Time and materials pricing occurs most often in the service and construction industries since it allows customers to get billed using the standard labour rate per hour, plus the actual cost of materials used.


The standard labour rate (SLR) is charged on a per unit basis, however, does not necessarily relate to the underlying cost of the labour. This is because the SLR is determined by market conditions. Financial analysts would study the market to get an idea about rates charged for  services similar to the relevant skill set and apply a profit percentage to this labour unit.