Setting the retention rate
Most people use the figure they used last time. It is worth about ten minutes of thought, because it is a financing decision for both parties.
QScope Team · 10 December 2025 · 4 min read
The rate sits in the contract particulars and there is no statutory figure. Three per cent is common on the JCT Standard Building Contract and on Design and Build; five per cent appears more often on Intermediate and Minor Works.
Those are conventions rather than rules, and both are negotiable.
What the rate is actually balancing
On the employer’s side, the risk that defects appear and the contractor does not return. On the contractor’s side, the cost of financing money it has earned and cannot use.
A higher rate buys the employer more security and costs it more in the tender, because the contractor prices the financing. It is not free security.
When a higher rate makes sense
- Unfamiliar contractor with limited track record.
- Thin balance sheet, where returning to make good may not be commercially possible in a year.
- Work with a high defect risk profile: complex envelopes, building services, specialist finishes.
- Short rectification period, so there is less time to find problems.
When a lower rate, or none, makes sense
- A substantial contractor with a bond or parent company guarantee already in place.
- Work with little that can go wrong later: demolition, groundworks, straightforward external works.
- Short contracts, where the administrative cost of tracking two releases outweighs the security.
Nil retention is not unusual on smaller works and on jobs where other security exists. It should be a decision, not an omission.
The reduced rate after practical completion
The particulars also state the rate that applies after practical completion, conventionally half the full rate. That is what produces the familiar three and one and a half, or five and two and a half.
It can be set at something else. What it should not be is left blank, because a blank there produces an argument at exactly the moment the first release is due.
Subcontracts are a separate decision
The subcontract rate is set in the subcontract, and it is frequently higher than the main contract rate. The difference between what is held down the chain and what is held from the main contractor is real working capital, and it is worth being deliberate about rather than inheriting from a template.
QScope suggests a default from the contract form and lets you override it per project and per subcontract, because the two are rarely the same.