# Direct Labour Cost

## Definition

Direct Labour Cost is any amount paid to employees for their efforts or labour put into making the product.

> In short: whatever the employer gives to the workers who directly work on the product.

## Components Included in Direct Labour Cost

1. Wages – Basic wages paid for direct work.

2. Employer's contribution to PF / ESI – Statutory contributions by the employer.

3. Other benefits – Such as free food, travel allowance, etc.

4. Bonus – Annual / festival bonuses paid.

5. Overtime – Wages paid for extra hours worked.

## Important Points

Only the employer's contribution to PF/ESI is included; the employee's portion is already part of wages.
Direct labour relates to workers who can be identified with a specific product or job.
Indirect labour (e.g., supervisor, watchman) is treated under Factory Overheads.

⚠️ Common exam mistakes

Including employee's own contribution to PF/ESI (only employer's share is included).
Treating supervisor's salary as direct labour (it is factory overhead).
Excluding overtime and bonus from direct labour cost.
Treating idle time wages as direct labour (only normal idle time is loaded, abnormal is excluded).

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Direct Labour Cost

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