“Total Labour Cost”

Overview of Total Labour Cost?

Total Labour Cost refers to the total amount of money an employer pays in wages, salaries, employee benefits, and payroll taxes to their employees. All labour-related expenses which are related to the hiring and retention of employees come under this term. These costs capitalize on the entire labour force that a business employs and are usually included in the overhead of a company.

Components of Total Labour Cost?

The Total Labour Cost includes a variety of items. The components might differ depending on the industry and the organization. Generally, these costs include:

• Wages:Salary and wages paid to employees
• Salaried Hours:The total number of working hours spent by salaried and hourly employees.
• Overtime: Payable salary and wages for overtime hours spent
• Employee Benefits: The compensation an employer pays in terms of benefits to their employees such as medical coverage, paid time off, etc.
• Payroll Taxes: Bureaucratic costs such as taxes, insurance, etc.

Importance of Total Labour Cost?

Total Labour Cost is an important metric that helps organizations to measure the efficiency of labour usage. It is used to measure the cost incurred in producing a unit of a product or service and analyze how labour affects the overall profitability of the enterprise. Total Labour Cost also helps to identify the most cost-effective strategies for the organization’s human resources and workforce planning.

FAQs

How do you calculate Total Labour Cost?

Total Labour Cost can be calculated by adding the costs related to wages, salaries, employee benefits, and payroll taxes together. This calculation should include both fixed and variable costs associated with labour.

What are the main components of Total Labour Cost?

The main components of Total Labour Cost are wages, salaries, overtime policy, employee benefits, and payroll taxes.

What role do benefits and overtime play in calculating Total Labour Cost?

Benefits and overtime are important factors that contribute to Total Labour Cost. Benefits are generally considered a fixed cost as they tend to remain the same unless altered. Overtime, however, is a variable cost as the cost increases with the higher amount of hours worked.

Also See: Partial Payments | components of salary slip