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Project Overhead means a project’s costs which an organization incurs indirectly – in other words they don’t comprise expenses for salaries and wages of the staff members working on a project (so called direct labor), payments to sub-contractors and consultants, amounts paid to buy raw materials or any other expenses generated specifically by a project. Project overhead involves items of costs which aren’t directly referred to a specific project because they are either shared by a company’s all projects (such as bills for office rent or energy) or it would be whether impossible, too difficult, or expensive to account them back to each project (such as costs of office supplies).
Project overhead can be accounted by separating direct project-related costs from indirect cost (if an item of expense is a direct cost, then it is never included into organization’s overhead). Normally a company’s overhead includes indirect employment costs that are not connected to work at a specific project (such as vacation, sick, general salary, benefits, etc) and expenses that can be allocated to all projects such as taxes, utilities (heat, light, etc) and rent of premises or working facilities.
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