Total Labour Cost

What is Total Labour Cost?

Total Labour Cost or Total Labor Cost is known as Labour Cost or Labor Cost. It’s the entire expenditure spent on labour in a business. The labour cost is considered in hiring, managing resources, salary bonuses, training & labor related expenses. There are other kinds of expenses incurred in the labour division.

How To Calculate Total Labour Cost?

Total Labour Cost = (Labour % * Total Sales) / Average Hourly Rate Of Labour

The labour cost is divided into direct and indirect costs.

• Direct Labour Cost

The direct labour cost includes the salary of employees, expenses that are unlikely to change over time. The salaries or wages of employees who manufacture the merchandise are considered direct costs.

• Indirect Labor Cost

Any employee whose function isn’t critical to the actual creation of a product is known as indirect labor. Indirect cost is the cost that is related to labourers who support production. These employees still perform critical tasks such as supervision, administration, and finance, but they’re not directly involved in the supply chain.

Also, See: Contract Labour