What does employee labor cost typically include?

Employee labor cost typically includes a variety of expenses associated with employing staff. Workers' compensation is a critical component because it provides insurance coverage for employees who may be injured or become ill as a direct result of their work duties. Employers are legally required to carry workers' compensation insurance in most jurisdictions, making it an essential part of labor costs.

Payroll taxes contribute to labor costs but typically refer to taxes that employers must pay based on employee wages, such as Social Security and Medicare taxes. Health insurance, while a significant expense, is more of a benefit cost rather than a direct labor cost. Overtime pay, on the other hand, is a cost that varies based on the number of hours worked beyond the standard workweek, and although it can add to overall labor costs, it doesn't encompass the broader, mandatory financial responsibilities associated with workforce safety.

By focusing on workers' compensation, we recognize its vital role in protecting both employees and employers from the financial impact of workplace injuries, thus categorizing it as a fundamental element of employee labor costs.