Labor costing measures the actual time and cost of human effort applied to manufactured goods. Within NetSuite WIP and Routing workflows, labor codes form the critical connection between workforce skills, production operations, and financial accuracy.
When you define a labor code, such as CNC Machinist – Level 2, you’re doing two things at once:
Specifying the skill level required to perform an operation
Establishing the cost category used to track time and labor expense
As work orders move through execution, operators clock in and out using these labor codes—via desktop entry or mobile barcode scanning. NetSuite automatically posts labor hours to the correct operations, cost buckets, and GL accounts in real time.
Why Labor Codes Matter to Your Margins
Labor is often the highest variable cost in manufacturing and the least visible. Labor codes bring that cost into focus.
What you gain immediately:
Accurate COGS: Actual labor replaces estimated routing assumptions
Skill-based execution: Only qualified operators can work on critical steps
Live variance visibility: See overruns while work orders are still open, not atthe month end
NetSuite continuously compares actual labor hours against routing standards to calculate efficiency and cost variances. Production managers can intervene early rather than explain surprises on the P&L.
Prerequisites for Labor Code Success in NetSuite
Labor codes depend on specific manufacturing features. Missing even one can cause them to disappear from dropdowns or fail silently.
Required NetSuite Features
Manufacturing Work In Process (WIP)
Manufacturing Routing & Work Centers
Advanced Manufacturing SuiteApp (for mobile and badge tracking)
Core Configuration Requirements
Work Centers: At least one active work center
Manufacturing Routings: Labor codes attach to routing operations
Locations: Labor codes are location-specific—multi-site manufacturers need separate setups
Access & Permissions
Admin access for labor code creation
Transaction and custom record permissions for planners
Operator roles enabled for Manufacturing Mobile badge-in/out
If you’re unsure whether these features are enabled correctly, Versich recommends validating your environment before configuration begins.
Structuring Labor Codes for Work Orders
NetSuite uses a two-layer structure:
Planning Skill Codes: Broad skill categories (Welding, CNC Machining, Inspection)
Labor Codes: Specific proficiency levels (Certified Welder, Machinist L2, QA Inspector L1)
Optional Labor Scanning Codes enable barcode or QR-based time capture for mobile execution.
Key configuration fields include:
Location
Cost Type & Base Rate
Description for reporting clarity
One skill code can support multiple labor codes, allowing granular tracking without bloating reports.
Step-by-Step: Implementing Labor Codes in NetSuite
Step 1: Create Labor Codes
Define labor codes within Advanced Manufacturing, including:
Location
Planning Skill Code
Labor Code name
Scanning Code (if using mobile)
Description
5 minutes per code
Step 2: Link Labor Codes to Routings
For each routing operation:
Assign the relevant skill code
Define headcount requirements
Select allocation method:
Fixed Minutes
Fixed Hours
Percentage of Cycle
When work orders are generated, labor codes are automatically applied during execution.
10 minutes per operation
Step 3: Configure Work Order Completions
At the location level:
Enable Use Labor Records for labor setup
Enable Use Labor Records for the labor run method
This ensures completions pull actual labor time instead of routing estimates.
20–30 minutes (one-time setup)
Capturing Labor Time on the Shop Floor
Once live, labor can be recorded through:
Manufacturing Mobile badge scanning
Manual web entry
Advanced Manufacturing Workbench
Your completion settings determine how labor flows into WIP, costing, and reporting.
Optimizing Routings with Labor Codes
Labor codes unlock smarter routing design:
Senior labor for setup, junior labor for run time
Machine-heavy vs. hands-on operations
Labor scaling based on production duration
With scheduling enabled, NetSuite can:
Identify shortages of certified labor
Flag capacity bottlenecks
Calculate realistic completion dates
This creates a true plan-to-execute feedback loop.
Reporting & Analyzing Labor Performance
Labor codes feed directly into NetSuite analytics, enabling:
Actual vs. standard labor hours
Cost variance tracking
Efficiency by skill, work center, or operator
Saved Searches and SuiteQL allow deeper analysis across work orders and time periods. Versich recommends setting action thresholds, for example, reviewing any labor variance over 15% while the order is still open.
Common Labor Code Issues (and How to Fix Them)
Labor codes missing: Work center name mismatch
Mobile not capturing time: Manufacturing Mobile not configured or missing scan codes
Zero labor variance: Routing lacks baseline labor standards
Wrong GL posting: Cost template misalignment
Critical note: “Issued Step” and “Auto-Issue” fields populate only at work order creation. Routings must be finalized before orders are generated.
Best Practices from Successful Implementations
Keep initial labor codes limited (8–15 max)
Use consistent naming conventions
Start with labor records from day one
Review variances monthly
Update routing standards quarterly
Archive inactive codes annually
Advanced Labor Costing & Integrations
NetSuite supports:
Multi-resource operations
Indirect labor allocation
Overtime cost rules
SuiteScript extensions
External time-tracking integrations via SuiteTalk
For regulated industries, labor codes provide full traceability supporting compliance and audit readiness.
Why Versich Is Your NetSuite Manufacturing Partner
Labor codes look simple until configuration details derail accuracy. Routing timing, work center alignment, mobile execution, and costing templates require experience to get right.
Versich brings deep manufacturing expertise as a trusted Oracle NetSuite partner. We don’t just explain best practices—we configure, test, and optimize NetSuite to reflect how your shop floor actually runs.
What sets Versich apart:
Manufacturing-first NetSuite expertise
Hands-on implementation and validation
Real-world costing and variance experience
Clear guidance, no overengineering
Whether you’re implementing labor codes for the first time or fixing a setup that isn’t delivering results, Versich helps you turn labor data into decisions not surprises.
Not sure where to start?
Schedule a free 30-minute consultation with a Versich NetSuite expert and get clarity before issues hit your close.
