Last updated November 6, 2026
General information, not tax or legal advice. The rules depend on your country and your situation, so check anything with a tax or legal consequence with your accountant.
Hourly billing charges a consultant's client for the time actually worked. A retainer charges a fixed monthly fee for an agreed amount of time, access or output. Choose hourly when the work is irregular or undefined, and a retainer when the client needs you steadily and you can say what the fee covers.
What is the difference between hourly and retainer billing?
Hourly billing ties a consultant's income to the hours worked, while a retainer ties it to the calendar. The client's question changes with it: hourly clients ask what the hours were for, and retainer clients ask what the fee includes.
| Hourly | Retainer | |
|---|---|---|
| What the client buys | Your time, as used | Agreed hours, access or output for a month |
| When you invoice | In arrears, after the work | Usually in advance |
| Invoice amount | Changes every month | The same each month, apart from extras |
| Who carries an overrun | The client | You, up to the limit you set |
| Who carries a quiet month | You | The client |
| What gets argued about | Whether the hours were needed | What is in scope |
Should a consultant bill hourly or on a retainer?
A consultant should bill hourly while the work is hard to predict, and move to a retainer once the client's need is steady enough to describe. These are the situations that usually decide it.
| If this is true | Use | Why |
|---|---|---|
| The scope isn't clear yet | Hourly | You can't set a limit on something you can't describe |
| It's a one-off piece of work | Hourly or a fixed fee | There's no continuing need to reserve time for |
| The client rings weekly with small questions | Retainer | Each question is too small to bill and they add up |
| The client needs a fixed monthly budget | Retainer with a limit | They get the number, and you keep the limit |
| Their demand swings widely month to month | Retainer plus an hourly rate for extras | You keep a floor, and the peaks still get paid |
| Your calendar is already full | Hourly | Retainer hours are a promise you have to keep open |
What are the types of consulting retainer?
A consulting retainer usually takes one of three forms, and many arguments start because each side assumed a different one.
- Hours retainer. A set number of hours a month. It's easy to explain and easy to check, and it's the closest thing to hourly billing with a floor under it.
- Access retainer. A fee for being available: calls answered, advice on hand, time held open. Hours aren't counted, so set the limit another way, such as response time or number of meetings.
- Output retainer. Fixed deliverables each month, such as a board pack or a monthly review. This is really a recurring fixed fee, and you should price it like one.
Name the form in the agreement. "Retainer" on its own doesn't tell anyone what's been bought.
A worked example: the same six months billed both ways
Here's an invented example. A consultant charges €120 an hour. On the retainer, the client pays €1,650 a month for up to 15 hours, which works out at €110 an hour, with extra hours at the full €120 and no rollover.
| Month | Hours worked | Hourly at €120 | Retainer plus extras |
|---|---|---|---|
| January | 18 | €2,160 | €2,010 |
| February | 12 | €1,440 | €1,650 |
| March | 25 | €3,000 | €2,850 |
| April | 9 | €1,080 | €1,650 |
| May | 14 | €1,680 | €1,650 |
| June | 22 | €2,640 | €2,490 |
| Total | 100 | €12,000 | €12,300 |
The totals barely move, at €12,000 and €12,300. The floor is what changes: the consultant's worst month goes from €1,080 to €1,650, and that money arrives before the work rather than after it. In return the client gets 15 hours a month held for them at a lower rate, and pays for the 10 hours they didn't use.
Now take out the extras clause. A client who uses 25 hours every month on a flat €1,650 is paying €66 an hour, and you have no way to raise it short of renegotiating. That's why a retainer without a limit is a poor deal for the consultant, however steady it feels.
Work out the target first. The guide to calculating a charge-out rate gives you the figure to test a retainer against. You also need to go on recording hours once the retainer starts, or you'll never know whether it pays. A consulting time tracking workflow covers that.
What should a retainer agreement say?
A retainer agreement should state what the monthly fee covers, what happens above that limit, what happens to unused time and how either side can end it. This wording handles all four for an hours retainer:
The monthly fee of €1,650 plus VAT covers up to 15 hours of consulting in each calendar month. Hours above 15 are charged at €120 an hour and invoiced at the end of the month. Unused hours do not carry over. Either of us can end this arrangement with 30 days' written notice.
The figures above are the invented ones from the example, so replace them with yours. The guide to invoicing a monthly retainer covers the invoice itself.
How do you move an hourly client to a retainer?
Move an hourly client to a retainer by starting from their own history, because the numbers are hard to argue with.
- Pull 6 to 12 months of hours. In the example the average is about 17 hours a month, with a range of 9 to 25.
- Set the included hours near a typical month, not the peak. The peaks are what the extras rate is for.
- Offer a small discount for the commitment. The predictable income is what pays for it.
- Propose a trial of three months with a review, so neither side feels locked into a guess.
If your rate is changing as well, handle that separately. A rate increase letter and a new billing arrangement arriving together read as one big price rise.
Billing hourly work and retainers in ERPFlow
ERPFlow bills both, and you do the hours arithmetic yourself. The page for consulting firms describes the wider fit.
- Retainers: set up a monthly recurring invoice for the client. Each run either issues and emails the invoice or leaves a draft for you. It bills and never collects, so payments go in by hand. A draft also lets you add a line of extra hours before issuing.
- Hourly work: create a service with the unit
hrand your rate, pick it on the invoice line and type the hours as the quantity. - Recording the hours: a card in Projects has a time spent field, typed as hours and minutes, with totals per project and per customer.
ERPFlow doesn't have a timer or timesheets today. Time tracking, including converting tracked time into invoices, is coming soon. Hours typed on a card don't become invoice lines at present, and ERPFlow doesn't count them against a retainer's allowance, so compare the total with the included hours by hand.