Let's start with Encarta's definition, I'll tweak it to better represent the accepted meaning in the manufacturing world, then I'll explain how it should be used in your business.

Per Encarta's online dictionary, Indirect Labor is:
Work not directly related to production: work that is not considered in determining costs per unit in producing or manufacturing something, e.g. work done by clerical or maintenance staff.

In the manufacturing world, accounting usually draws the line between direct labor and indirect labor based on job position. In other words, all hours turned in by factory floor workers are defined as direct labor hours. Hours turned in by everyone else are considered indirect labor.

When it comes to indirect labor, manufacturing can get away with tagging positions as either direct or indirect. It makes the cost accounting easier and it rarely sends misleading signals to management.

That approach does not work so well for contractors. Where manufacturers can cleanly tag a particular job as either direct or indirect, you as a contractor must look at each field worker hour. For you, indirect labor should be coded by task, not by job. Failure to do so can mask a potentially devastating expense.