What retainer means
A retainer is an arrangement under which a professional is engaged on a continuing basis.
The word covers two different things, and confusing them causes most retainer disputes.
A general retainer secures availability. The client pays a periodic fee for the professional to be available and to handle defined routine work, and additional matters are charged separately.
A fee on account is money paid in advance against work to be done, drawn down as the work is performed and topped up when exhausted. It is not a fee for availability; it is prepayment.
A third arrangement, common in practice, is a monthly fee covering a defined scope of services, which functions as a subscription.
What matters is that the arrangement says which it is, what is included, what is not, and what happens when the work exceeds the scope.
How it is used
A retainer letter or engagement agreement should cover a settled list.
The parties, and who exactly is the client where a group of companies is involved.
The scope: what work is covered by the retainer fee, described specifically, and what falls outside it.
The fee, when it is payable, and whether it is subject to review.
How out of scope work is charged, and whether the client's approval is required before it is undertaken.
Expenses and disbursements, and whether they are included.
Term and termination, including notice on both sides and what happens to work in progress.
Confidentiality, and for lawyers, the position on privilege.
Conflicts of interest, and what happens if one arises.
And, for professionals, the file: who owns the documents and what happens to them on termination.
That last one produces disputes. A client who terminates and asks for their file, and a professional holding it against unpaid fees, is a familiar standoff, and the agreement should say what happens.
Key features
- An ongoing engagement of a professional for a periodic fee
- A general retainer secures availability; a fee on account is prepayment
- Scope should state what is included and what is charged separately
- Should cover expenses, term, termination and work in progress
- Conflicts and confidentiality belong in the engagement terms
- The position on the client file should be agreed at the outset
How this works in Nigeria
Scope creep is the recurring Nigerian retainer problem, and it runs in both directions.
A client engages a lawyer on a monthly retainer for general corporate advice, and then sends a litigation matter, a property transaction and a regulatory investigation. The professional either absorbs work they were not paid for or raises an invoice the client did not expect. Both damage the relationship.
The fix is a scope schedule listing what the retainer covers, with a rate card for anything outside it and a requirement that out of scope work is confirmed in writing before it starts.
The second Nigerian issue is the professional's lien. A professional holding documents against unpaid fees is exercising a recognised right in appropriate circumstances, and it is also a relationship ending move. Agreeing at the outset what happens to the file on termination, and what fees must be settled first, prevents the standoff.
Withholding tax is the third practical point. Professional fees attract withholding tax, and a retainer agreement should state whether the monthly figure is gross or net of it, because discovering the deduction on the first payment is a poor start.
For professionals, the discipline that makes retainers work is recording time even on a fixed fee. Without it there is no basis for a conversation about scope, and no evidence of what was actually delivered for the money.
Retainer vs fee on account vs contingency fee
Three ways a professional is paid, with different risk allocation.
A retainer is a periodic fee for availability or for a defined scope of work. The professional has predictable income and the client has predictable cost, provided the scope holds.
A fee on account is money paid in advance and drawn down as work is performed, topped up when exhausted. It is prepayment rather than a fee, and any unused balance is returnable.
A contingency or success fee ties payment to outcome. The professional carries the risk of the matter failing and is compensated for that by a higher fee on success. Its availability and permissible structure depend on the profession's rules, and for lawyers those rules should be checked rather than assumed.
A client should know which they have agreed, because the answer decides whether unused money comes back and whether anything is payable if the matter goes nowhere.
Limits and risks
A retainer only works where the scope is defined. Without a scope schedule the arrangement drifts and both sides feel aggrieved.
Fixed fees also misprice. Some months the professional does far more than the fee justifies and some months far less, and the arrangement only survives if both sides accept that averaging.
Retainers can create dependency and complacency on either side, which is why periodic review of scope and fee is worth building in.
And for clients, a retainer is not a substitute for a proper engagement on a significant matter. A major transaction or a serious dispute should be scoped and priced separately rather than absorbed into a monthly arrangement.
Worth knowing
Attach a scope schedule to the retainer listing what is included and what is charged separately, and require out of scope work to be confirmed in writing before it starts. Nigerian retainer relationships end over an invoice for work the client believed was already paid for.
Questions people ask
What is a retainer?
An ongoing engagement of a professional for a periodic fee, either securing their availability, covering a defined scope of work, or functioning as a subscription for routine services.
What is the difference between a retainer and a fee on account?
A retainer is a fee for availability or defined work. A fee on account is money paid in advance and drawn down as work is performed, with any unused balance returnable.
What should a retainer agreement contain?
The parties, the scope of included work, the fee and payment terms, how out of scope work is charged and approved, expenses, term and termination, confidentiality, conflicts, and what happens to the client file.
How do I avoid scope disputes?
Attach a scope schedule listing what is covered, provide a rate card for anything outside it, and require out of scope work to be confirmed in writing before it starts.
Can a professional hold my file over unpaid fees?
A lien over documents is a recognised right in appropriate circumstances. Agreeing at the outset what happens to the file on termination, and which fees must be settled first, prevents the standoff.
Is withholding tax deducted from a retainer?
Professional fees attract withholding tax in Nigeria. The agreement should state whether the monthly figure is gross or net of it, rather than leaving it to be discovered on the first payment.