Retention in construction refers to the amount of money held back until a construction project is complete. Retention is usually a percentage of the total project cost, typically sitting at 5% or 10% . Retention payments are a percentage of milestone payments owed to a subcontractor or vendor, which are withheld pending full practical completion and resolution of any defects. Retention is built into the construction industry and is completely legal, and it affects both primary contractors and subcontractors.

Retention is an unfortunate reality for most contractors in the construction industry, and it can cause cash flow problems for contractors. Retentions can be large amounts of money and may cause cash flow problems for contractors. However, retainage is effective and has a long history in the construction industry, and it is shown to be one of the best ways to get a job done correctly.

Retention is processed by holding onto or retaining a portion of the contract until the job is complete. Once the job is done and the individual that hired the contractor is satisfied, the contractor will receive the retained portion. Retention money is used for two primary purposes: as protection for the owner to ensure the job is completed and to ensure problems will be taken care of that arise during construction or for a specified period after construction is complete.

Retention can negatively affect ongoing projects in several ways, including limited cash flow, slow down projects, and make life extremely complicated for the accounts teams and project managers. However, construction companies learn to work around the burdens they bring, and there are steps companies can take to ease the burden and receive payment faster, such as asking questions.