Hi there, @ktuva.
Allow me to share some details about why you're seeing the billable time as a 100% Profit in your Project.
Adding the Time activity to an Expense is unavailable because the billable time in your project is the service you've offered to your customer.
You'll want to pay your employee though running a payroll to track it as an expense in your business not in the Projects.
I've added this article to know more about handling Time Activities using the Project feature in QuickBooks Online: Track income, costs, and profitability by project.
You may consider checking out this article to help you with your future task for the year-end: Year-end checklist for QuickBooks Online Payroll. This contains information to stay in compliance with the taxes.
I'll be here if you have other questions. Let me know in the comment section. Take care and have a wonderful day ahead.