Contractor License Practice Exam

What term describes the additional costs over and above wages for employees?

1. Labor burden

2. Overhead costs

3. Direct costs

4. Fixed costs

The correct answer is: Labor burden

The term that refers to the additional costs over and above wages for employees is labor burden. Labor burden encompasses all the extra expenses incurred by an employer in relation to their employees, beyond just the gross pay. This includes but is not limited to costs such as employer contributions to Social Security, Medicare taxes, unemployment insurance, workers’ compensation insurance, health benefits, retirement contributions, and other employee-related expenses. Understanding labor burden is critical for accurately calculating the total cost of employing staff, which has significant implications for budgeting, project bidding, and profitability assessment. This term stands out from the other options in the list because it focuses specifically on employee-related costs, while overhead costs refer to general operational costs not directly tied to salaries, direct costs pertain to expenses directly linked to project completion, and fixed costs are those that remain constant regardless of the level of production or service activity.