How is a retainer fee determined?

Freelance and commission employees work hard yet companies seem not to care to ensure they have enough to keep them going in the field. Don’t commission-based employees deserve a retainer/basic fee and how is it determined? George

Dear George,
Your question is an inquiry and a constant phenomenon of debate amongst many commission-based earners that never ends. The confusion lies in the choice of words which is a mix up of what is applicable to an employee and a contractor. It is important to draw a distinction between the two. An employee and a contractor both offer a service to an organisation but the legal interpretation, the tax and contractual obligations of the two are different.
Earning a retainer is dependent on the organisation you are working for. In other words, nothing in the law mandates an organisation to give a retainer fee to a commission earner. Under normal circumstances, you are only entitled to a commission but some companies create what’s called a retainer fee to basically address two major issues. The first is to provide a monetary fee that locks you into guaranteeing them a specific service and prioritisation of their work. Secondly, some try to insulate themselves from certain realities that impede the execution of an assignment. For example, transport, lunch, and airtime allowance. Determination of retainer fees varies depending on the kind of industry, business and labour jurisdiction you are operating in. In some places retainer will be applicable only to existing service contractors who have an existing track record. It is also dependent on the scope of work or how valuable your skill is.

Solomon Muhiirwa
Human Resource Consultant
[email protected]