There are 5 ways (maybe more) you can add labor costs to your manufacturing orders. The first 3 require your finished product to either be in AVCO or FIFO costing method and the 4th is for standard costing, while the 5th is a way to apply labor costs through employees app.

1. Consumable product on the BOM

Create your Labor Cost as a consumable product in inventory. Make sure you add the cost of labor in the cost field. This consumable product will directly be added as a BOM line.  You can set the unit of measure to be hours so that it can be adjusted on the MO, depending on how many hours of labor has gone into a particular order. Based on the hours on each MO, Odoo will calculate the labor cost and directly add that cost to the finished product and hit the required labor account.

Limitations –

• Consumable products DOES NOT hit your expense account when consumed and hence the labor account will never get credited. Everytime the labor product is consumed, there will be no journal entry created. However, when the finished product is put into stock, it will have the value of labor as well in it. This means that the WIP account will not balance out, this labor cost will sit as a credit in your WIP account. Periodically someone will have to create a manual journal entry to write it off the WIP account and hit the Labor account instead. This doesn’t have to be per manufacturing order, can be done once a day/week/month/year.
• Need to create a new product in the system (not really a limitation).
• Cannot set it as a service because services will not hit your COGS account.
• Cannot set quantity on the BOM as the hours might change for each MO. The BOM might just have a placeholder but the quantities will have to manually edited on each MO.
• If you have multiple different types of labor costs ($10/hr for day shift, $20/hr for night shift), you might need to create separate consumable products for each of these.

2. Work center

Labor can be created in the form of a work center in manufacturing. This work center functions as the labor itself. You can set the labor cost on the cost field in the work center configurations. This work center will be added to the BOMs and you can use the ‘Duration’ field to input the hours of labor.

Limitations –

• Cannot accurately credit the required labor account.
• If the tablet view is being used for work orders, you might have to treat this labor as a work order on every MO.
• Like the previous method, if you have multiple labor costs, you will need to create a different work center for each.

3. Landed Costs

Labor can also be added separately as a landed cost. Landed costs have the option of applying it on Manufacturing Order and this can be used after every MO. Landed costs give us the flexibility to add multiple labor costs as you define the cost on each landed cost. You will need to create a serviceable product called Labor which can simply be added as a landed cost on multiple MO’s.

Limitations –

• You cannot define the number of hours of labor. Instead, you must input the total labor cost as a landed cost. The calculation will have to be manually done and input. 
  
• Required an additional process of adding landed costs after each MO. If you have a large volume of MO’s, it might not be scalable.

4. Manual Journal Entry

This option only applies to products that have their costing method set to Standard Costing (not AVCO or FIFO). Since it is standard cost, the finished product will not take up any cost of components and instead expect you to input the cost of the finished product manually in the product template. Periodically, you can create manual journal entries to credit your labor account and debit the stock valuation account for the labor cost for that period.

Limitations –

• Labor hours cannot be recorded anywhere.
• If you do it periodically, the labor cost will be a lump sum and won’t be attributed to each MO.
• Manual effort to do it periodically, and susceptible to errors.
• The finished good will not reflect the cost in the cost field (or inventory valuation report), but it will just be a separate debit to the stock valuation account.

5. Employee Cost on Employees App

If you use the Employees app, this method allows you to enter the hourly cost on each employee and then use that cost to determine the labor cost. The first step for this process is to configure “Hourly Cost” under “HR Settings” on the Employees app. You can then set these employees as allowed users on the workcenter by checking on the “Requires Log-in” checkbox and then setting the employee user. Once this is configured, every time a user starts and stops an operation, Odoo will track their time and then use the hourly cost to add the total labor cost to the finished product.

Limitations –

• Need to configure the Employees app for this to work.
• The WIP account will hold the value of the labor until you balance it out manually at the end of the day/week/month/year.
• Employees need to track their time by using the tablet view or by manually entering the time they spent; time-tracking is imperative to this workflow