Time and Materials (T&M)
A billing arrangement where a contractor charges for all labor hours at a pre-agreed rate plus the actual cost of materials used, typically with a markup, rather than agreeing a fixed total price before work begins.
Time and Materials is a billing arrangement used widely in construction, AV integration, electrical contracting, HVAC, and other project-based service businesses. Under a T&M structure, the customer pays for actual hours worked at pre-agreed hourly rates per labor category, plus the cost of materials purchased for the job, typically with a contractor markup applied to materials. Unlike a fixed-price or lump-sum contract, the total project cost is not set in advance. It reflects what was actually required to complete the work. T&M is most appropriate when the full scope cannot be defined before starting, or when conditions discovered on site are likely to change what is required.
How T&M Billing Is Structured
A T&M contract typically contains three core components. First, labor rates: fixed hourly rates per worker category - project manager, skilled trade, general labor - covering base wages, overhead, and profit. Second, materials at cost plus markup: the actual cost of materials purchased for the job, with a percentage markup added. Contractors typically apply a markup of 15-35% on materials on T&M projects to cover overhead and profit (Premier Construction Software, March 2026; projectmanager.com, May 2025). Third, a not-to-exceed (NTE) clause: an agreed ceiling for the total project cost that prevents open-ended cost risk for the customer.
Billing frequency on T&M work is typically weekly or bi-weekly, supported by timesheets per labor category and receipts for every material purchase. This documentation requirement is not optional - it is the basis of every invoice and the only defence against billing disputes.
Never Start T&M Work Without Daily Recording in Place
T&M billing pays only what you can document. Hours logged to a project total rather than by day and labor category, and materials purchased without receipts attached to the job, cannot be billed reliably. Set up daily timesheet and material receipt discipline before the first operative arrives on site.
When T&M Works and When Fixed Price Is Better
T&M suits projects where the scope is genuinely undefined at the start: renovation work where hidden conditions may emerge, emergency or reactive callout work, early-stage design-and-build where requirements are evolving, and ongoing maintenance contracts where weekly hours fluctuate. Fixed price is the better structure when the specification is complete and locked before work starts and the contractor can estimate accurately.
A practical approach used by many contractors is to price clearly defined scope on a fixed basis and use T&M only for provisional items or phases where conditions cannot be predicted. Whichever structure applies to which work should be identified separately in the contract, with the billing method and payment schedule stated in writing before work begins.
Zigaflow's Quotes module supports both fixed-price and provisional line item structures, letting you build quotes that reflect how the work is actually priced rather than forcing everything into a single model.
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