Our workers are all under labor contracts; therefore, our labor rate variance is bound to be zero." The labor rate variance will not be zero, it depends upon the way labor is used. For example, skilled workers with high hourly rates of pay may be given duties that require low skill of labor and can be pay for lower hourly rates of pay, resulting in an unfavorable labor rate variance. Alternatively workers who are paid at a lower rate than the standard, however, they are not efficient compare with skilled labor may resulting in a favorable rate variance