Business glossary
Labor cost
The cost of employee or contractor time attributable to work, including applicable related costs.
Example
A job uses 12 labor hours at an illustrative loaded cost of $30 per hour. Labor cost is $360. The loaded rate may include wages and attributable employer costs, according to the business's costing method.
How it differs from related terms
Labor cost measures what the work costs the business; the billing rate is what the customer is charged. Count person-hours consistently: two workers for three hours represent six person-hours, not three.
Frequently asked questions
What is an example of labor cost?
A job uses 12 labor hours at an illustrative loaded cost of $30 per hour. Labor cost is $360. The loaded rate may include wages and attributable employer costs, according to the business's costing method.
How should labor cost be interpreted?
Labor cost measures what the work costs the business; the billing rate is what the customer is charged. Count person-hours consistently: two workers for three hours represent six person-hours, not three.