Direct Labour Costs

Direct Labour Costs

Direct labour costs are the wages paid to employees who work directly on the production of goods or services. These workers are also known as direct labour or direct workers.

The main purpose of classifying labour as direct is to distinguish it from indirect labour, which includes all other types of employees not directly involved in production. Indirect labourers include office staff, marketing personnel, and janitors.

While all businesses have some form of direct labour costs, they vary greatly in terms of the proportion of total costs that they represent. For example, a company that manufactures computer chips will have very high direct labour costs because its workers are highly skilled and paid accordingly. A company that sells fast food will have much lower direct labour costs because its workers are unskilled and paid at minimum wage rates.