Time & Materials (T&M)
Also known as: T&M, Hourly billing, Time and materials
Billing model where the client pays for hours actually worked, multiplied by an agreed bill rate, plus pass-through expenses.
Time & Materials is the most common pricing model in professional services where scope is highly variable. The client signs a master agreement fixing bill rates by role (e.g. 600€/day for a senior consultant, 1,200€/day for a partner) and pays based on validated timesheets.
Unlike Fixed Price, the overrun risk stays with the client, while the vendor must guarantee transparency on hours and activities. T&M is ideal for discovery projects, ongoing work or staff augmentation, but requires a robust PSA to track timesheets, approvals and unbilled WIP.
Margin on a T&M contract is not decided at signature, it is built week by week, and it leaks in a small number of predictable places: hours worked and never entered, bookings made outside the assignment, rates not updated after an agreed annual uplift, and delivered work that nobody invoices because an approval is missing.
There is a quieter fifth leak: variance in the seniority mix. A project sold with two seniors and three juniors but delivered with four seniors bills the same amount and leaves considerably less. Comparing the planned composition with the actual one every fortnight is one of the most profitable reviews an engagement owner can run, and it requires no new data.
A client signs a T&M with a 50,000€ cap for an assessment: the consultant bills 80 hours at 150€/h, totaling 12,000€ over two weeks.