Retention guarantees

In addition to requesting a performance guarantee, employers often withhold a percentage of the payment due to the contractor to ensure continued performance under the contract. However, instead of retaining cash, the employer may accept a Retention Guarantee South Africa as an alternative form of security.

A Retention Guarantee South Africa allows the contractor to maintain healthy cash flow while still providing the employer with protection against defective workmanship or incomplete obligations. This guarantee may be issued during the construction phase or after completion of the works, covering the agreed maintenance or defects liability period.

The difference between retention and performance guarantees

Most contracts require contractors working on public/private projects to post various construction surety bonds or guarantees. A performance guarantee is one of the most common and widely available types of surety bonds, ensuring that the contractor completes the project according to the contract specifications. However, there is some ambiguity regarding contractor performance guarantees. Some contractors must also post a retention guarantee.

Retention

Retention is a financial security (also known as cash retention or withheld cash) held by the lead client or contractor through a specialist in retention guarantees in South Africa, like WFJ Services, to ensure its contractor or subcontractors adequately fulfil their contractual obligations. It is also used to protect against defects if a subcontractor fails to correct them.

The guarantee will kick in if the subcontractor fails to complete the work or prevents a certificate of making good defects from being issued. The contractor can then "call" on the retention guarantee. A subcontractor is usually given a set period to correct any defects, as specified by the retention bond. If they fail to remedy the defect, the contractor may invoke the retention bond, and the surety must cover the remedial costs before pursuing the subcontractor.

Retention guarantees can also be used instead of retention between the employer and the main contractor.

Performance bonds

In the construction industry, a performance bond is commonly used to insure a client against the risk of a contractor failing to fulfil contractual obligations to the client. You can learn more about performance guarantees here. These bonds can also be obtained through a specialist in retention guarantees in South Africa, like WFJ Services.

Why choose WFJ Services?

We specialize in retention guarantees in South Africa. Our friendly staff has years of experience, will assist with your insurance needs with partnered FSP Brokerage companies, and promise a quick turnaround time.