Brianna has a masters of education in educational leadership, a DBA business management, and a BS in animal science.
What Is Indirect Labor?
Imagine you own your own toy store. Every day, you produce and sell a variety of toys for kids of all ages. On a daily basis, you have 20 employees on your payroll, ranging from those that operate the machines that produce the toys to those that package them. While those employees that aid in producing and selling the toys seem like obvious labor that contributes to your business, there are other employees that often do not come to mind that are also on your payroll. Those employees are what we call indirect labor.
So, what exactly is meant by indirect labor? Well, for starters, indirect labor, includes employees who are not directly involved in the production of goods and/or services. While they do support the production process, they do not actually help in converting materials into the finished good and are not usually assigned a specific task, like operating one specific machine all day.
Who Falls Within the Category of Indirect Labor?
Now, that we know what indirect labor is, let's look at those employees that make up this group within a business.
1. Accountants- Accountants are needed to handle the financial aspect of businesses. Without them, a business may not be able to properly budget their money, which could cause the company to close or stop production.
2. Supervisors- A supervisor has to oversee those employees who are actually involved in the production process. They may not convert materials into finished goods, but they are necessary to ensure those who do, are doing their job.
3. Security guard- Security guards are responsible for making sure the production area is safe and free from anything or anyone that might interfere with production.
4. Production supervisors, quality control employees, marketing employees, and engineering positions, also fall within this category as they fulfill managerial and supervising roles but are not directly involved in the actual production process.
Examples of Real Life Scenarios
So, let's take the information we have learned and now apply it to a couple of business scenarios. Bill and Kevin both work for Mattress Corporation. Bill goes to work every day and runs the machine that places the stuffing in the mattress. Kevin is employed as the corporations janitor where he helps upkeep the facility and does minor repairs. While both individuals work for the same company, Bill is considered direct labor because he works directly in the production of the goods, and Kevin is considered indirect labor because he does not actually help with the production process.
Sue and Tammy work for a T-shirt company that places logos on t-shirts. Sue goes to work and uses a sewing machine to attach logos to the shirts. Tammy has her own office where she works as the company's accountant. While Tammy's job is crucial in order to make sure the company has the budget to keep up production of their t-shirt orders, she does not directly work in the production process. She is not directly converting materials into goods. Therefore, Tammy is considered indirect labor for the company. Sue, on the other hand, is running an actual machine and actually converting the materials into a finished t-shirt. Sue is considered direct labor.
Indirect labor is an important aspect to any business. While they may not be directly responsible for taking materials and making a finished product, without them, the production process would be difficult to complete.
To unlock this lesson you must be a Study.com Member.
Create your account
Register to view this lesson
Unlock Your Education
See for yourself why 30 million people use Study.com
Become a Study.com member and start learning now.Become a Member
Already a member? Log InBack