Direct and Indirect Labour
Labour can be direct as well as indirect. Direct labour is that which can be charged to specific cost units directly. Indirect labour is one the direct allocation of which is not possible. If wages can be allocated to different jobs or products on a convenient basis and are paid to workers engaged directly in the fabrication of products the wages are direct. The wages are indirect when the workers are not directly engaged in the manufacturing of products and the wages cannot be identified to particular jobs or products. The examples of indirect labour are wages paid to supervisors, workmen, chowkidars, inspectors, material handlers, time-keepers, foremen, watchmen, cleaners, etc. The example of direct labour is wages paid to workmen put on definite jobs or products in the factory.
Sometimes, it is difficult to distinguish between direct labour and indirect labour. A worker might be engaged in doing a particular work concerned with manufacturing a commodity and after an hour the same worker might be placed on a different job concerned with, say, time-keeping. In such a case the wages paid for the first hour should be treated as direct and for the rest of the period, indirect. It is to be noted that the classification of labour between direct and indirect also depends upon the criteria laid down by the management for the work and nature of the industry. The distinction must be observed because direct labour is a part of Prime Cost of Production whereas indirect labour is treated as Factory Overhead and, therefore, included under Works or Factory Cost.
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