Retention Money

Retention money is a percentage (commonly around 5%, capped at an overall limit) deducted by the employer from each of the contractor's running-account bills and held as security for due performance and for making good defects. It gives the employer a readily available fund if the contractor fails to complete or to rectify defects, and aligns the contractor's incentive with quality and timely completion. It is distinct from, but works alongside, the Earnest Money Deposit and the performance security.

Release is staged: typically a portion is released on practical completion / virtual completion and the balance after the Defect Liability Period ends and the defect-liability/final certificate is issued. Many contracts allow the retained amount to be substituted by an equivalent bank guarantee so the contractor's working capital is not tied up. Disputes commonly arise over delayed or wrongful withholding of retention beyond entitlement and over what defects justify continued retention — making clear contract terms and timely certification important.