What is Time and Material contract?

The article is a part of Code Inspiration’s software development outsourcing Knowledge Base.

Having discussed the scope of both Fixed price and Dedicated team software development contracts, together with basic aspects of any software development contract, today we will get through the Time and Material type of contract. Time and Material, or just TM, is one of the most popular contracts in software development outsourcing.

Basically, the main goal of the TM contract is to arrange the work when the developer or team is paid only for the time spent for the software development. This type of contract is very popular among clients and software development companies, as well as frequently used working with individual freelancers also. Time and Material software development contract makes it possible to pay only for the work done and time spent.

However, how to identify the time was spent on development, how to track it? Also, it is clear that for one developer it can take one day to perform a task and for another one it might take a week of efforts with no results at all. Let’s discuss first how to deal with this and further let’s proceed to the scope of the Time and Material contract.

How to track time in Time and Material contract?

 There are different options to do this, from using Jira to hub spot tracking tools. Which tool to select is up to you. All you need to know about the options – there are multiple tools which provide you with the possibility to track time of your developer, even doing screenshots of what he is working on at the moment and adding them automatically to the report.

Is there any possibility to know about the budget using time and material model of work?

At first sight it might seem, that there is no. However, at Code Inspiration, we usually provide pre-estimations to the tasks required to do. Having 12 years of experience behind, we are able to estimate approximately the majority of tasks. Here is the main idea:

“Some software development task might take from 8 to 12 hours. If it took 9 – we charge only for nine, if 12 – we charge for 12. If the estimation went higher than we estimated, for example 15 hours – the customer will still pay for 12”.

Time and Material contract, basic aspects

Now, when we discussed this frequently asked questions, let’s move to the scope of the contract itself. In time and material software development, contract it is important to mention the following:

  • Hourly rate
  • Billing periods
  • Tracking tools

 First point seems to be clear. So, let’s move directly to the points 2 and 3.

It is not obligatory to have a tracking tool to sign a time and material contract. While most clients ask to track hours to tickets in their Jira, use hub staff tracker to track time automatically. Sometimes clients ask to mention the number of hours spent just in Excel. The main idea is that you need to understand how to do report which you will use in order to do invoicing every billing period.

Billing periods according to time and material software development contract can start from one week time, two weeks and usually the max is up to 2 months’ time.

While development from scratch is usually possible to estimate, on practice there are usually situations, when there is no detailed scope and the plan is adjusted any subsequent month. Also, when it comes to fixing bugs – the main idea is that usually, it is not that difficult to complete development for fixing, rather than FIND where the bug is located in the code.

Time and material contract was addressed to relief this pain and help customers not to pay for hours spent on actually development, fixing or other works done for their project. Also, it is one of the mostly used among agile teams.


The article is a part of Code Inspiration’s software development outsourcing Knowledge Base.