Direct Labor Calculator
The wage is not the cost. Direct labor’s true price adds the overtime premium, the burden rate (payroll taxes, workers’ comp, benefits), and any extras: then divides by units for the per-unit labor cost that belongs in your product costing. Enter the crew and the hours below.
Direct labor only: workers traceable to the product. Supervisors, maintenance, and QA are indirect labor (overhead).
Worked example, checked against this exact tool
8 workers, 40 regular + 5 overtime hours each, $25/hr, 1.5x overtime, 20% burden, $500 extras, 1,000 units. Click Calculate: regular $8,000.00, overtime $1,500.00, burden $1,900.00, total $11,900.00 over 360 hours: $33.06 effective per labor hour, $11.90 per unit. Note the wage was $25 but the true hourly cost is $33.06: that 32% gap is the whole point of this tool.
What burden usually includes
Employer payroll taxes (7.65% FICA in the US), unemployment insurance, workers’ compensation, health insurance, retirement contributions, and paid leave. All-in burden commonly lands at 25–40% of wages: 20% here is conservative. Ask payroll for your loaded rate and use that instead of guessing.
Direct vs indirect labor
Direct labor is traceable to the product: the assemblers, the machine operators. Supervisors, maintenance techs, and QA inspectors are indirect labor: they belong in manufacturing overhead, applied per direct-labor hour. Mixing the two double-counts or under-costs. Our predetermined overhead rate calculator handles the overhead side.
What competing calculators miss
Basic tools multiply workers × hours × wage and stop, which understates true cost by a third or more. This page prices the overtime premium and the burden explicitly, then answers the manufacturer’s real question: what does labor cost per unit.
Frequently asked questions
What is direct labor cost?
Wages (plus overtime premium and burden) for workers directly making the product.
How do you calculate direct labor cost per unit?
Total direct labor cost divided by units produced.
What is a typical burden rate?
Often 25–40% of wages all-in; 7.65% is just the employer FICA portion.
What is the standard overtime multiplier?
1.5x the regular rate in the US (federal law for non-exempt workers over 40 hours/week).
Is direct labor a fixed or variable cost?
Usually variable: it rises and falls with production volume.
What is the difference between direct and indirect labor?
Direct is traceable to the product; indirect (supervisors, maintenance) goes to overhead.
How does direct labor affect COGS?
It is a core component of cost of goods sold, alongside materials and applied overhead.
Should salaried workers be included?
Only if their time is traceable to production; convert salary to an effective hourly rate first.
What are additional costs here?
Shift differentials, bonuses, training, or uniforms tied to the crew: anything beyond wages and burden.
How can I reduce direct labor cost per unit?
Raise output per hour (training, better tooling, process design): the denominator matters more than the wage.