Definition: Indirect labor refers to worker’s hours that are spent on working on projects that cannot be traced back to specific production units or products. In other words, indirect labor is employee work that can’t be billed to goods produced.
What Does Indirect Labor Mean?
Since indirect labor is a bit of an intangible concept, it might be best to look at an example. Direct labor consists of work done on specific products.
For example, an assembly line worker who fabricates car fenders and then bolts them onto car chassis would be considered direct labor. This employee’s work and pay can be associated with a specific product that is being produced.
Indirect labor can’t be traced back to specific product. If a janitor cleans the work area for the assembly line worker mentioned above, the janitor’s work doesn’t really make a product. It also can’t be traced back to a product.
The janitor helps the company produce products, but his work is not associated with any products. That is why the janitor’s work is considered an indirect labor. It indirectly helps the company produce products.