Labour Cost Index (LCI) Known issues

LCI – Known issues Hours worked Bonus Weights Enterprises with less than 10 employees Sources

LCI – known issues Dealing with the issues: –LAMAS meetings –Work shops –Mail correspondence with member states –Task force

Hours worked On-going discussion How to collect hours worked –Quarterly business survey –LFS – drawback: hours and labour costs are collected from two different sources and may not be compatible

Hours worked How is it measured? What is included? What is collected?

Hours worked - Denmark How is it measured? –Through the pay systems What is included? –Paid overtime –Normal hours worked –Paid lunch

Hours worked - Denmark What is collected? –Paid by the month: Contractual hours a week Annual holidays Hours not worked but paid Overtime hours –Paid by the hour: Hours actually worked

Bonus The LCI has to be calculated with and without bonuses. –D Direct remuneration, bonuses and allowances not paid in each pay period on-going process of adding new payments on-going process of guidance to member states on what this item should include

Bonus, allowance and payments in kind Bonus –Reward or recognition granted by an employer –No expectation or assumption that the bonus will be used to cover any specific expense. –The value and timing of a bonus payment can be at the discretion of the employer or stipulated in workplace agreements.

Bonus, allowance and payments in kind Allowance –An entitlement, granted by the employer to an employee, to cover a specific expense, which is incurred by the employee and which is not work related –Often stipulated in workplace agreements –Paid at the time of entitlement

Bonus, allowance and payments in kind Payments in kind: –Wages and salaries which are not cash transactions –Goods, services or other benefits provided free or at a reduced price by the employer –The employee who receives payments in kind is free to choose how to make use of them

Bonus, allowance and payments in kind vs. D11112 Some bonuses and allowances can be classified as D11112 “Payments not made in each pay period” Others as D11111 “Payments made in each pay period” Payments in kind is classified in D1114 “Payments in kind”

Characteristics of D11112 It must: –be a transaction from an employer to an employee It must not: –be paid in every pay period –be a payment in kind –be a payment to an employees saving scheme –be a payment intended to cover a specific period that is not worked

Characteristics of D11112 It can: –be an allowance towards specific costs or expenses –be paid several times during the year, at fixed or variable dates –reflect performance of an employee or group of employees –be a discretionary payment –be an obligatory payment stipulated in the employment contract or collective agreement

D Issues The same cost item can be in D11112 or D11111 depending on the employer.

D Issues Example – a monthly production bonus: –Employer A: Normal pay period: week Production bonus is D11112 –Employer B: Normal pay period: month Production bonus is D11111

D11112 – Member states Some use cost specific items –Not as in regulation where it is the frequency that define it. –E.g. 13 th and 14 th months pay. Some member states consider this regular bonus and include it in payments paid in each pay period.

Bonus in Denmark Collected as in the regulation –Payments paid in each pay period –Payments not paid in each pay period For national reasons this information is collected in 4 different types

Weights Total labour costs associated with that activity/country fixed for one year.

Weights in Denmark Business register information of number of employees compared to the sample. Number of hours worked

Enterprises with less than ten employees Most member states do not collect this information. Accepted that the development for enterprises with less then 10 employees follow the development for enterprises with more than 9 employees.

Enterprises with less than 10 employees in Denmark Denmark do not collect data from private enterprises with less than 10 employees For public enterprises we collect information

Sources Many sources for the LCI: –Business surveys –LCS –National accounts –LFS –Social security schemes –Other short-term administrative sources

Sources in Denmark Quarterly business survey covering wages and salaries (95% of total LCI) Yearly business survey covering other costs (5% of total LCI)