Work types vs cost codes: what payroll actually needs from job costing

Payroll needs work types to calculate what an employee must be paid. Cost codes show where that cost belongs. A construction timesheet usually needs both, because one drives pay rules while the other drives project reporting.

The short version

Think of it this way. Your work type answers, “What did the worker do?” Your cost code answers, “Which job, stage or budget should wear the cost?”

A work type might be:

• ordinary hours
• overtime
• rostered day off
• annual leave
• travel time
• site allowance
• meal allowance
• leading hand duties

A cost code might be:

• Project 104, concrete labour
• Project 104, formwork
• Project 221, defects
• workshop repairs
• yard overhead

Those fields can sit on the same timesheet line, but they have different jobs. If you ask one field to do both, payroll gets messy quickly.

Our job costing guide covers the wider setup, including labour allocation, payroll on-costs and reporting.

Work types and cost codes compared

Question	Work type	Cost code
What does it describe?	The pay event or type of time	The financial destination of the cost
Who mainly uses it?	Payroll and employees	Project managers, estimators and finance
Does it affect gross pay?	Usually, yes	Usually, no
Can it trigger award rules?	Yes, when mapped correctly	It should not determine entitlements by itself
Example	Travel time	Project 104, mobilisation
Main risk	Underpayment or incorrect entitlements	Poor job margins or costs in the wrong budget

Here is the key point. A cost code should not decide whether an hour is ordinary time, overtime or an allowance. The employee's classification, employment type, roster, hours and applicable award or enterprise agreement still matter.

What payroll actually needs on a timesheet

For most construction crews, payroll needs enough detail to establish who worked, when they worked, what happened and where the cost belongs.

That normally means:

1. Employee name or payroll ID.
2. Work date.
3. Start and finish times.
4. Unpaid break times.
5. Work type, where something special occurred.
6. Project, job or site.
7. Cost code or activity.
8. Allowance units, such as kilometres, meals or days.
9. A supervisor approval and a clear audit trail.

Do not make workers select award clauses from a long list. A carpenter should be able to enter facts such as start time, finish time, travel and site. Payroll rules should turn those facts into the correct payment.

As at October 2026, the National Employment Standards set 38 hours as the maximum ordinary weekly hours for a full-time employee, plus reasonable additional hours. An award or agreement may add daily spans, overtime triggers and roster rules.

As at October 2026, the super guarantee rate is 12 per cent. Whether a payment forms part of ordinary time earnings still depends on what the payment is for. A cost code cannot answer that question.

As at October 2026, employers must generally give a pay slip within 1 working day of paying an employee. Employee records must generally be kept for 7 years. That is why edits, approvals and rule results need to remain traceable.

One hour can need two labels

Say Mick works from 6:30am to 5:00pm on a concrete pour. He spends the morning on formwork and the afternoon placing concrete.

The cost allocation might be:

• 5 hours to formwork
• 4.5 hours to concrete labour

But payroll cannot assume all 9.5 paid hours are ordinary just because they sit under valid cost codes. It must look at breaks, the roster, the relevant industrial instrument and Mick's earlier hours.

The final lines could include ordinary hours, overtime and an allowance, each allocated across one or more cost codes. The work type explains the payment. The cost code places the resulting cost.

This matters when overtime starts after work has already been split between activities. Each new cost code must not reset the employee's daily or weekly overtime count.

Calculate pay first, then allocate it properly

The safest order is:

1. Capture the raw time and work facts.
2. Combine all hours for the employee across jobs and sites.
3. Apply the correct pay rules.
4. Calculate gross wages, allowances and applicable on-costs.
5. Allocate those amounts to jobs using a documented method.

Project managers sometimes want the last job of the day to carry all overtime. Others spread the overtime premium across every job worked that day. Either approach can affect job margins.

That allocation policy is a management accounting choice. It must not reduce the worker's entitlement. Write the policy down and use it consistently.

The same issue arises with paid leave, public holidays, training, inductions and wet weather. Some businesses allocate these costs to a live project. Others use an overhead code. Payroll needs a clear destination, not a guess.

Do not hide allowances inside cost codes

A code called “remote site” might help project reporting, but it does not prove that every worker qualifies for a particular allowance.

Allowance eligibility may depend on the employee's classification, distance travelled, overnight stay, tools supplied, meal break timing or the terms of an award or agreement. Record the actual event or quantity.

For example, keep these as separate facts:

• job: hospital extension
• cost code: structural steel installation
• work type: travel time
• kilometres: 42
• overnight stay: no

That gives payroll something it can test. It also gives the project team clean cost data.

Include payroll on-costs in the job view

Direct wages are only part of labour cost. Depending on the business and payment type, the job may also need an allocation for:

• superannuation
• workers compensation premiums
• payroll tax
• portable long service leave
• leave provisions
• redundancy fund contributions
• training or industry fund contributions

Not every on-cost applies to every payment. Some are state-based, some have thresholds, and some depend on the industrial arrangement. Keep the calculation rules separate from the cost code structure.

When reviewing charge-out rates and labour recovery, use the Crew Time pricing calculator to compare Crew Time with the level of job detail your team needs.

A practical coding structure

Keep the worker's choices short. Too many codes lead to guesses and supervisor corrections.

A useful structure has three layers:

• Employee profile: classification, employment type, pay rule set and normal roster.
• Work type: the event that may change pay, such as travel, leave or call-back work.
• Cost destination: project, phase and activity code.

Use defaults where the facts are predictable. A worker assigned to one site can have that project prefilled. Ordinary work can be the default work type. Ask for extra detail only when the day differs from the plan.

Finally, test real weeks before going live. Include a worker who changes sites, works overtime across two jobs, receives an allowance and takes leave. If payroll calculates the entitlement correctly and finance can follow every dollar to its destination, the setup is doing its job.