Indirect labor costs, such as employee health insurance, are often known as what?

Indirect labor costs, which encompass expenses like employee health insurance, are commonly referred to as Labor Burden. This term defines all costs associated with employing workers that are not directly associated with their productivity or the creation of a product. These costs include benefits, payroll taxes, and other non-wage benefits that companies incur beyond just base salaries or hourly wages.

Identifying these costs as Labor Burden is essential for accurate budgeting and financial analysis in construction and other industries, as it helps companies understand the true cost of labor and its impact on project profitability. Understanding Labor Burden enables business owners and managers to effectively allocate resources and set appropriate pricing strategies, ensuring that they account for the full range of expenses associated with staffing.

While Overhead Costs also refer to indirect expenses, this term is broader and may include various other business costs not solely limited to labor-related expenses. Variable Expenses and Fixed Costs are general terms referring to how costs behave in relation to production, rather than specifically addressing indirect labor. Thus, the recognition of indirect labor costs as Labor Burden provides a more precise understanding that is critical in financial and operational planning.