What Is the Cost  of Labor?

An organization's total cost of labor includes all of the money it pays out in compensation to its workers.

Additionally, it covers all of the benefits and payroll taxes that your company has paid to the federal, state, and local governments (not the portion your employees paid).

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Expenses for labor are split down into direct and indirect costs (overhead).

The term "direct labor costs" refers to the costs incurred directly in the process of making a product.

Wages paid to those involved in the production process are included in the term "direct costs." The costs of supporting the creation of a product are known as indirect labor costs.  Wages paid to office staff, security guards, and factory equipment maintenance workers are examples of indirect costs.

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