Time and materials (T&M) pricing bills the customer for the labor hours actually spent on a job at an agreed hourly rate, plus the materials used, usually with a markup. The final price is not known until the work is done.
It is the main alternative to flat rate pricing, where the price is fixed before work starts.
How to calculate a T&M invoice
With labor hours, H, your hourly labor rate, R, materials cost, P, and a markup, m:
T&M invoice = H × R + P × (1 + m)
Say a technician spends 3 hours on site, your rate is $130 an hour, materials cost $200 and you mark up 30%. The invoice is $390 + $260, or $650.
Decide in writing whether travel counts toward H. Some companies bill portal to portal, from leaving the shop to returning. Others bill on-site time only and add a trip charge. Others bill a minimum, such as one hour, on every visit.
Why it matters
T&M puts the risk of a long job on the customer. That makes it the safer model when the scope is unclear: older equipment, intermittent faults, remodel work or anything where you don't know what you'll find until you open it up.
The trade-off is that T&M pays you for hours, not results. A faster technician brings in less per job. That can work against efficiency unless you track technician efficiency and billable hours separately.
T&M also depends on accurate time records. Arrival and departure times on every job are the foundation. Without them you are estimating the invoice, and customers notice. The field service pricing guide compares T&M with flat rate in more detail.
A common mistake
Billing on-site hours only and not accounting for the drive anywhere. The drive is paid labor for you. If it isn't in the hourly rate, a trip charge or a minimum, every job far from the shop earns less than one nearby. The windshield time post shows how to price that drive.
Related terms
- Flat rate pricing fixes the price in advance instead.
- Billable hours are the hours T&M invoices are built from.
- Labor rate is the hourly charge.
Common questions
When should you use time and materials pricing?
When the scope is uncertain, the job is large or unusual, or the customer prefers to pay for actual work. Many companies use flat rate for common repairs and T&M for everything else.
Can a T&M job have a cap?
Yes. A not-to-exceed amount is common in commercial work. It gives the customer a ceiling while keeping hourly billing underneath.
Does time and materials include travel time?
Only if the agreement says so. State your policy on travel, minimums and after-hours rates before the job starts.