What is Labor Cost

The labor cost for an organization is how much it costs them to employ their staff. This includes not only the total of all wages paid but the cost of payroll taxes and employee benefits as well. The labor cost consists of both overheads and direct costs associated with having employees.
Wages are an example of a direct cost. Indirect costs are those which support the staff doing their work, such as the maintenance of computers and other equipment. When companies set the prices for their products or services, they take into account not only the cost price of the item but how much it costs them to produce or provide that item. This comprises of labor costs, overhead, and materials.