Labour cost is what employing someone actually costs the business, which is more than the wage agreed.
What is added to the wage
The employer's share of FICA.
Federal and state unemployment tax.
Workers compensation premium, which in the trades is priced by role and can be a significant percentage of payroll for field work.
Any benefits: health insurance, retirement contributions, paid leave.
The size of the gap
Together these commonly add somewhere between fifteen and thirty per cent on top of the wage, varying most with the workers compensation rate for the trade.
An hourly rate quoted at the wage understates the real cost by roughly that much, which is why pricing built on the wage alone produces a margin that never materialises.
Paid time that is not billable
The full cost is spread across the hours actually charged, not the hours worked. Travel, loading, waiting, training and time between jobs are paid and not invoiced.
A technician paid for forty hours and billing thirty carries their whole cost on those thirty. This is what technician utilisation measures, and it is usually a larger effect than the tax burden.
Where it is used
Labour cost is the input to job pricing, job costs and any hiring decision. Using the wage in its place understates all three.
What an employee receives beyond the wage, and why it belongs in this figure, is employee benefits.