Wage and Labour Cost represents a cost (labour costs) that includes not only the wages and salaries paid to employees but also non-wage costs, mainly social contributions payable by the employer. The cost of labour is broken into direct and indirect costs. Direct costs include wages for the employees that produce a product, while indirect costs are associated with support labour, such as employees who maintain factory equipment.

Reference Definition by OECD: Wage and Labour Costs may be described through use of three distinct and complementary indicators: 1) average real wages; 2) nominal and real wage rates and/or earnings; 3) average compensation costs. The first two may be viewed from the workers’ standpoint and represent a measure of the levels and trends of their purchasing power and an approximation to their standard of living. The third measure provides an estimate of employers’ expenditure on the employment of labour. Whilst these measures can be compiled for the total economy, they are more frequently available for the manufacturing sector. However, it should be noted that the development of wages and labour costs may vary across sectors.

Related Definitions in the Project: The Project Cost; Construction