Labour Cost Index LCI Known issues LCI Known

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 11112 - 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. D 11112 • Some bonuses and allowances can be classified as D 11112 “Payments not made in each pay period” • Others as D 11111 “Payments made in each pay period” • Payments in kind is classified in D 1114 “Payments in kind”

Characteristics of D 11112 • 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 D 11112 • 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 11112 - Issues • The same cost item can be in D 11112 or D 11111 depending on the employer.

D 11112 - Issues • Example – a monthly production bonus: – Employer A: • Normal pay period: week • Production bonus is D 11112 – Employer B: • Normal pay period: month • Production bonus is D 11111

D 11112 – 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)