Yet another option for direct labor costs is the payment made to a logistics company responsible for delivering goods across the country. Another example could be the annual salary of a welder who works on the production line of a steel parts manufacturing company.
One example of a direct labor cost is the hourly salary of a quality assurance inspector adjusted to include healthcare benefits and short-term disability.
#HOURLY LABOR RATE IT CONSULTION DRIVERS#
This could be assemblers, manufacturers, heavy machinery users, fabricators, craftsmen and artisans, delivery drivers and other logistical employees essential for getting goods into consumer's hands. Here are four examples of labor cost: Direct labor cost exampleĭirect labor costs refer to costs that are derived directly from supply chain employees involved in the production. Related: Learn About Being an Estimator Example of labor cost Variable: Variable costs increase and decrease with variables like production demand and economic conditions.
#HOURLY LABOR RATE IT CONSULTION HOW TO#
As a result, a deep understanding of labor cost and how to use it is beneficial for the economy.Ĭost of labor can be further broken down into fixed and variable costs:įixed: Fixed costs are usually contracted costs but sometimes includes essential costs that are predictable. Understanding the cost of labor helps companies price products, and without an understanding of direct and indirect costs companies may find it challenging to arrive at the right cost of products. The indirect cost of labor refers to amounts paid for employees that support the commodity but aren't directly involved in making it. The direct cost of labor includes the cost of wages and benefits for employees who are directly involved in producing the product or service commodity. Labor cost is an important value that finance and accounting professionals calculate to determine the direct and indirect price that a company pays for labor. Related: Base Salary and Your Benefits Package What is the cost of labor?
In this article, we define labor costs and give examples of how to use it and how it's calculated.
If you're in human resources, finance, accounting or executive leadership, you may need to understand labor cost and how it impacts you. This value is arrived at by calculating the cost of all employee pay and benefits. They are unlikely to find someone for much less if the consulting market is representative of other parts of the country (assuming US), and since many consultants will come with an added 'tax' of either a recruiting firm or a markup as a staff consultant, it's probably a price that results in a win-win.Labor cost is a financial term that's used interchangeably with "cost of labor" on financial reports. That said, I'd still charge 60-70/hr for the consulting. But even at 90K, OP was only making 45/hr. If OP has a family and 100% paid health premiums that could be 20K right there, and 3 weeks vacation is roughly another 6% of salary. If OP was making 68K, the total loaded cost (health/vacation/etc) to company A was higher than that, perhaps around 80-90K. 50 weeks x 40 hours = 2000.Ħ8K a year generally means cash comp of $34/hr, but of course it's assumed the company has some other benefits and perks to add to the mix like a contribution to health insurance and vacation as you mention. Unless I misunderstood your logic here, the general rule is divide by 2000 - because there are roughly 2000 hours in a year.
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