Time and materials (T&M)
A time-and-materials contract bills for actual labor hours at set rates plus materials, often with a markup, rather than a fixed price.
T&M is common for repair, service, and open-ended scopes. Profitability depends on billing the fully burdened labor rate (not the bare wage) and applying markup to materials — otherwise the work runs busy but thin.
Related terms
- Cost-plus contract — A cost-plus contract bills the client for actual job costs plus an agreed fee or percentage, rather than a fixed price.
- Fixed-price (lump-sum) contract — A fixed-price contract sets one total price for the defined scope; the contractor keeps the upside if costs come in low and eats overruns if they don't.
- Labor burden — Labor burden is everything you pay on top of a worker's wage — payroll taxes, workers' comp, benefits, and overhead — so the true cost of an hour is usually 25–40% above the wage.