Labour cost is defined as follows in the Resolution concerning statistics of labour cost adopted by the Eleventh International Conference of Labour Statisticians (Geneva, 1966): ¹

3. For the purposes of labour cost statistics, labour cost is the cost incurred by the employer in the employment of labour. The statistical concept of labour cost comprises remuneration for work performed, payments in respect of time paid for but not worked, bonuses and gratuities, the cost of food, drink and other payments in kind, cost of workers’ housing borne by employers, employers’ social security expenditures, cost to the employer for vocational training, welfare services and miscellaneous items, such as transport of workers, work clothes and recruitment, together with taxes regarded as labour cost...

Compensation of employees was defined in the United Nations System of National Accounts, 1967 (SNA), ² as follows:

7.11. The compensation of employees comprises all payments by producers of wages and salaries to their employees, in kind as well as in cash, and of contributions in respect of their employees to social security and to private pension, casualty insurance, life insurance and similar schemes...

Labour cost and compensation of employees are thus closely related concepts, with many common elements. The major part of labour cost comprises compensation of employees, while the remainder consists of employers’ expenditure for vocational training and welfare services (such as canteens and assimilated services, educational, cultural and recreational facilities and services, grants to credit unions and the cost of assimilated services for employees), the cost of recruitment and other miscellaneous items (such as work clothes, travel between the home and the place of work and vice versa, etc.) and taxes regarded as labour cost. The concept of compensation of employees includes fees paid to members of boards of directors (which are excluded from the labour cost concept) and excludes outlays by employers such as expenditures on amenities at the place of work, medical examinations, sports and other recreational activities and reimbursements by employers of the expenses of work clothing and tools which are incurred by their employees.

The SNA was revised in 1993, ³ and the components of compensation of employees were, in general, extended to cover a number of welfare services such as sports, recreation, holidays facilities, etc., and other miscellaneous items (e.g. work clothes which employees choose to wear frequently outside of the workplace as well as at work, transportation to and from work, car parking). Labour cost and compensation of employees have thus become even more closely related concepts. However, most statistics of compensation of employees published in this chapter are still based on the 1967 SNA guidelines.

The statistics presented in this chapter relate to average labour cost per employee, or, in some cases, to average compensation of employees. While the level and composition of labour cost tend to vary between wage earners and salaried employees, in many cases it is not possible to distinguish between labour costs for these two groups of employees. Therefore, with a few exceptions, the figures cover all paid employees, that is, wage earners and salaried employees, of both sexes, without distinction as to age, occupation, experience, level of skill, etc. Data are provided separately for each country as a whole, and in general they represent the average for a calendar year. Where the coverage does not correspond to the above, the differences are indicated in footnotes.

Statistics of average labour cost are expressed in national currency. In the tables, the currency shown next to the country name is the current one. In case of change of currency in a country, the equivalence between the old and new currencies is indicated by a footnote on the relevant year.

The type of statistics shown for each country is indicated in the table by the following codes:

(LC)

Labour cost

(CR)

Compensation of employees

(h.)

per hour

(d.j.)

per day

(m.)

per month

(y.a.)

per year

For various reasons, national definitions of labour cost and compensation of employees often differ from the recommended international standard definitions. In certain countries, some items of labour cost (for example the full cost or part of the cost of social security and vocational training) are not chargeable to employers, but represent expenditures by the State for social or other reasons. As a rule, however, the State contributes along with the employer and the employee to finance the wage-related social security schemes, although the extent of State, employer and employee participation varies from country to country. ⁴ Taxes of a social character paid by employers are counted by some countries as labour cost, especially payroll taxes or employment taxes. The national concepts of labour cost may also differ as a result of variations in the national practices with regard to pension, health or life insurance schemes, etc., as well as taxes and subsidies relating to employment. Some of the differences in costs may therefore be explained by the fact that in some countries certain social costs are financed through general taxation and hence are excluded from labour cost, while in others they are financed through direct contributions by employers.

The statistics shown may also reflect differences in the sources, coverage and methods used for measuring labour cost. Labour cost data are obtained mainly through establishment surveys, that is either labour cost surveys or industrial censuses or surveys, although in some countries official estimates of labour cost are made on the basis of data from a number of sources, such as current surveys of earnings, administrative records of social security organizations, employers’ organizations, etc.

The main objective of labour cost surveys is to compile measures of the level, composition and evolution of labour cost to the employer. The data are used, inter alia, for the analysis of the structure of labour cost, and the relationships between the different components. The principal objective of industrial censuses and surveys is to estimate the gross and net input and output of industry (including compensation of employees) and other measures which can be used for the study of the structure of industry and the analysis of the various factors influencing the industry. Official estimates are generally used as a measure of the evolution of total labour cost over time, and are usually calculated at quarterly or yearly intervals.

Labour cost surveys are generally sample surveys of establishments or enterprises, covering establishments above a certain size (usually those employing more than a given number of workers), and are conducted at intervals of three or more years. As a rule, they cover wage earners and salaried employees, while persons working at home, directors paid by fees, persons paid by commission only and working proprietors are usually excluded. In general, the emphasis of labour cost surveys is on the compilation of detailed data concerning labour cost and its components, together with information on the corresponding employment as well as the characteristics of the establishments. In some countries labour cost surveys are also used for collecting supplementary information on establishment practices and policies which have a bearing on the level, composition and evolution of labour cost, such as the systems of payments for time not worked, social security and pension schemes and methods of financing them, payroll taxes, etc.

Data on compensation of employees are generally obtained through industrial censuses or surveys, normally conducted at yearly intervals, and covering establishments or enterprises above a given size. The statistics on compensation of employees are usually compiled with respect to wage earners and salaried employees. In some cases, however, working proprietors and persons paid only by commission are covered as well as paid employees. In addition to data on compensation of employees, these surveys provide information on other inputs to production, such as materials, fuel, etc., output, value added, stocks, inventories, assets, capital formation, etc. In general, only aggregate estimates are required, so that data are not usually compiled separately on the various components of compensation of employees, nor on the different characteristics of employees.

The statistical series compiled through these surveys may be influenced by changes over time in the industrial structure, the structure of employment and levels of activity, as well as the growth or decline of establishments. Furthermore, such data may be subject to bias, owing to the exclusion of establishments or enterprises below a certain size.

When using the data to make comparisons, at either the national or the international level, it should be borne in mind that there may be variations in the definitions, scope, coverage and methods used in compiling the data, as well as in the presentation of the data. In particular, when making comparisons between countries, account should be taken of a number of factors which have a bearing on labour cost, such as the financing of social security, as well as the systems of taxes or subsidies, etc.

Care should also be taken when using the figures along with data from other chapters of the Yearbook or from other sources. This should only be done in cases where there is close correspondence between the definitions and the scope and coverage of the data, the methods used for compiling the data, and the ways in which the data are presented.

For further information, see ILO: An integrated system of wages statistics, a manual on methods (Geneva, 1979) and Sources and Methods: Labour statistics, Vol. 2: "Employment, wages, hours of works and labour cost (establishment surveys)", second edition (Geneva, 1995).

This table presents data on average labour cost per employee in manufacturing as a whole and by major industry group or division. The type of source of the series is shown as a code in parentheses following the name of the country, and the codes are listed on page XVI. As far as possible, the different industries have been arranged according to the International Standard Industrial Classification of all Economic Activities (ISIC) Revision 3, or its former version, ISIC Revision 2 (see Appendix) with the corresponding codes. Any differences are indicated in footnotes.

¹ For the full text of the resolution, see ILO: Current international recommendations on labour statistics (Geneva, 1988).

² For the full text, see United Nations: A System of National Accounts, Studies in Methods, Series F, No. 2, Rev. 3 (New York, 1967).

³ For the full text, see System of National Accounts, 1993, prepared under the auspices of the Inter-Secretariat Working Group on National Accounts (Brussels/Luxembourg, New York, Paris, Washington, D.C., 1993).

⁴ For further information concerning national social security systems and their financing, see ILO: The cost of social security, Fourteenth international inquiry, 1987-89 (Geneva, 1995).