It refers to the total expenditure spent on labour in a particular organisation. It is one of the most important aspects of operational costing while hiring and managing sources. This cost specifically includes payrolls, salary, bonuses, incentives, taxes and even the cost of training and development programmes. While figuring out the total labour cost, the HRM divides the cost into two major parts: direct and indirect costing. The direct costing includes the salary and wages that an employee who produces the product in the company and the indirect one includes the costing related to labour that supports the production process such as assuring maintenance of the machinery and their equipment.
Calculation of Total Labour Cost?
TLC= Labour percentage * Total number of sales/ average rate of labour per hour
