Believe It or Not, There’s Good News About Retainage

Retainage has been a part of construction for nearly two centuries. And for most of that time, subcontractors have been expected to accept it as one more cost of doing business. They front the labor and materials, cover payroll, and get the job moving before ever seeing a payment. Then, when the money does start coming in—often months later—5% to 10% of what they’ve earned is held back.

While retainage isn’t solely a subcontractor issue, the burden often falls disproportionately on them. It’s not uncommon for general contractors (GCs) to withhold more from their subs than the owner is withholding from them. And subs often wait longer to see that money released. In our 2026 State of Subcontractor Billing Report, 43% of subcontractors told us they wait more than 90 days for final payment and retainage, compared to just 15% of GCs.

The good news is that lawmakers are starting to recognize some of these imbalances, too. Over the last decade or so, we’ve seen meaningful movement around retainage—and much of it has been in subcontractors’ favor.

The rules around retainage are changing.

Thus far, there isn't a prevailing model of retainage reform leveraged across the country. It’s been interesting to see how many different parts of the practice states are reconsidering. A few common retainage reform trends include:

Reducing the Amount of Cash Withheld

California now caps retainage at 5% for all private works contracts entered on or after January 1, 2026. Ohio recently reduced retainage on public work, and Indiana has placed new limits on retainage for both public and private construction.

Stopping Greater Retainage Downstream Withholdings

California (again) now prevents a GC from withholding a greater percentage from a subcontractor than the owner is withholding from the GC on covered projects. Ohio has also adopted similar protections for public work, while Minnesota requires upstream retainage reductions to flow proportionally down to subcontractors.

Releasing Earned Money Sooner

New York generally requires that retainage on qualifying private projects be released within 30 days of final approval. Minnesota ties release to substantial completion and establishes deadlines for payment down the chain. Ohio’s recent public-work changes also include a 30-day release requirement.

Replacing Cash With Another Form of Security

More recently, states have started giving contractors another option altogether: replacing withheld cash with another form of security, like a retainage bond. This one is particularly interesting because it questions whether money needs to be withheld in the first place.

Retainage bonds offer a different way to think about the problem.

Retainage serves a legitimate purpose. Owners and GCs need some protection if the work isn’t completed or is done shoddily. But that doesn’t necessarily mean the only way to provide that protection is to hold a contractor’s cash. 

A retainage bond separates the two. Instead of cash withheld, a contractor or subcontractor obtains a surety bond that provides financial protection if it fails to complete or correct its work. The upstream party keeps that security, while the contractor keeps access to money it has already earned.

Versions of this approach are already available in several states. Washington, Oregon, Louisiana, and Missouri have established retainage-bond provisions, while Colorado added a new option for private construction this year. Other states allow contractors to replace cash retainage with other forms of security—a strategy the American Subcontractors Association (ASA) and other subcontractor groups are pushing for broader adoption.

I've had a chance to see some of that advocacy up close through my work with ASA. Retainage reform was among the issues we took to Capitol Hill earlier this year, and Martin Press, ASA's Secretary/Treasurer, has since been keeping me updated on an effort he's involved with in Virginia. He's been working with the Associated Builders and Contractors (ABC) of Virginia on a retainage-bond proposal, while gathering input from the National Association of Surety Bond Producers (NASBP) to determine how it should operate.

What’s cool about the idea is that it doesn’t force retainage bonds onto every project; it makes them an option. A bond comes with its own costs, so subcontractors would still need to weigh those against the cost of leaving cash upstream. But having the choice puts them in a better position to decide what’s best for their business.

Retainage reforms only get you so far.

This movement is encouraging, but laws still vary widely by state and project type, and there will always be jobs where retainage remains part of the deal. That means subcontractors still have to manage the terms and the money in front of them—and the contract is the first place to start.

Tara Cristel, co-owner of Total Glass and our first guest on Billing & Chilling, learned that the hard way. For years, she assumed what many subcontractors do: if you want the work, you sign the contract the GC sends you. It took a large project where Total Glass went months without getting paid for her to go back through the contract, looking for protection, only to realize how much risk she had agreed to without really understanding it.

This changed the way Tara approached contracts, including retainage. She started reading the fine print, understanding the laws in the states where they worked, and pushing back when the terms didn’t make sense. In one case, she discovered that language Total Glass had added to its proposal rejecting 10% retainage on materials was effectively overridden elsewhere in the subcontract. In another, she challenged a GC on retainage terms that conflicted with state law—and the GC’s own attorney had to look up the provision.

Those experiences reinforced something Tara hadn’t realized when she first started signing contracts: the terms you’re handed aren’t necessarily the terms you have to accept. Knowing what the contract actually says—and what the law allows—puts you in a much better position to question them. 

Good retainage management still matters.

That said, you won’t win every negotiation. Sometimes the GC won’t budge, and sometimes the job still makes sense even with terms you don’t love. Once you sign, managing retainage well comes down to knowing exactly what you’re owed and what needs to happen to collect it.

That sounds simple, but retainage is unusually easy to lose sight of. The money may sit for months after you’ve finished your scope because the release is tied to final approvals further upstream. Your team needs a way to see what’s being held across every job, when each balance becomes eligible for release, and anything standing between you and billing it. Lien and notice deadlines also need to stay visible throughout that wait; a long retainage timeline doesn’t stop those clocks from running.

That’s a big part of why we built retainage tracking into Siteline. We can’t change the terms you signed or make an owner release the money, but we can keep retainage visible alongside the rest of your receivables so your team knows what’s outstanding, what’s ready to collect, and what needs attention.

Retainage isn’t as fixed as it seems.

After nearly 200 years, retainage is getting more attention than we’ve seen in a long time. Laws are changing what’s allowed, industry groups like ASA are pushing for better options, and subcontractors are using their leverage to negotiate more for themselves. None of those things solves retainage on its own, but together, they give subs more control over how much of their cash gets tied up—and for how long. That’s progress worth paying attention to.