Time & Materials
Time and Materials (T&M) billing definition. Learn how to bill hourly with material markups for construction service work.
Calculation Formula
T&M Invoice = (Hours × Hourly Rate) + (Material Cost × Markup %) Real Contractor Example
An electrician repairs a circuit. They spend 3 hours at $95/hr and use $80 in parts with a 20% markup.
How Time and Materials Billing Works
With time and materials (T&M) billing, the client pays for the actual labor hours at an agreed hourly rate, plus materials at cost with a markup. It is common for service calls and work where the scope is hard to define up front.
In the example above, the electrician bills 3 hours at $95, which is $285, plus $80 of parts marked up 20%, which is $96. The invoice total is $381.
Setting T&M Rates That Actually Make Money
The hourly rate has to cover the fully burdened wage, a share of overhead and profit, not just the wage you pay. Billing a rate close to the base wage is the most common way T&M work loses money.
Track hours daily, mark up materials to cover procurement, handling and warranty, and agree a not-to-exceed amount if the client wants cost certainty.
Frequently Asked Questions
What is the difference between T&M and a fixed-price contract?
On a fixed-price contract the contractor carries the cost risk. On T&M the client pays for the actual hours and materials, so the client carries more of the risk, and the contractor needs good time records.
Should I mark up materials on T&M work?
Most contractors do, to cover sourcing, delivery, handling and warranty. State the markup in the contract so it is agreed before the work starts.
What is a not-to-exceed cap?
It is a maximum the client will pay on a T&M job. If the work is likely to pass the cap, the contractor stops and gets written approval before continuing.
Related terms
Put This Into Practice
Knowing the definition is step one. RemodelFin tracks this in real time on every job — no spreadsheets.