Are you interested in learning how to set up and manage labor categories in Unanet to improve project management, timekeeping, and labor cost compliance for government contractors? Labor categories are critical for organizing and tracking work performed on contracts, especially on Time & Materials (“T&M”) contracts. While cost type and fixed price billing may not require a labor category for billing purposes, they can still play an important role in project management and budgeting at the contract level. In accounting systems like Unanet, these categories classify time into roles such as Project Manager or Senior Software Developer that are tied to billing rates, simplifying T&M billing. Unanet also provides flexibility in how labor categories are derived, allowing setup at the admin/master level, project level, person level, or person-to-project assignment level. This adaptability ensures alignment with contract requirements regardless of how your business is structured.
Setting Up Labor Categories in Unanet
Labor categories in Unanet are managed through Admin > Setup > People > Labor Categories for master lists, with project-specific categories defined under Project > List > Labor Categories. Each employee can also have a default labor category assigned via People > List > Edit > Time. This hierarchical structure allows contractors to tailor categories to organizational and contractual needs. Depending on where the data is populated in Unanet, the mapping to the timesheet is variable. The labor category can also always be overridden at the person’s project assignment if none of the default areas fit the needs of the contract.
Best Practices for Setting Up Labor Categories in Unanet
Designing labor categories with care is essential for maintaining clarity, compliance, and accuracy across your projects. A well-structured approach ensures that categories not only meet contractual requirements but also provide consistency in billing and reporting. By establishing clear standards at the start, contractors can avoid confusion, reduce errors, and create a reliable foundation for long-term system use.
To set up labor categories effectively, consider the following best practices:
- Clear Naming Conventions: Use prefixes and descriptive names like “Senior Software Developer” or “Quality Assurance Specialist” to reflect job roles. Will your master labor category list be used for multiple projects, or will labor categories at the master level be project-specific? Determine the best fit for your organization and be consistent with the design.
- Detailed Descriptions: Include role responsibilities to ensure alignment with contract statements of work (SOWs). Ensure that staff members qualify for the labor categories based on contractual documentation.
- Rate Structures: Assign bill rates at the master, project, or assignment level. For example, a Project Manager’s rate might be $175/hr system-wide but overridden to $150/hr for a specific project. It is important to be consistent so that assumptions within the new project setup are accurate.
Common Use Cases for Labor Categories
Labor categories in Unanet are more than just labels for time entry. They serve as a bridge between project execution, compliance, and financial management. By tying employee roles to contract requirements, labor categories provide consistency across billing, reporting, and cost tracking. They also allow contractors to translate the technical language of contracts into practical, system-driven structures that guide how work is managed and billed. Whether used during proposal development, for ongoing project management, or to ensure accurate billing under specific contract types, labor categories are essential for aligning people, projects, and costs.
The most common ways contractors leverage labor categories include:
- Contract Role Terminology: Especially important for Time & Materials contracts. Align categories with roles specified in contracts, such as Program Manager or Junior Engineer, to ensure accurate billing and compliance.
- Proposal Development: Use labor categories to map projected labor costs accurately during bidding, improving cost estimation for T&M or CPFF contracts.
- Project Management/Budgeting: Track labor costs across multiple projects, enabling detailed cost analysis for each contract type. A labor category might not be required on a contract, but could represent a break-even revenue rate or opportunity cost rate for contract management purposes.
- Examples:
- T&M Contracts: Pair categories like Senior Software Developer ($180/hr) with project-specific rates to bill clients accurately.
- CPFF Contracts: Use categories to track actual labor costs against reimbursable ceilings (as applicable).
- FFP Contracts: Monitor labor utilization to ensure project profitability within fixed budgets.
Compliance Considerations
In government contracting, compliance requirements extend beyond accounting rules and financial reporting, they also apply to how labor is categorized and billed. Labor categories must align with contract language and remain consistent across projects to withstand audit scrutiny. When managed correctly in Unanet, they serve as a safeguard against billing errors, audit findings, and disputes with customers. A strong compliance framework for labor categories ensures contractors can demonstrate that the right people are performing the right work at the right rates.
With this in mind, there are two primary areas where contractors should pay close attention:
- SOW Alignment: Ensure categories match roles in the contract SOW to avoid misclassification, which could trigger audit findings and rejected billings.
- Consistency: Avoid issues like inconsistent category usage across projects by standardizing master lists and training staff.
Misclassified labor, such as assigning a Junior Developer to a Senior Developer role, can lead to billing disputes or compliance violations. Regular audits and intentional Unanet system design of category assignments help mitigate these risks.
Tips for Managing Labor Categories Over Time
Setting up labor categories correctly is only the first step. Maintaining them over the life of your contracts is equally important. As organizations grow and projects evolve, categories can become outdated or misapplied if not actively managed. Ongoing oversight helps ensure accuracy in timekeeping, billing, and compliance, while also keeping your Unanet system clean and efficient.
To keep your labor category structure effective over time, contractors should:
- Periodic Reviews: Clean up unused or outdated categories to streamline timekeeping and reporting.
- Document Processes: Create guidelines for assigning and updating categories, ensuring consistency across projects.
- Training: Educate project managers and employees on selecting the correct category during time entry to prevent errors.
Getting Labor Categories Right in Unanet
At Redstone Government Consulting, our Unanet Team works closely with government contractors to set up and optimize labor categories for improved compliance, accuracy, and visibility. We support labor category alignment with cost structures and rate calculations, assist in configuring your system to match contractual labor requirements, and provide training to ensure consistent use across your organization. Whether you’re implementing Unanet for the first time or need help refining your existing setup, we’re here to support your team every step of the way.
