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Billable Hours vs Retainer

Harvest empowers teams to manage billable hours and retainer agreements with clarity and precision, ensuring no revenue is lost to untracked time.

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What should you charge per hour?

Most freelancers and consultants dramatically undercharge. This calculator accounts for what most people miss: non-billable time, taxes, and overhead.

$
Accounting for vacation, holidays, sick days
60%
Most freelancers can bill 50-70% of their time. The rest goes to admin, marketing, proposals, and learning.
$
Software, insurance, equipment, accounting, taxes beyond income tax, etc.
Your break-even rate $0
Recommended rate (+20% buffer) $0
Billable hours per week 0h
Equivalent daily rate $0

Start tracking your billable hours

Walk through the entire flow below. Start a timer, check your reports, and create a real invoice — all in three clicks.

Go ahead — start tracking!

One click and you're timing. Try it right here: start a timer, add an entry, edit the details. This is exactly how it feels in Harvest.

  • One-click timer from browser, desktop & mobile
  • Works inside Jira, Asana, Trello, GitHub & 50+ tools
  • Duration or start/end — your call
  • Day, week & calendar views to stay on top of it all
  • Friendly reminders so no hour gets left behind
Acme Corp
Website Redesign
Homepage layout revisions
1:24:09
Content Strategy
Blog calendar planning
1:30:00
SEO Audit
Technical audit report
0:45:00
Brand Guidelines
Color system documentation
2:15:00
Logo Concepts
Initial sketches round 1
1:00:00
Today's total 6:54:09

Understanding the Fundamentals: Billable Hours vs. Retainers

When evaluating billing methods, understanding the core differences between billable hours and retainers is crucial for freelancers and service professionals. Billable hours are the time spent on specific client tasks that are directly charged at an agreed hourly rate, making it a flexible model for projects with evolving scopes. In contrast, a retainer fee is an upfront payment that secures a professional’s availability over a period or for future work, offering budget certainty for both parties.

Billable hours provide transparency, allowing clients to see exactly how their resources are utilized. However, they depend heavily on accurate time tracking, which can be a challenge as companies that fail to track properly may lose up to $50,000 annually. Retainers, on the other hand, simplify billing with predictable income, but require careful scope management to avoid underestimation and scope creep.

The Mechanics of Each Billing Model

Understanding how each billing model functions in practice can guide decisions. Billable hours involve tracking time in increments (often 0.1 hours) and invoicing based on the actual time logged. For instance, legal professionals typically charge between $100 to $300 per hour, with tracking errors potentially leading to significant revenue loss.

Retainers come in various forms, such as advance fee retainers, which are held in trust accounts until the work is completed, or evergreen retainers, which require periodic replenishment. These models are often calculated by estimating hours and adding a profit margin, with average monthly retainers ranging from $1,800 to $25,500 for marketing agencies. This approach is particularly beneficial for ongoing projects, providing stable cash flow and fostering long-term client relationships.

Advantages and Disadvantages: A Balanced Perspective

Each billing method has its pros and cons, impacting both clients and providers. Billable hours offer flexibility and transparency, but can lead to client budget uncertainty and administrative burdens. For example, legal professionals often face pressure to meet billable targets of 1,700 to 2,300 hours annually, which can incentivize inefficiency.

Retainers, meanwhile, provide predictable income and budget certainty, reducing the need for granular time-tracking. However, they carry risks such as underestimation and client perceptions of overpayment if services are underutilized. For projects with high variability, the flexibility of hourly billing can prove more advantageous.

Choosing the Right Model for Your Business

Deciding between billable hours and retainers depends on your business model, client needs, and project types. For projects with defined scopes and ongoing needs, retainers can be more beneficial, offering steady income and fostering deeper client relationships. Conversely, for short-term or evolving projects, billing by the hour might be preferable.

Harvest supports both billing methods by allowing you to define project scopes clearly, whether as Time & Materials or Fixed Fee. This capability helps in making informed decisions about which model aligns best with your business objectives and client expectations.

Explore Billable Hours vs Retainer with Harvest

See how Harvest tracks billable hours and retainer agreements, offering clarity and precision in billing methods.

Screenshot of Harvest tracking billable hours and retainer agreements.

Billable Hours vs Retainer FAQs

  • Billable hours involve charging clients based on the time spent on specific tasks at an agreed hourly rate. Retainers are upfront payments securing a professional's availability for a set period. Each method has distinct implications for budgeting and project flexibility.

  • Retainer fees are often calculated by estimating the hours required for a project, multiplying by an hourly rate, and adding a profit margin. This method ensures that the fee covers potential expenses and provides predictable income for service providers.

  • Billable hours provide transparency and flexibility, allowing clients to see how resources are allocated and enabling adjustments for evolving project scopes. However, accurate tracking is essential to avoid revenue loss.

  • Retainers are ideal for ongoing projects with predictable workloads, offering consistent cash flow and fostering strong client relationships. They are less suited for short-term or highly variable tasks where flexibility is needed.

  • Yes, a retainer can switch to hourly billing if the retainer balance is depleted, or if the project scope changes significantly. Flexibility in billing ensures that client needs and project realities are met effectively.

  • Harvest offers one-click start/stop timers, manual time entry, and integrations with project management tools, making it easy to track billable hours accurately. This helps prevent revenue loss from untracked time.

  • Harvest allows you to define project types and billing structures, such as Fixed Fee or Time & Materials, ensuring clarity and effective management of retainer agreements.