Productive Labour, Cost of Sales Labour & Sub-Contractors: Codes 6000, 6001 & 6002

Not all staff costs sit in Overheads — where labour is directly tied to producing what the business sells, Sage classes it as a Direct Expense instead, sitting alongside materials in the cost of sales.

The codes, and what each one holds

Code 6000 — Productive Labour records the wages of employees directly engaged in producing goods or delivering the service being sold, such as factory or workshop staff.

Code 6001 — Cost of Sales Labour covers a broader or alternative labour cost directly attributable to sales, depending on how a business structures its payroll codes.

Code 6002 — Sub-Contractors records payments to self-employed contractors or subcontracted businesses brought in to help deliver the work being sold, rather than employees on the payroll. All three are Direct Expenses codes and normally carry a debit balance.

A worked example

Say a construction business pays £12,000 in wages to its own site labourers this month, and separately pays a self-employed electrician £2,800 to complete wiring on a project.

Productive Labour (code 6000): £12,000 debited for the direct wages.

Sub-Contractors (code 6002): £2,800 debited for the subcontracted electrical work.

Why this matters day to day

Classing direct labour as a cost of sale rather than an overhead means gross profit reflects the true cost of delivering what's being sold, which is essential for accurate job costing and pricing. Keeping subcontractors separate from employed labour also matters for CIS (Construction Industry Scheme) reporting in the building trade, and more generally for understanding how much of production capacity is being outsourced versus done in-house.