This will create too many service items and will make things complicated.  

I believe QB desktop can manage this kind of time sheet billing but it sounds like Quickbooks on line can not.

I just found a workaround.  Once I approve the time I go to weekly timesheets.  From here I can adjust the pay rate based on employee at the service code level.  It's a bit slow and "clunky" and would expect software like QB to make it streamline like the rest of the software.