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The A to Z of Freelance Retainer Agreements

The A to Z of Freelance Retainer Agreements

Working as a freelancer comes with many perks. You can create your own schedule, be selective about the kind of work you take on, and work from wherever you please. But on the flipside, you also sign up for a lot of uncertainties. You don’t receive a steady paycheck, and the amount of work coming in fluctuates from one month to the next. A freelance retainer agreement can be the happy medium that lets you enjoy all the flexibilities of gig and freelance work, while reducing some of the uncertainties.

What is a freelance retainer agreement?

This is a contract by which an employer agrees to retain a freelancer’s services for a certain amount every month. Unlike a project-based freelance contract, a retainer agreement offers guarantees over a longer term — from several months to maybe even a year. For the entire duration of the contract, the freelancer is ensured payment and the employer is guaranteed service, all without needing to make a full-time commitment.

Based on requirements, a retainer agreement may fall into one of these two most common categories.

  • Time-based retainer agreement. Here, the freelancer commits a certain number of hours to the employer every month, and charges a flat rate for this time. Under this, the freelancer agrees to work on whatever the client requires for those hours.

  • Service-based retainer agreement. Under this contract, the freelancer and the employer agree upon a list of recurring tasks to be done every month. The freelancer then charges a flat rate for those tasks, irrespective of how much time it takes to complete them. 

Regardless of the kind of contract you enter into, a retainer agreement has certain advantages and disadvantages that you should consider.

Freelance retainer agreements: The pros

1. Financial guarantee

A steady inflow of cash is the most obvious benefit for a freelancer. Freelancers and independent contractors are used to a certain volatility in their income — so having a retainership in place helps take away some of those uncertainties. It enables one to plan ahead without always needing to worry about next month’s bills.

As for clients, it becomes easier to plan budgets accurately when the freelancer charges a flat fee every month. A retainership may also be more cost-effective in some cases. For instance, when a brand engages a freelance designer every time they need a new graphic created, they are charged separately for each task. But if they have the designer on retainer for, say 30 hours every month, they may find that she can create all the graphics needed within those hours (and have some time left over for a few extra tasks), all for a flat fee. So the overall cost comes down, and managers don’t have to account for every little tweak or update they ask for.

2. Easier to plan out work

As a freelancer, once you know how much time and effort you have committed to a client, it becomes easier to create a schedule for yourself. For example, a content writer who has agreed to provide 4 blogs a month to his client, knows that he has to set aside roughly enough time to complete one blog a week. This tells him exactly how much bandwidth he has to take on other projects. It also makes it easier to plan out vacations and time off — all he has to do is work around his schedule and make sure the agreed number of deliverables are completed by the end of the month.

3. Improved efficiencies

A freelance retainer agreement creates improved efficiencies for both parties involved. Every month, freelancers spend a lot of time creating proposals, negotiating terms and pitching for new work — time that can now be spent on tasks that actually drive income. Many retainer agreements also require the client to pay upfront — which means you no longer have to spend time chasing clients for payments after the work is done.

A retainership is more efficient for clients too. Rather than having to spend time and money looking for a new freelancer for every task, a retainership gives you guaranteed access to a professional whom you already know and trust. Moreover, a longer engagement also helps the freelancer understand your needs better. This makes it easier to get the best work out of them, with minimum trainings and discussions.

Freelance retainer agreements: The cons

1. Financial growth may be negatively impacted

Sometimes, a freelance retainer agreement comes with certain financial drawbacks. Freelancers are usually expected to offer a discounted rate in exchange for the guarantee of a retainership. While some professionals consider this a small price to pay for income consistency, others end up working for a rate that falls much below market standards.

It is also worth noting that once your prices are set for a client, it becomes very difficult to increase them later. In fact, they may even influence the way your rates are determined in future — it is all too common for clients to reverse engineer the discounted pricing and negotiate a lower hourly rate for new jobs. Moreover, as a freelancer, if you commit all your working hours to retainer clients, that effectively puts a cap on your earning capacity.

2. Scope creep

This tends to happen with contracts where the scope of work is not specified, and your client’s requirements vary greatly from one month to the next. You may realise that some projects involve a lot more effort than others. In these cases, the flat rate you initially quoted may not cover these fluctuations. Additional research, endless rounds of iterations, and extra time taken for project-related travel are other elements that can increase the effort involved, quickly outweighing your flat fee.

3. Chance of expectation mismatch

If terms and conditions are not clearly defined, a retainership can create conflict, which ultimately, may sour the freelancer relationship. Take time-based retainers, for example. Some employers take it to mean that freelancers would be ‘on call’ for the agreed number of hours — and that until those many hours are reached, they can demand immediate turnaround. In reality however, it is simply a time commitment from the freelancer. The actual details of when the commitment will be fulfilled are to be mutually decided.

Unused hours are another sensitive issue. Employers who are unable to use up the agreed number of hours often resent being billed for the full amount and may want to pay less. Alternatively, they may expect those hours to roll over, creating an unexpectedly huge workload for the freelancer the following month. These solutions, however, defeat the very purpose of a retainership guarantee.

So when should you use a freelance retainer agreement?

As you may have guessed, there is no one correct answer to this. But under certain circumstances, a retainership can be extremely advantageous, whether you are a freelancer or an employer.

The first condition, of course, is that you already trust the other party. A retainer lock-in is not recommended right at the beginning of a new freelance engagement. However, for an established relationship, it can be the next logical step. Mutual understanding with the other party can help you sidestep many of the misunderstandings discussed above, and ensure that the arrangement is successful.

Secondly, a freelance retainership only works when the amount of work involved is consistent and recurrent. With wildly fluctuating requirements, it may be difficult to calculate and arrive upon a fair rate. The retainer agreement only succeeds when the client doesn’t feel short changed and the freelancer doesn’t feel like they are being taken unfair advantage of.

Finally, if you are a freelancer, it is important to ensure that you don’t place all your eggs in one basket. While a retainer contract can be a great way to enjoy a consistent income, it is best to supplement it with other projects and tasks. That way, you don’t put a ceiling on your earning capacity — and you still get to enjoy the flexibility you signed up for.

With these prerequisites met, a freelance retainer agreement is well placed to be a resounding success for everyone involved.

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