Terms for a software house working on time and materials

Time and materials is the honest way to charge for work whose scope is not known, and its terms have to make the honesty enforceable: rates that are agreed, estimates that are not caps, records that prove the hours, invoices that are paid on time and disputed within a window, deliverables that are the work done rather than a finished product, and IP that passes as it is paid for. Where the software house uses contractors, the terms also have to keep the off-payroll rules in view. I draft those terms for a fixed fee of £995, delivered in five working days.

Who this is for

Software houses, development agencies and consultancies in England and Wales that provide developers, teams or specialists on a time and materials basis, whether embedded with the client or working on defined tasks charged by the hour or day.

What matters in time and materials terms

Rates, estimates and the absence of a cap

The terms should state the rates by role, the unit (hour or day, and what a day is), overtime and out-of-hours rates, annual rate reviews, and that any estimate given is an estimate of effort rather than a fixed price or a cap, with the software house obliged to warn the client when an estimate is likely to be exceeded and the client entitled to stop; an estimate that the client treats as a quote is the dispute in every time and materials engagement, and the terms should say in plain words which it is.

Timesheets and records as the evidence

The terms should require the software house to keep records of time spent by person, day and task, to provide them with each invoice or on request, and should say that the records are conclusive of the time spent absent manifest error unless the client objects within a stated period; where the client approves timesheets, the approval process and the deemed approval after a stated period should be set out, because the argument is always about hours the client did not see.

Invoicing, disputes and payment

The terms should provide for invoicing monthly or at stated intervals in arrears, payment within a stated period, a window within which the client must raise a dispute in writing with the undisputed part paid on time, interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998, and the software house's right to suspend work for non-payment; expenses should be chargeable at cost with prior approval above a threshold, and VAT stated.

What is delivered and what is not promised

The terms should say that the software house provides skilled effort with reasonable care and skill under section 13 of the Supply of Goods and Services Act 1982, that the deliverable is the work performed rather than a finished product meeting a specification, that the client directs priorities and accepts the results as work progresses, and that no warranty of fitness for purpose or of completion by a date is given unless a statement of work says so; where the client wants a fixed outcome, the terms should point to a fixed-price statement of work instead.

Intellectual property as work is paid for

The terms should assign the IP in the work product to the client as each invoice is paid, in writing as section 90 of the Copyright, Designs and Patents Act 1988 requires, with the software house's pre-existing materials and tools retained and licensed, moral rights waived, and open source components identified; until payment the software house owns the work and the client's use is under a licence that ends if payment does not arrive. Confidentiality of the client's systems and information should be mutual and continuing.

Contractors, status, the off-payroll rules, notice and liability

Where the software house supplies individuals who work under the client's direction, the terms should address status: the software house's staff and contractors remain its responsibility, the client does not employ them, and where a contractor works through their own company on an engagement the client would treat as employment, the off-payroll working rules in Chapter 10 of Part 2 of the Income Tax (Earnings and Pensions) Act 2003 make the client responsible for the status determination where it is a medium or large business; the terms should say who does what. Either party should be able to end the engagement on stated notice, the client should not solicit the software house's people for a stated period, and liability should be capped at the fees paid in the preceding months, tested under section 11 of the Unfair Contract Terms Act 1977.

What it costs

SaaS or technology contract, £995. One contract drafted for how your product or service is sold, delivered and supported. Five working days.

Buying online forms the engagement on payment. The scope is what the saas and technology contracts page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• A bespoke contract drafted for how your product is sold, delivered and supported
• Service levels you can meet, with remedies that are proportionate rather than aspirational
• A liability position that is defensible and will survive enterprise procurement
• IP and data provisions that fit together rather than contradicting each other
• A commercial note on where you will get pushback and what is worth conceding
• One round of amendments

What is not included

• Negotiating individual enterprise deals, which I quote separately
• Advice on the law of jurisdictions outside England and Wales
• Technical security certification or audit
• Regulatory advice for regulated sectors such as financial services or health

Questions I am often asked

The client says our estimate was a quote and refuses to pay the excess. What does the agreement say?

That an estimate is an estimate and not a cap, and that the software house must warn when it is likely to be exceeded. If the warning was given and the client let work continue, the hours are payable; if it was not, the terms are on the client's side.

Our developers sit in the client's office and take instructions from its managers. Is that a problem?

It can be, for status and for the off-payroll rules where contractors are involved. The terms allocate the status determination and keep the individuals the software house's responsibility; the working arrangements should match.

Can the client end the engagement without notice?

Only if the terms allow it. The terms provide a notice period on both sides, with work to the end of the notice period payable, which protects a team that has been reserved for the client.

Related guidance and services

• SaaS and technology contracts, £995, the service this page describes
• Contract review, £495
• Data protection agreements and privacy terms, £795
• Terms for a software house doing fixed-price projects
• Terms for a technology consultancy

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: September 2026. Email geoffrey@caesar.co.uk.