Definition

Direct labor is labor that can be identified with a specific job or project—e.g., carpenters on a deck build, electricians on a tenant fit-out. It is distinct from indirect labor (shop foreman, office staff) that supports the business but is not tied to one contract. For job costing, only direct labor is typically charged to the job.

Why It Matters

Assigning direct labor to jobs is how you know true job cost. If labor is not allocated to jobs, you see total payroll but not which jobs consumed it. That undermines bidding, profitability analysis, and variance reporting. Accurate direct labor tracking is essential for contractors who employ field crews.

Field Example

A crew of three works 40 hours on Job #452 (kitchen remodel). Total direct labor = 120 hours × $32/hr burdened rate = $3,840 charged to Job #452. The same week, 8 hours of the same crew’s time is spent on shop maintenance; that 8 hours is indirect, not charged to any job.

Calculation / Formula (if applicable)

Direct Labor Cost = Hours worked on job × Labor rate (often burdened rate).
Job direct labor total = Sum of (hours × rate) for all workers assigned to that job.

Software Application

Allow assigning time or labor cost to a job (and optionally to a cost code). Support timesheets or payroll integration so hours and rates flow to the correct job. Report direct labor by job, by worker, and by period. Distinguish direct vs. indirect in the chart of accounts or job cost setup.

Tooltip Version

Direct labor is field labor you can tie to a specific job; it’s what you charge to that project for job costing and profitability.

Direct Labor