For example, a real estate lawyer may charge anywhere between $150 and $350 per hour. So the client pays the retainer fee according to the terms specified in the retainer agreement.
To escape the “feast and famine” cycle, most freelancers offer their services at a slightly decreased rate in exchange for steady pay through retainer agreements. Clients see it is a way to hire someone without paying high payroll taxes while getting the job done at the best quality/price ratio.
Those who work in creative and support services know very well the definition of a retainer agreement. They are more likely to work in social media marketing, newsletter design, graphic design, content creation or web design. All retainers must keep track of the number of hours allotted to each customer and make sure they don’t work too much for the pay they receive.