Labor cost is another name for total labor cost. It is the entire amount spent on labor in a company. The cost of hiring and managing resources is the major operational expenditure. Salary, bonuses, training, and any other labor-related expenses are included in the cost. Direct and indirect labor costs are separated from the total labor cost. The salaries of employees who manufacture the product are considered direct costs, whereas indirect costs are associated with laborers who assist the manufacturing, such as those who maintain industrial equipment and machinery.
Labor expenses that are unlikely to alter over time are known as fixed labor costs. A fixed labor cost can be the annual wage of an important manufacturing worker in a particular year.
Any employee whose function is not critical to the actual creation of a product is considered indirect labor. These workers continue to perform critical tasks such as administration, supervision, and finance, but they are not involved in the supply chain.