Retainage

This question is tough to answer without more context. Can you post the entire retainage clause? Personally, in this question's vacuum, I would argue that the clause means that the entity withholding payment of retainage (whether that is the owner or the general contractor) can only withhold 8%, and only on 50% of the total sum of the labor and materials. Stated differently, the entity withholding retainage could withhold a maximum of 4% through the project. 

Again, this answer may be incorrect or I may change it depending on what the rest of the contract states. Contracts must be read as a whole instrument in order to determine the full story of what is meant by certain clauses such as this one.