What a time and materials contract is
Instead of one fixed price, the customer pays for the labor hours at an agreed rate and the materials at cost plus an agreed markup. It suits work where nobody can see the whole job before it starts: older homes, repairs behind walls, troubleshooting, or work that grows as it goes. The risk of the unknown moves from you to the customer, so the contract has to be clear and the records have to be good.
The terms that matter
- Labor rate per hour, and whether it differs for a helper, overtime or after-hours work.
- Markup on materials, and whether you bill equipment rental the same way.
- Not-to-exceed amount, so the customer knows the most they will pay without signing off on more.
- Billing: how often, and what records come with each invoice.
- Travel and supply runs: whether they are billed.
Time and materials or fixed price
A fixed price is simpler for the customer and rewards you for working efficiently. Time and materials protects you when the job is uncertain. Many contractors use time and materials for the investigation and a fixed price for the repair once they can see it. Our guide to flat rate vs time and materials walks through the choice.
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