Hi and welcome to the forum.
The idea of setting up the Warehouse module to invoice for labor seems interesting, but this will not solve a bigger problem, therefore I would not recommend this approach. Yes - you can setup Service Items in the Warehouse, and this is exactly what this type of item was setup for, however you will have no way to automatically create invoices for your customers based on time-sheets.
In your case you will need a custom module which will integrate the following:
- Projects - which are tied to your customers
- Workers (employees)
- Tasks - which will tie together: project, customer, employees
- Time sheets - which will be tied to tasks
Tasks will be used as a scheduler for your employees. Having all this data it will be easy to generate an invoice per task or per project based on information gathered in time-sheets. Of course you will be able to see the total number of hours per employee, task, project, cost, revenue etc.
The Warehouse module was intended for a different purpose and while you can utilize some of its features it will not provide functionality you are looking for.
We created a package called GC Projects that was created for a contracting company (thus GC for General Contractor). It has pretty much all modules that you need. It will be available in EPESI Store in about 1-2 months time frame.