When to raise a client's monthly retainer, based on the hours you actually spend

Raise a monthly retainer when the work it covers has taken more hours than the fee was priced for, several months running, and the extra hours come from more of the same work. One-off requests and fixes for your own team's mistakes don't count. To see it, divide each month's fee before tax by the hours you worked, and compare the result with the hourly rate you priced the retainer at.

Your effective rate and utilization

Even if the agreement never mentions an hourly rate, you chose one. A fee of USD 1,500 before tax for 20 hours a month is USD 75 an hour. Every hour above 20 that you don't bill lowers that rate, and the invoice doesn't change.

Here is a made-up client over six months, counting only time logged on work the retainer covers:

Utilization is hours used divided by hours included. Above 100%, you're working hours nobody pays for. If it sits well below 100% for months, the client is paying for hours that go unused, and you're better off raising that yourself.

From August to October you worked 71 hours for USD 4,500, which is USD 63.38 an hour. At your own rate, the 11 hours over the allowance are worth USD 825. Count hours the way you bill them: if invoices round each entry up to 15 minutes, round the same way here.

Leave sales tax out of the fee. BTW, OB or ABB is collected for the tax office and isn't part of your rate. Our tax guides cover how it goes on the invoice.

Three months over the allowance

A launch, a new contact on the client's side or an outage can blow up a single month. Look at the average of the last three months instead, and decide beforehand how much overrun you'll let go. This example uses 10%, or 2 hours a month.

August to October averages 23.7 hours, 3.7 over the 20 included. That's past the margin, and June and July were already over too.

Watch for carried-over hours. If unused hours roll into the next month, the 2 hours left in May were already paid for, and using them later isn't an overrun. If unused hours expire at month end, May doesn't count.

Which extra hours count

Only some of the 11 extra hours belong in the monthly fee. Go through the tasks behind them.

Say 3 hours went into a newsletter template the client asked for once. That's a separate job: quote it next time, or bill the hours on a normal invoice. A fixed monthly fee isn't the place for it.

Say another 2 hours went into fixing a mistake your own team made. Those are on you, and they say nothing about the price.

The remaining 6 hours are more of the work already in the agreement: the same updates and support requests, just more often. Over three months, that's 2 hours a month, and it's what the proposal rests on.

How much to add

The work now takes about 22 hours a month. At USD 75, that's USD 1,650 before tax. You can offer the client three versions:

The second suits a client with a fixed budget: you agree which tasks drop out. The third suits work that swings a lot from month to month, if the client accepts an invoice that varies. If rising costs have made your hourly rate itself too low, that's a separate calculation, covered in our article on Bonaire's inflation.

Start date and the email to the client

The new fee starts with the next period. Months already invoiced stay as they are. If the agreement sets a notice period for price changes, keep to it. If it doesn't, give the client at least a full month.

The email can be this short:

From August to October, the work under our monthly agreement took 22 hours a month on average, against the 20 it includes. From 1 December, I'd like to raise the retainer to 22 hours for USD 1,650 a month before tax. If you'd rather stay at the current fee, we can agree which tasks to drop. Hours above the allowance would be billed at USD 85, and only after you approve them. The hours by task are attached.

The attachment lets the client check the hours against the work that was requested.

Where Zentract helps

In Zentract, your team logs time on the task they're working on. A retainer on the project sets the hours and fee for each period, and the project shows the hours available, used and remaining in the current one. Admins and managers get an alert at 80% and 100% of the available hours by default.

For hours above the allowance, you choose: bill them at an overage rate when the period closes, take them off the next period, or don't bill them. Overage you don't bill is still recorded, so closed periods show how often the plan ran short. Work categories keep work the retainer doesn't cover out of the count, and that work goes on a normal hourly invoice. You share the hours by task with the client through a link. A new number of hours or a new fee starts with the next period. Our guide to client retainers shows the setup.

This article is general information, not tax or legal advice. The client, amounts and hours in the examples are made up.