Retention & Progress Payment Calculator
Work out what a progress claim actually pays out after retention and VAT — and track when the money being held gets released.
1. Contract and retention terms
From the contract or the payment certificate — usually JBCC, NEC or the tender’s own conditions of contract.
Most SA building contracts stop withholding once total retention reaches this cap, commonly 5%.
2. This claim
| Value certified this claim | R 0 |
| Retention withheld this claim (5%) | -R 0 |
| Net before VAT | R 0 |
| VAT (15%) | R 0 |
| Amount payable this claim | R 0 |
3. Where the retention stands
Retention is not lost — it’s released in two moieties, typically half at practical completion and half at the end of the defects liability period.
Nothing you type here is sent anywhere — this runs entirely in your browser tab.
Won the tender? The cash-flow gap doesn’t end there.
Retention held for months, plus thirty-plus-day payment terms, is exactly what the Purchase Order Funding Toolkit is built to plan around — bridging the gap between starting work and actually being paid.
Why retention catches South African SMEs off guard
Retention is not a hidden cost — it is written into every standard-form contract — but it is routinely left out of a small contractor’s cash-flow planning anyway. The work is done, the material is bought, the wages are paid, and then five or ten percent of what was earned simply does not arrive with the rest of the payment. It arrives later, in two pieces, sometimes over a year apart.
On government and municipal work this compounds with payment terms that are already thirty days on paper and often slower in practice. See why government suppliers need to understand their invoice status and what vendors need to know about the new invoice system for what that looks like once you’ve won the work.
A worked example
A contractor is three months into a R2,400,000 renovation contract with 5% retention per claim, capped at 5% of contract value. This month’s certificate values the work done at R480,000 excl. VAT.
- Retention withheld this claim: R480,000 × 5% = R24,000
- Net before VAT: R480,000 − R24,000 = R456,000
- VAT at 15%: R68,400
- Amount actually paid: R524,400
R24,000 that month, and roughly the same on every claim before the cap is reached, sits with the client until practical completion — and then only half of it. The rest waits for the defects liability period to run out. None of it is lost. All of it needs to be planned for.
Common questions
What is retention on a South African construction contract?
Retention is a percentage of each progress payment — commonly 5% to 10% — that the employer withholds as security against defective or incomplete work. It is not a penalty and not lost; it is released once the risk it covers has passed, in two stages under most JBCC and NEC-based contracts.
When does the employer release retention?
In two moieties. The first half is typically released at practical completion, once the works are handed over and in use. The second half is released at the end of the defects liability period — usually twelve months later — once any defects identified during that period have been fixed.
Is there a limit to how much retention can be withheld?
Yes, almost always. Contracts typically cap total retention at a fixed percentage of the contract value, commonly 5%. Once cumulative retention reaches that cap, no further retention should be deducted from later claims — check every certificate against this, since it is a common place for a mistake to go unnoticed.
Do I charge VAT on the full claim, or only on the amount after retention?
VAT is charged on the net amount actually payable — the claim value less the retention withheld — not on the full claim value. The retained portion becomes liable for VAT only when it is actually paid out on release, not at the time it is withheld.
Why does retention matter for cash flow?
Because it is money you have already spent labour and materials earning, that sits with the client for months, sometimes over a year. On a contract with thin margins, the retained amount can be larger than the entire profit — which is exactly why it needs to be planned for, not discovered.
Is this calculator legal or financial advice?
No. It is a planning tool for a standard retention structure. Confirm the actual retention rate, cap and release conditions against your specific contract, which may differ from the JBCC/NEC norms this calculator assumes.
This is a planning tool for a standard retention structure. Confirm the actual retention rate, cap and release conditions against your specific contract before relying on these numbers.
Deciding whether to bid in the first place? Use the bid/no-bid calculator, or see all free business calculators.
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