Direct and Indirect Labour

Direct and Indirect Labour

Direct labour is a labour which is directly connected with the production process whereas the indirect labour is not directly connected with production process. The direct labour is the person who are producing the product and any other labour would be treated as indirect labour and would be treated as production overhead.

Example of Direct Labour

The basic rate of direct labour is the only direct labour cost and any other cost will be treated as indirect cost. There is once exception to the rule when there customer is ready to pay for overtime premium then overtime premium may be charged as direct labour.

Example of Indirect Labour

There are number of indirect labour involve in the production process like supervisor and managerial involvement in production. There are also some payment made to the direct labor but actually those payment would be treated as indirect labor cost. These include the overtime premium payment, bonus payment etc.