Time and materials is the simplest way to be paid for work nobody can scope: exploratory demolition, repairs, small jobs, a client who keeps changing their mind. The contractor quotes an hourly rate per crew member and a markup on materials, tracks hours and receipts, and bills what was used. The rate is the whole business: it has to carry the wage, the burden, the overhead and the profit, or every T&M hour loses money quietly.
A worked number
A carpenter paid $28 an hour costs about $41 with burden. At a 25% overhead rate and a 10% profit target, the billable rate needs to be about $63. Bill at $55 because it "sounds reasonable" and each of the 320 hours on a T&M job gives away $8: $2,560 on the job, more than most contractors think they made on it.
The mistake it hides
Unbilled hours. T&M work is only as profitable as the hours that make it to the invoice, and hours reconstructed on Friday from memory are always fewer than the hours worked. Materials have the same problem: receipts that don't reach the office don't reach the invoice.
In Obra
Labor entries and receipts are recorded on the project the day they happen, so the T&M invoice is an export rather than an archaeology exercise. The labor burden calculator finds the rate a crew member actually needs to bill at.