Variable costs are defined as costs that vary directly with the quantity of product manufactured.  These usually include raw material, supplies, production labor and other operating costs associated with the manufacturing process.

In professional service firms, labor costs are only partially variable.  Management can't lay-off and re-hire staff on a continuous basis to match market demand.  Because of the difficulty in hiring professional staff as needed, most professional service firms will keep staff during periods of low demand for future anticipated work, often when the anticipated work hasn't even been identified.  This would seem to argue against direct labor being a variable cost and argue for staff to be treated more as fixed assets.  In reality, they are semi-variable.  Few firms will go out of business before reducing professional staff, however many have come close.  On the other end of the spectrum, firms often use overtime to try to smooth out spikes in workload rather than hiring professionals to meet temporary demand spikes.

Some aspects of direct labor are variable, such as overtime and bonuses.  In the long-run, professional service labor can be adjusted downward through attrition.  In a tight labor market, hiring decisions are highly dependent on accurate forecasting (an oxymoron in some peoples book) and occurs slowly.

Because of labor union rules, even many manufacturers are treating labor as fixed costs.  This is due to the consideration of variable costs as those costs which can be varied with production in the short-run versus the long-run, which is the period over which capacity can be adjusted.