This takes some setup and use of Functions: "For example, if some of our guys work part of a day doing excavation, then the other part of the day doing concrete, these are two different service items."

You start with Time Entries = the single activity or weekly view for Timesheets. You set the Preferences to Job Track Per Earnings Item, so that you can Reiterate the Pay item, Job tracking that task. You also set the Employee Default to Pay From Time Data, so that you see the two columns next to each other. For any one task line, you see Payroll item and Service item available, such as:

Service item Excavation, payroll item Hourly Rate, Smith project, 3 hours, Billable (as a direct time and costs project)

Service item Concrete, payroll item Hourly Rate, Jone project, 2 hours, Not Billable (as a Fixed Bid contract job)

And Paychecks get that data from the timesheet details, which is the Purchase event, and now you have Cost data.

"I cannot seem to find a report that show the service items, along with the hours applied to each"

That offers you Timesheet reporting, such as Time by Name by Job by Item, or Time by Item Summary or Time by Item by Job, or Time by Item by Name by Job (there are a lot of permutations).

"and the pay that each employee received from these hours."

Until that paydate, you can run the Excel report that projects Job Costs based on the payroll item and employee setup.

Please see my attachment and follow the Like Colors.