How retainer arrangements work
The company and the consultant sign an agreement that sets out the scope, such as up to ten hours of labour law advice a month, the monthly fee, how extra work is charged, the notice to end the arrangement, and confidentiality terms. The consultant raises an invoice each month, and accounts pays it as a vendor payment, after any tax deduction that applies to professional fees. A retainer suits companies that need regular expert access but not a full-time hire, such as a factory medical officer visiting twice a week.
Consultant or employee?
The line matters because employees get statutory benefits and consultants do not. Signs that a consultant is really an employee include fixed office hours, a reporting manager who directs daily work, exclusive work for one company, company equipment, leave rules and no other clients. In such cases the relationship may be treated as employment, whatever the agreement says. Review long-running individual retainers that show these signs with a legal adviser.
Managing retainers in HR
Keep consultants out of the employee register and payroll, but track their agreements, renewal dates, system access and confidentiality undertakings. If they need building access or a laptop, record it and recover it when the retainer ends. Paying a consultant through payroll by mistake tangles statutory deductions and records, so route their fees through accounts payable from the start.
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Is a consultant on retainer an employee?
No, not if the arrangement is genuine. A retainer consultant is an independent professional who provides agreed services for a fee, invoices the company and controls how they do the work. If the person works fixed hours under a manager's direction for only one company, the relationship may be treated as employment, so structure and review such arrangements carefully.
What is a retainer fee?
A retainer fee is a fixed amount paid regularly, usually monthly, to keep a consultant available for a defined scope of work. It is paid whether or not the full scope is used that month, and work beyond the scope is billed separately at agreed rates. The retainer agreement sets out the fee, the scope and the notice period.