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Time and Materials (T&M) is a contract and pricing model in which the client pays for the actual time worked — at agreed hourly or daily rates — plus any materials and expenses, rather than paying a single fixed price for the whole project. It is most common on engagements where the scope is evolving or uncertain and hard to define precisely up front, such as ongoing development, discovery work, or open-ended support. Time and Materials contrasts with a fixed-price (fixed-bid) contract, where the provider commits to a set price for a defined deliverable. Both models can be documented within the same Statement of Work, so the choice comes down to how the two parties want to allocate cost certainty and scope risk. In short, Time and Materials trades cost predictability for flexibility, and shifts more of the scope risk toward the client.
Under a Time and Materials arrangement, the client is billed for the resources actually consumed by the project rather than a lump sum agreed in advance. Two components make up the invoice: the labor (time) worked by each person on the engagement, and the materials, tools, and pass-through expenses the work requires.
Because billing follows the work, Time and Materials adapts easily as priorities change — you can add scope, reprioritize a backlog, or extend an engagement without renegotiating a fixed bid. That flexibility is the model's core advantage, and it is why T&M is so common with a contingent worker, consultant, or staff augmentation team working alongside your own staff.
A Time and Materials engagement is usually captured in a Statement of Work that spells out the mechanics both sides will follow. The bill is straightforward to calculate: hours worked multiplied by the agreed rate, plus approved materials and expenses.
Common elements of a T&M contract
Because the client absorbs scope changes, disciplined tracking matters — many overruns trace back to weak visibility rather than the model itself. WorkGenius' guide on why contingent budgets go over and how to stop it covers the controls that keep T&M engagements on track.
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Book a Demo The clearest way to understand Time and Materials is to compare it with the fixed-price model it is usually weighed against. The difference comes down to who carries the scope risk and how much cost certainty each side gets.
| Feature | Time and Materials | Fixed-Price |
|---|---|---|
| Pricing basis | Actual hours worked plus materials | Set price for a defined deliverable |
| Best when scope is | Evolving or uncertain | Well-defined and stable |
| Cost certainty | Lower — cost varies with effort | Higher — price fixed up front |
| Who carries scope risk | Mostly the client | Mostly the provider |
| Flexibility to change direction | High | Low — changes need a new bid |
Neither model is inherently better; they simply fit different situations. Fixed-price suits a clearly scoped deliverable, while Time and Materials suits ongoing or exploratory work where requirements will shift. A single Statement of Work can even blend the two — for example, a fixed-price discovery phase followed by a T&M build.
Time and Materials only works well when you have clean visibility into rates, hours, and spend — which is exactly what WorkGenius is built to give US enterprises. WorkGenius pairs AI matching with expert human recruiters to put pre-vetted candidates in front of you, typically within 48 hours, so you can staff a T&M engagement fast and start billing against real work.
The result: the flexibility of Time and Materials without losing control of cost. See the Contingent Workforce Management playbook for more on structuring and governing flexible engagements.
It means the client pays for the actual time worked at agreed hourly or daily rates, plus any materials and expenses, instead of a single fixed price for the whole project. Billing follows the effort, so the total cost is known only as the work is completed. It is a common alternative to a fixed-price contract and is often documented in a Statement of Work.
Use Time and Materials when the scope is evolving or uncertain — for example ongoing development, discovery work, or open-ended support where requirements will change. Fixed-price fits better when the deliverable is clearly defined and stable. Because T&M shifts scope risk toward the client, it trades cost certainty for the flexibility to change direction without renegotiating a bid.
The main risk is lower cost certainty: because you pay for actual effort, costs can climb if scope grows or work is poorly tracked. The client carries most of that scope risk. Teams manage it with a not-to-exceed cap, disciplined timesheet approvals, and real-time visibility into contingent workforce spend so overruns are caught early.
Yes. A single Statement of Work can use either model or blend them — for instance, a fixed-price discovery or design phase followed by a Time and Materials build phase. Choosing the right structure for each phase lets you balance cost certainty against flexibility across the life of the engagement.
Explore more concepts in our workforce glossary
A formal document that defines the scope, deliverables, timeline, and payment terms for a project-based engagement with a contractor or freelancer.
Learn moreThe bill rate is the total hourly, daily, or project rate a client pays a staffing provider for a contingent worker's services.
Learn moreA rate card is a standardized document listing pre-agreed bill rates for contingent roles by skill, seniority, role type, and location.
Learn moreMarkup is the percentage a staffing provider adds to a worker's pay rate to set the client's bill rate, covering costs and profit.
Learn moreContingent workforce spend is the total an organization pays for its non-employee talent — contractors, freelancers, temps, and SOW services.
Learn moreWorkGenius combines AI-powered talent matching with enterprise-grade compliance. Source, onboard, manage, and pay freelancers globally — all from one platform.
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