Cost Accounting· · 4 min read
How to Classify Indirect Costs (Fringe, Overhead, and G&A)
What counts as an indirect cost, and how to tell whether it belongs in Fringe, Overhead, or G&A, plus the unallowable costs that never reach an invoice.
Indirect costs are the ones that keep contractors up at night, because deciding which pool they belong to is where classification gets subjective. This guide walks the three indirect pools and the unallowable pool, what goes in each, and the one distinction contractors ask about most. It's the indirect companion to our four-question classification method and to Direct vs. Indirect Costs.
What Makes a Cost Indirect
An indirect cost is any cost you cannot trace to a single contract. It still benefits the business, but it supports either your labor, your contract work in general, or the company as a whole, rather than one job. Every indirect cost lands in one of three pools, and each pool later produces an indirect rate that spreads the cost fairly across contracts.
Fringe (60000s)
The Fringe pool holds the employer-side cost of having employees. These benefit all employees rather than one contract, so they are collected in one pool and spread across all labor. Fringe is usually the most mechanical of the three pools, because what belongs in it is rarely ambiguous.
Key accounts in this pool:
- 60101 to 60102 Medical and Dental insurance
- 60200 401(k) contribution expense
- 60300 Workers' Compensation
- 60401 to 60404 Employer payroll taxes: FUTA, SUI/DI, and the employer portion of Social Security and Medicare
- 60405 to 60406 PTO and Holiday Pay
Overhead (70000s)
The Overhead pool holds costs that support contract performance but can't be tied to one contract. The test is whether the cost helps you perform the work, without belonging to any single job.
Key accounts in this pool:
- 71100 Overhead Labor: project supervision and other labor that supports contracts broadly
- 71201 to 71204 Bonus, Retro Pay, Severance, and Overtime Premiums on overhead labor
- 71300 series Overhead Travel: the same travel breakdown as the direct pool, for trips that support work broadly
G&A (80000s)
The G&A pool holds the cost of running the company as a whole. These support the overall operation rather than contract performance.
Key accounts in this pool:
- 80100 G&A Labor: executive and administrative salaries
- 80201 to 80202 Bonus and Commissions
- 80300 series G&A Travel: trips to run the business, such as management meetings or meeting your CPA or banker
- General and administrative expenses such as accounting, legal, HR, and business insurance
The Line Everyone Asks About: Overhead vs. G&A
The hardest call in indirect classification is the boundary between Overhead and G&A.
"Overhead supports performing the work, while G&A supports running the business."
Sarah Sun, CPA, Manager at Wendroff & Associates, CPA
The distinction matters beyond tidiness: Overhead and G&A use different allocation bases and produce different rates, so misclassifying between them changes what you bill and what your contracts appear to cost. When a cost could go either way, fall back on purpose. A manager supervising contract work is Overhead; the same manager sitting in a company strategy meeting is G&A.
Unallowable (90000s)
Not every indirect cost is billable. The unallowable pool holds costs the government has defined as never billable under FAR Part 31: entertainment, alcohol, lobbying, fines, and penalties. You still record these in your books; you simply keep them segregated so they never reach a government invoice.
Unallowable costs left inside Overhead or G&A inflate the indirect rates you bill on. Skipping this pool is one of the most common small-contractor mistakes.
From Pools to Rates
Sorting costs into the right indirect pool is not the end of the job, it's the setup. Each pool becomes an indirect rate, calculated as the pool total divided by an allocation base, and that rate is how the shared cost lands on each contract. We walk the full calculation in how to calculate indirect rates in QuickBooks Online.
How WiseCost Handles Indirect Costs
Indirect labor is the piece QuickBooks Online can't handle on its own: an employee's time might split between a contract, an overhead task, and a proposal in the same week. WiseCost distributes that labor to the correct indirect pool at the employee's actual rate, posts it back into QuickBooks Online with an immutable audit trail, and then calculates and allocates your indirect rates across contracts. The pools you classify are the pools your rates are built from.
Get the free 147-account chart of accounts template. It is CPA-reviewed and built for GovCon books, with the Fringe, Overhead, G&A, and Unallowable pools already built out, ready to import into QuickBooks Online.
You can also run our free DCAA Readiness Self-Assessment to check your indirect pools against an SF-1408 review, or book a demo to see how WiseCost keeps indirect costs audit-ready.