Indirect labor costs (Labor overheads)

Last updated: 26.03.2016

Indirect labor costs (labor overheads) are together with indirect material costs and possibly indirect expenses part of indirect (overhead) production costs. As being their part, they are NOT directly and clearly identifiable with cost object (usually product or service).

Indirect labor costs include in particular salaries of staff involved in the production process only indirectly, for example:

  • wages of employees in purchasing department or security guards overseeing the production premises
  • wages of direct workers for time not working directly in production

 

Because the production differs from industry to industry, or even from business to business it is difficult to prepare a detailed list of indirect labor costs. There are usually only a several general lists and definitions (see e.g. above) which can help to comprehend their meaning. Therefore, the final detailed classification is up to the entity.

 

More about production overheads and their booking here.



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