Direct Labor:
Work involved directly in making the product is classified as 'Direct Labor', sometime referred to as "touch labor". For example, Assembly Operator, Fabrication Operator, Testing Operator, etc. Dictionary of small business defines Direct Labor as 'Personnel assigned to production process whose payroll expenses are traced to the units of output and are included in cost of goods sold.'
Indirect Labor:
Indirect Labor consists of support activities that do not contribute directly in making the product. For example, Material Handling Operator, Support Technician, Engineers, etc. Dictionary of small business defines Indirect Labor as 'Personnel assigned to tasks other than producing products. It is included as a part of operating expenses.'
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