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| Information about the Labour Cost Index |
Availability
| Valid From: .. | 10/01/1992 |
| To: .. | Ongoing |
| Frequency: .. | Quarterly |
Design
Purpose: The Labour Cost Index measures changes in base salary and ordinary time wage rates, overtime wage rates (on a quarterly basis), and the following non-wage labour-related costs (on an annual basis):
- annual leave and statutory holidays
- superannuation
- ACC employer premiums
- medical insurance
- motor vehicles available for private use
- low interest loans.
General Information ..Reasons for developing the index
For 15 years the Prevailing Weekly Wage Rates Index (PWWRI) measured movements in ordinary time wage and salary rates being paid to full-time adult employees. The index measured movements in pay rates of people covered by awards and agreements registered with the Arbitration Commission. About 60 percent of the paid workforce was covered by these awards and agreements.
When the Employment Contracts Act came into effect in May 1991, the award system and the Arbitration Commission were abolished. This had major implications for the index. Clearly, there was a need to redefine coverage of the index if it was to continue and remain relevant.
The year before the Employment Contracts Act came into effect, a committee of major users met to review the range of macroeconomic statistics produced by Statistics New Zealand. The committee noted that "an evolving trend for employee compensation packages to increasingly include non-wage and salary benefits" was not being measured in existing wage rate statistics, and recommended development of an index of total employment costs.
In order to implement the committee's recommendation and at the same time address the need to redefine coverage of the Prevailing Weekly Wage Rates Index, it was decided to use the wage rates index as a basis for the development of the Labour Cost Index.
The PWWRI was last published for the June 1993 quarter, providing a three-quarter overlap with the Labour Cost Index, which started with indexes for the December 1992 quarter.
Index calculation and base
The index is calculated using the price-relative form of the base-weighted Laspeyres formula, and is expressed on a base of the June 2001 quarter (=1000). Prior to this the expression base was the December 1992 quarter (=1000). The index's calculation base is periodically updated to reflect changes in the sector of ownership of organisations.
The expenditure-aggregate Laspeyres index formula is as follows.
The price-relative form of the Laspeyres index, used in the Labour Cost Index, is calculated using the following formula.
Coverage
The index essentially used to cover all employees aged 15 years and over, in all occupations and in all industries except domestic services, however the index now covers jobs filled by paid employees in all occupations and in all industries except private households employing staff. Coverage was extended to include jobs filled by paid employees under 15 years of age when the index was reweighted and re-expressed on a base of the June 2001 quarter (=1000).
In practice, there are few part-time job descriptions in the survey, as it is assumed that part-time salary and wage rates move in a similar way to full-time rates for the same job descriptions. Thus the main effect of the inclusion of part-timers was their influence in determining the weights for each occupation, based on their numbers in the 2001 Census of Population.
How information is obtained
Information used in calculating the index is obtained by a quarterly postal survey of employers. Salary and wage rates for a fixed set of job descriptions are surveyed for the pay period which includes the 15th of the middle month of each quarter. Information on non-wage costs (superannuation, annual leave, fringe benefits and ACC rates) are collected in the June quarter each year.
Sample size
Prior to the reweight in the June 2001 quarter there were some 5,100 job descriptions for which salary and ordinary time wage rates were collected each quarter. More than 1,000 overtime descriptions designed to survey changes in overtime wage rates were attached to ordinary time wage descriptions in the survey.
About 2,600 employers supplied information on pay rates, annual leave entitlements and ACC employer premiums. Of these, about 1,200 also provided information on superannuation costs, 600 on medical insurance costs, 400 on motor vehicles available for private use and about 50 on the cost of low interest loans.
For the reweight, the LCI sample was not reselected, but updated to the extent that several hundred new positions were recruited in occupations such as information technology, telecommunication, hospitality and caregiver related occupations, that were under-represented in the existing sample.
In the December quarter 2003 a further 200 job descriptions were added improving the coverage in a number of existing area's as well as extending the survey to cover additional positions such as Maori teachers.
Quality control
The index is a quality-controlled measure. Only changes in salary and wage rates for the same quality and quantity of work are reflected in the index. This is achieved in practice by asking respondents to provide reasons for movements in salary and wage rates. If a movement is due to more than one reason, the respondent is also asked to indicate how much of the movement is due to each reason.
To further assist the measurement of movements in pay rates for a fixed level of labour input, job descriptions are specified in detail. Surveyed job descriptions typically specify the duties involved, qualifications required, years of service and number of hours worked.
In theory, these job descriptions should remain fixed between index revisions. In practice, many descriptions change over time, usually as a result of changes to contractual arrangements or because specific employees are being tracked through time. If a newly negotiated contract involves an increase in the number of ordinary time hours worked per week, then the description is amended and an adjustment is made to ensure that the pay rate movement used in the index relates to the same quantity of work as specified in the new contract.
Similarly, rates being paid for job descriptions in the survey may change partly or wholly because employees undertaking these jobs have become more experienced, more (or less) proficient or productive, better qualified, have taken on additional responsibilities or have been promoted. Components of salary and wage rate movements which are due to changes of this type in the quality of work are not reflected in index movements. A policy of excluding increases due to service increments and merit promotions is consistent with this approach.
One-off payments in lieu of pay rises are also excluded, as they do not result in changes to pay rates, as such. There have been several employment contract settlements of this type in recent years, particularly in the central government sector.
Regular fixed allowances and regular fixed bonuses are included in some surveyed pay rates. Where included, these are specified in job descriptions. Payments such as commissions and irregular bonuses are excluded, however, as these payments are usually performance-based.
In instances where allowances, penal rates and other payments (such as commissions) which have not previously been included in surveyed rates are incorporated into base rates, only the overall effect of such changes is reflected in the index.
A paper entitled Quality-control Procedures Used in Compiling the Salary and Wage Rates Index is available on request.
Each quarter an 'unadjusted' series is also made available on Infos. This experimental unadjusted index retains fixed weights for occupations within industries within sectors of ownership, but is based on a matched sample of reported rates prior to quality control. In addition to price change, it reflects quality change, such as change in the performance of employees, change in the qualifications, responsibility or experience of employees filling surveyed positions, and the effect of different employees moving into surveyed positions at lower or higher rates. Rates for which the wage/salary periods (eg per annum, per week, per hour) differ from those for the previous period and rates where change is wholly or partly due to change in hours worked are excluded from the matched sample.
Index weights
Determining weights
Prior to the reweight in the June 2001 quarter, each job description used in calculating the Labour Cost Index was assigned a weight which reflected the relative importance of the job description within its sector of ownership, industry and occupation group. The main source of information used in determining these weights was the 1991 Census of Population, supplemented by information contained in Statistics New Zealand's Business Frame, and by information gathered from government organisations.
The reweighted LCI was weighted using 2001 Census of Population and Dwellings information on the relative importance of occupations within each sector by industry group, Business Frame (BF) information on the relative importance of industry groups within each sector, and pay rates surveyed in the June 2001 quarter.
The BF paid-employee numbers were used to weight industry groups within sectors of ownership, meaning that the 2001 Census data gave the mix of occupations within industry groups and sectors of ownership, but not absolute levels (that is, the Census full-time and part-time employee numbers at the five-digit occupational level within industry groups by sectors of ownership were adjusted so that industry by sector of ownership totals matched those from the BF.
The part-time/full-time ratios were used to derive full-time equivalent paid employee numbers at the detailed occupational level within industry groups and sectors of ownership. Full-time equivalent paid employee numbers were used for calculating the ordinary time weights and the overtime weights.
A simple example illustrates this:
| Sector 1 | Census | BF |
 | Full-time Employees | Part-time Employees | Adjusted to Match BF Totals |
| Full-time Employees | Part-time Employees | Full-time Equivalent Employees* | Full-time Employees | Part-time Employees | Full-time Equivalent Employees* |
Industry Group 1 |
| Occupation 1 | 30 | 7 | 29.36 | 13.42 | 35.04 | | | |
| Occupation 2 | 19 | 3 | 18.60 | 5.75 | 21.03 | | | |
| Occupation 3 | 45 | 2 | 44.04 | 3.83 | 45.66 | | | |
| Total | 94 | 12 | 92.00 | 23.00 | 101.73 | 92 | 23 | 101.73 |
* Part-time/full-time ratio, from Census, is equal to 0.423.
Weights of component costs
The expression base weights of component costs for all sectors combined are:
Labour Cost Index |
Base Expenditure Weights by Cost |
| Base Expenditure Weight |
| Cost | December 1992 Quarter | June 2001 Quarter |
| Salary and Ordinary Time Wage Rates | 80.34 | 81.33 |
| Overtime Wage Rates | 2.69 | 2.36 |
| All Salary and Wage Rates(1) | 83.03 | 83.69 |
| Annual Leave and Statutory Holidays | 11.08 | 11.49 |
| Superannuation | 2.22 | 1.37 |
| ACC Employer Premiums | 1.72 | 1.63 |
| Motor Vehicles Available for Private Use | 1.53 | 1.52 |
| Medical Insurance | 0.31 | 0.28 |
| Low Interest Loans | 0.10 | 0.02 |
| Other Non-wage Labour Costs(2) | 1.94 | 1.83 |
| All Non-wage Labour Costs(3) | 16.97 | 16.31 |
| All Labour Costs(4) | 100.00 | 100.00 |
(1) Comprise Salary and Ordinary Time Wage Rates; and Overtime Wage Rates.
(2) Other surveyed non-wage labour costs comprise Motor Vehicles Available for Private Use; Medical Insurance; and Low Interest Loans.
(3) All surveyed non-wage labour costs comprise Annual Leave and Statutory Holidays; Superannuation ACC Employer Premiums; and Other Non-wage Labour Costs.
(4) All surveyed labour costs comprise All Salary and Wage Rates; and All Non-wage Labour Costs.
Industry group weights
The June 2001 quarter expression base weights (all sectors combined) for the salary and wage rates (including overtime) index and all labour costs index, by published industry group are:
Labour Cost Index |
Base Expenditure Weights by Industry |
June 2001 quarter |
| Industry Group (1) | All Salary and Wage Rates | All Labour Costs |
| Agriculture | 3.3 | 3.2 |
| Forestry and Logging | 0.8 | 0.8 |
| Agriculture, Forestry and Fishing (2) | 4.3 | 4.3 |
| Mining | 0.3 | 0.3 |
| Food, Beverages and Tobacco Mfg | 5.2 | 5.2 |
| Textile and Apparel Manufacturing | 1.1 | 1.1 |
| Wood and Paper Product Mfg | 2.2 | 2.3 |
| Printing, Publishing & Recorded Media | 1.6 | 1.6 |
| Petrol, Coal, Chemical & Assoc Mfg | 1.9 | 1.9 |
| Non-metallic Mineral Product Mfg | 0.6 | 0.6 |
| Metal Product Manufacturing | 2.1 | 2.2 |
| Machinery and Equipment Mfg | 3.7 | 3.6 |
| Furniture and Other Manufacturing | 0.8 | 0.8 |
| Manufacturing (3) | 19.3 | 19.3 |
| Electricity, Gas and Water Supply | 0.6 | 0.6 |
| Construction | 6.0 | 5.9 |
| Wholesale Trade | 7.1 | 7.4 |
| Retail Trade | 7.8 | 7.6 |
| Accommodation, Cafes and Restaurants | 3.1 | 3.0 |
| Transport and Storage | 4.4 | 4.5 |
| Communication Services | 1.6 | 1.6 |
| Finance and Insurance | 4.4 | 4.4 |
| Property and Business Services | 11.5 | 11.3 |
| Central Govt Admin and Defence | 5.8 | 5.9 |
| Local Govt Admin and Defence | 1.4 | 1.4 |
| Government Admin and Defence (4) | 7.2 | 7.3 |
| Education | 8.3 | 9.1 |
| Health & Community Services | 9.1 | 8.7 |
| Cultural & Recreational Services | 2.9 | 2.7 |
| Personal & Other Services | 2.0 | 2.0 |
| All Industries Combined (2) | 100.0 | 100.0 |
(1) Based on the Australian and New Zealand Standard Industrial Classification (ANZSIC96).
(2) Also includes industry A07 (Fishing).
(3) Food, Beverages and Tobacco Mfg, Textile and Apparel Manufacturing, Wood and Paper Product Mfg, Printing, Publishing & Recorded Media, Petrol, Coal, Chemical & Assoc Mfg, Non-metallic Mineral Product Mfg, Metal Product Manufacturing, Machinery & Equipment Mfg, Furniture & Other Manufacturing.
(4) Central Government Administration and Defence and Local Government Administration and Defence.
The December 1992 quarter expression base weights (all sectors combined) for the salary and wage rates (including overtime) index and all labour costs index, by published industry group were:
Labour Cost Index |
Base Expenditure Weights by Industry |
December 1992 quarter |
| Industry Group (1) | All Salary and Wage Rates | All Labour Costs |
| Agriculture | 3.5 | 3.3 |
| Forestry and Logging | 0.4 | 0.4 |
| Mining and Quarrying | 0.4 | 0.4 |
| Food, Beverages and Tobacco | 5.1 | 5.1 |
| Textiles, Apparel and Leather | 1.8 | 1.8 |
| Wood and Wood Products | 1.6 | 1.6 |
| Paper, Printing and Publishing | 2.6 | 2.6 |
| Chemicals, Petroleum and Plastics | 2.1 | 2.2 |
| Non-metallic Mineral Products | 0.6 | 0.6 |
| Basic Metals | 0.7 | 0.7 |
| Machinery and Metal Products | 5.0 | 4.9 |
| All Manufacturing Groups (2) | 19.8 | 19.8 |
| Electricity, Gas and Water | 1.4 | 1.4 |
| Construction | 3.9 | 3.8 |
| Trade, Restaurants and Hotels | 18.1 | 18.1 |
| Transport and Storage | 4.6 | 4.7 |
| Communication | 2.4 | 2.4 |
| Insurance and Financing | 13.5 | 13.4 |
| Community and Personal Services | 5.3 | 5.1 |
| All Market Groups (3) | 73.8 | 73.2 |
| Central Government Services | 21.1 | 21.7 |
| Local Government Services | 2.3 | 2.3 |
| Private Non-profit Services | 2.9 | 2.8 |
| All Non-market Groups (4) | 26.2 | 26.8 |
| All Industries Combined (5) | 100.0 | 100.0 |
(1) New Zealand System of National Accounts industry production groups.
(2) Food, Beverages and Tobacco; Textiles, Apparel and Leather; Wood and Wood Products; Paper, Printing and Publishing; Chemicals, Petroleum and Plastics; Non-metallic Mineral Products; Basic Metals; Machinery and Metal Products; and Other Manufacturing (not published).
(3) Agriculture; Fishing and Hunting (not published); Forestry and Logging; Mining and Quarrying; All Manufacturing Groups; Electricity, Gas and Water; Construction; Trade, Restaurants and Hotels; Transport and Storage; Communication; Insurance and Financing; and Community and Personal Services.
(4) Central Government Services; Local Government Services; and Private Non-profit Services.
(5) All Market Groups; and All Non-market Groups.
Occupation group weights
The expression base weights (all sectors combined) for the salary and wage rates (including overtime) index, by broad published occupation group are:
Labour Cost Index |
Base Expenditure Weights by Occupation |
| Base Expenditure Weight |
| Occupation Group (1) | December 1992 Quarter | June 2001 Quarter |
| Legislators, Administrators & Managers | 16.0 | 20.0 |
| Professionals | 16.5 | 19.8 |
| Technicians and Associate Professionals | 12.2 | 13.4 |
| Managers, Professionals & Technicians (2) | 44.7 | 53.2 |
| Clerks | 15.9 | 12.2 |
| Service and Sales Workers (3) | 9.8 | 9.2 |
| Clerks, Service and Sales Workers (3)(4) | 26.7 | 21.5 |
| Agriculture and Fishery Workers | 4.3 | 3.6 |
| Trades Workers | 10.1 | 8.1 |
| Plant and Machine Operators & Assemblers | 8.8 | 9.2 |
| Elementary Occupations | 5.4 | 4.6 |
| Other Occupations (5) | 28.6 | 25.3 |
| All Occupations Combined | 100 | 100 |
(1) New Zealand Standard Classification of Occupations 1990 (NZSCO99) major groups and New Zealand Standard Classification of Occupations 1999 (NZSCO99) major groups. NZSCO99 was used in the index with the base of the December 1992 quarter and NZSCO99 is now being used in the index with the base of the June 2001 quarter.
(2) Legislators, Administrators and Managers; Professionals; and Technicians and Associate Professionals in both NZSCO90 and NZSCO99.
(3) Clerks; Service and Sales Workers; and Armed Forces (not published).
(4) Agriculture and Fishery Workers; Trades Workers; Plant and Machine Operators
and Assemblers; Elementary Operations.
(5) Managers, Professionals and Technicians; Clerks, Service and Sales Workers; and Other Occupations.
Sector, industry and occupation breakdowns
The Labour Cost Index is published by sector of ownership, by sector and industry, by sector and occupation, and by industry and occupation for all sectors combined.
Sector of ownership groupings comprise the local government sector, central government sector, public sector, private sector, and all sectors combined.
The industry breakdown of the reweighted index, consisting of 27 published industry groups, is based on the Australian and New Zealand Standard Industrial Classification (ANZSIC). The 21 previously published industry groups are New Zealand System of National Accounts production groups, based on the New Zealand Standard Industrial Classification (NZSIC). The ANZSIC-based industry groups are broadly in line with those used for the Producers Price Index.
Occupation groups prior to the reweight were based on the New Zealand Standard Classification of Occupations 1990 (NZSCO90), and comprise one-digit major groups, selected two-digit sub-major groups, and the three broader categories of managers, professionals and technicians; clerks, service and sales workers; and other occupations. Occupation groups are now based on the New Zealand Standard Classification of Occupations 1999 (NZSCO99) and comprise one-digit major groups, selected two-digit sub-major groups, and the three broader categories of managers, professionals and technicians; clerks, service and sales workers; and other occupations.
There are also indexes for these three broad occupation groups within selected industry groups.
Overtime wage rates
Overtime descriptions in the survey represent hours actually worked by employees in excess of the standard working week, in the index base period of the June 2001 quarter. Some of these pay rates have fallen to ordinary time levels in subsequent quarters, with such decreases often being partly or fully offset by related increases in ordinary time wage rates.
The overtime wage rates index measures changes in rates paid for the same number of overtime hours as were worked in the base period. These hours are held constant, and the index is not affected by the varying number of overtime hours that may be worked from quarter to quarter.
Non-wage labour costs
Ordinary time and overtime pay rates are surveyed for a fixed set of job descriptions. However, information relating to non-wage labour costs is collected at a more aggregated level within enterprises. In some cases, employers provide information on non-wage costs at an occupational level, in some cases information relates to broader categories such as "managerial" and "other," but, in general, information relates to all employees at each enterprise.
This is a limitation in that it precludes determination, at a disaggregated occupational level, of the proportions of employees incurring particular non-wage costs. Component costs affected most by this are superannuation, medical insurance and low interest loans. Information relating to motor vehicles available for private use is being collected at the occupational level.
As information on non-wage costs is, in general, being gathered at the enterprise (rather than occupational) level, index series of all labour costs are not being released at the occupational level of disaggregation.
A brief description of the methodology being used to measure changes in each of the component non-wage costs follows.
Annual leave and statutory holidays
Annual leave entitlements and the numbers of employees with each entitlement are surveyed in the June quarter each year. In some cases employers have been able to provide information for particular occupations but in most cases the entitlement used in the index is the average annual number of leave days per employee, as at the survey date. This is added to the number of statutory holidays falling on weekdays in the current calendar year. The total, as a percentage of the number of weekdays in the year is the annual leave proportion, and this is applied to surveyed (ordinary time plus overtime) pay rates in order to determine the cost to employers of annual leave and statutory holidays.
Leave entitlements paid as a percentage of wages are treated as leave day equivalents (e.g. 6 percent as 15 days and 8 percent as 20 days leave).
Changes in pay rates, in actual and average leave entitlements, and in the number of statutory holidays falling on weekdays all influence the index.
Both Waitangi and Anzac Days fell on weekends in 1993 and 1999, whereas Waitangi Day was on a weekday in 1992, thus constituting a paid statutory holiday for the vast majority of employees. Changes in the number of statutory holidays available in a calendar year are reflected in the index for the March quarter of that year. The number of paid statutory holidays in the years since 1992 (inclusive) are:
| Year | Number of paid statutory holidays |
| 1992 | 10 |
| 1993 | 9 |
| 1994 | 10 |
| 1995 | 11 |
| 1996 | 11 |
| 1997 | 11 |
| 1998 | 10 |
| 1999 | 9 |
| 2000 | 10 |
| 2001 | 11 |
| 2002 | 11 |
| 2003 | 11 |
Superannuation
Information is collected on employer contribution rates and employee participation rates. The contribution rate (e.g. 9 percent) is the rate, including withholding tax, at which the employer contributes to the superannuation scheme. The participation rate (e.g. 50 percent) is the proportion of employees belonging to the scheme.
The contribution rate is multiplied by the participation rate and applied to the relevant surveyed salary or ordinary time wage rate, in order to calculate the superannuation cost used in the index. Changes in employer contribution rates, employee participation rates, and pay rates all influence superannuation costs.
The termination of schemes, the closing of schemes to new employees, and superannuation holidays (the term used when operators of defined-benefit schemes exempt employers from contributing for a period of time) all have an impact on the index.
Government Superannuation Fund schemes have been closed to new members from 30 June 1992. Membership of these schemes has been declining through attrition, though some government departments have set up alternative schemes for newer employees.
ACC employer premiums
Accident Compensation Corporation employer premiums are compulsory payments by employers to meet the costs associated with workplace accidents.
Information on industrial activities applicable to respondents' businesses is updated in the June quarter of each year. Updated information on industrial activities and premium class numbers (now called classification unit descriptions and classification unit numbers, respectively) relates to premium rates used by employers to calculate payments on March year salaries and wages, due retrospectively in May.
Changes in employer premium rates are first reflected in the June quarter of each year. As these premium rates relate to salary and wage payments for the previous March year, the index's measure of changes in ACC employer premium costs is, in effect, lagged a year. Also influencing the index are changes in salary and wage rates, as the appropriate premium rates are applied to surveyed (ordinary time plus overtime) pay rates.
No account is taken of employer discount or loading payments under the experience rating system, or of premium rebates under the accredited workplace scheme. There are plans to extend the accredited workplace scheme, which started in 1995, from 39 employers covering 90,000 employees to 89 employers covering 180,000 employees (Dominion, 23 February 1998).
1 July 1999 saw the lead up to deregulation of the provision of workplace accident insurance. Employer premium rates were split into two parts: an ongoing 'residual claims levy' to fund historical injuries and a 'base premium' relating to the 15-month period which ended 30 June 1999. The residual claims levies and base premiums were added together at the disaggregated industry (ie five-digit ACC 'classification unit') level.
From 1 July 2000, the provision of workplace accident insurance was renationalised, with ACC again becoming the sole provider. Under the renationalised scheme, employers continue to pay residual claims levies and they also pay base ACC WorkPlace Cover premiums to cover the costs of ongoing injuries.
There are two optional programmes now offered by ACC: the ACC Workplace Safety Management Practices Programme and the ACC Partnership Programme. Under the latter programme's two options, the Partnership Discount Plan and the Full Self Cover Plan, employers are able to share various levels of risk in return for reductions in base premium rates.
Under both the safety management practices programme and the partnership programme, employers passing safety audits at one of three levels (primary, secondary and tertiary) are eligible for safety management practices discounts of 10, 15 or 20 percent off standard WorkPlace Cover premium rates.
Medical insurance, motor vehicles and loans
The non-wage component of the LCI includes three costs that are subject to fringe benefit tax (FBT). These are:
- Medical insurance
- Motor vehicles available for private use
- Low interest loans
For each of these costs, the taxable value of the benefit and the number of employees are collected in the survey. The taxable value plus FBT and excluding GST is averaged over all employees or specific occupations to give the average cost per employee per week of providing the benefit.
In the case of motor vehicles, average costs are also influenced by changes in the number of days vehicles are made available for private use, and the purchase or lease of new, or disposal of existing, vehicles.
For medical insurance, changes in the level of cover provided by employers influence average costs.
The criterion for assessing whether loans to employees are deemed to be low interest loans and thus liable for fringe benefit tax, is whether loan interest rates fall below the "prescribed interest rate." Changes in the prescribed rate, which is used by employers to calculate the fringe benefit value of low interest loans, influence the index. So do changes in interest rates below this prescribed level at which employers provide loans to employees.
FBT had in the past been calculated as 49 percent of the taxable value. When the top personal tax rate was increased from 33 percent to 39 percent, the FBT rate was increased from 49 percent to 64 percent for fringe benefits provided on or after 1 April 2000. This was enacted in December 1999.
Under legislation enacted in late September 2000, employers were given the choice of either continuing to use the flat 64 percent FBT rate; or opting to use the new multi-rate FBT rules.
The multi-rate FBT regime allows fringe benefits attributed to individual employees to be subject to FBT rates based on the remuneration levels of employees receiving the benefits, thereby reducing the effect of the increase in the FBT rate to 64 percent.
For employers that elected to undertake the multi-rate end-of-year (ie March quarter) 'square-up' for the year to March 2001, benefits attributed to individual employees during the year were subject to FBT rates based on employees' remuneration levels. Employers providing about two-thirds of fringe benefits by value chose the multi-rate option for the year to March 2001. Collectively, these employers significantly reduced their FBT liability. |
There are eight Labour Cost Survey questionnaires:
- Changes to wage and salary rates - WR/LC/03 (
 )
- Number of employees - WR/LC/04 (). The numbers of full-time and part-time employees collected on this questionnaire are used in calculating the average cost per employee per week, for some of the component non-wage costs.
- ACC employer premiums - WR/LC/05 ()
- Superannuation costs - WR/LC/06 ()
- Annual leave entitlements - WR/LC/07 ()
- Medical insurance costs - WR/LC/08 ()
- Motor vehicles available for private use - WR/LC/09 ()
- Low interest loans - WR/LC/10 ()
Respondent details are over-printed on the front pages of questionnaires before they are posted out to respondents.
Output Variables
Output variables are pieces of individual information that can be extracted from the survey/output data. Often output variables can be cross tabulated with other output variables, for example sales by industry classification. The list below contains all current and past output variables which have been released for this survey/output.
| Labour Cost | The Labour Cost Index measures changes in employers' labour costs. Labour costs in the survey are Salary and wage rates, Overtime wage rates, Annual leave and statutory holidays, Superannuation, ACC employer premiums, Medical insurance, Motor vehicles available for private use and Low interest loans. |
| Salary and ordinary time wage rates | This variable measures changes in base salary and ordinary time wage rates. |
| Overtime wage rates | Measures changes in overtime wage rates. |
| All salary and wage rates | Provides an overall measure of changes in pay rates (i.e. Salary and ordinary time wage rates and Overtime wage rates).
|
| Annual leave and statutory holidays | Measures changes in the cost to employers of annual leave and statutory holidays. |
| Superannuation | Measures changes in the cost to employers of contributing towards superannuation schemes for employees.
|
| ACC employer premiums | Measures changes in the cost to employers of ACC employer premiums. |
| Other non-wage labour costs | Measures changes in the cost of providing employees with Medical insurance cover, Motor vehicles available for private use, and Low interest loans. |
| All non-wage labour costs | Provides an overall measure of changes in surveyed non-wage labour costs (i.e. Annual leave and statutory holidays, Superannuation, ACC employer premiums, and Other non-wage labour costs). |
| All labour costs | Provides an overall measure of changes in surveyed labour costs (i.e. All salary and wage rates, and All non-wage labour costs). |
| |
| Sector of Ownership | Organisations are classified to a sector of ownership on the basis of ownership and control. The sectors of ownership used in the Labour Cost Index are based on non-standard aggregations of the New Zealand Standard Institutional Sector Classification (NZISC90).
|
| Local government sector | This sector of ownership covers organisations which are owned or controlled by local government (i.e. by territorial authorities or community organisations with elected boards). It includes city, district and regional councils, local authority trading enterprises (LATEs), port companies, licensing trusts and energy supply companies owned or controlled by councils or community trusts. |
| Central government sector | This sector of ownership covers organisations which are owned or controlled by central government. It includes government departments, quasi government organisations, state schools, polytechnics and universities, public hospitals and state owned enterprises. |
| Public sector | The public sector groups together the Local government sector and the Central government sector. |
| Private sector | This sector of ownership includes:
privately owned and controlled enterprises engaged in producing goods and services which are sold at market prices,
financial intermediaries such as banks,
non-profit organisations such as churches, charities, trade unions and sports clubs.
|
| All sectors combined | This category combines the public and private sectors. |
| |
| Occupation | Publicly available occupation groups are based on the New Zealand Standard Classification of Occupations 1990 (NZSCO99), and comprise one-digit major groups, selected two-digit sub-major groups, and the three broader categories of Managers, professionals and technicians; Clerks, service and sales workers; and Other occupations. A greater range of occupation indexes is calculated than is published and surveyed job descriptions are classified at the five-digit group level, allowing very disaggregated indexes to be calculated (where sample size permits). The following occupation groups are the one-digit major groups and three broader categories.
|
| Armed Forces | NZSCO99 major group 0. Not published. |
| Legislators, Administrators and Managers | NZSCO99 major group 1 |
| Professionals | NZSCO99 major group 2 |
| Technicians and Associate Professionals | NZSCO99 major group 3 |
| Managers, Professionals and Technicians | NZSCO99 major groups 1, 2 and 3 |
| Clerks | NZSCO99 major group 4 |
| Service and Sales Workers | NZSCO99 major group 5 |
| Clerks, Service and Sales Workers | NZSCO99 major groups 4, 5 and 0 |
| Agriculture and Fishery Workers | NZSCO99 major group 6 |
| Trades Workers | NZSCO99 major group 7 |
| Plant and Machine Operators and Assemblers | NZSCO99 major group 8 |
| Elementary Occupations | NZSCO99 major group 9 |
| Other Occupations | NZSCO99 major groups 6, 7, 8 and 9 |
| All Occupations Combined | NZSCO99 major groups 0-9 |
| |
| Industry | The Labour Cost Index industry groups are based on the Australian and New Zealand Standard Industrial Classification (ANZSIC). |
| Agriculture | Production group 1. ANZSIC Major groups 111, 112. |
| Fishing and Hunting | Production group 2. ANZSIC Major group 113, division 13. Not published. |
| Forestry and Logging | Production group 3. ANZSIC division 12. |
| Mining and Quarrying | Production group 4. ANZSIC major division 2. |
| Food, Beverages and Tobacco | Production group 5. ANZSIC division 31. |
| Textiles, Apparel and Leather | Production group 6. ANZSIC division 32. |
| Wood and Wood Products | Production group 7. ANZSIC division 33. |
| Paper, Printing and Publishing | Production group 8. ANZSIC division 34. |
| Chemicals, Petroleum and Plastics | Production group 9. ANZSIC division 35. |
| Non-metallic Mineral Products | Production group 10. ANZSIC division 36. |
| Basic Metals | Production group 11. ANZSIC division 37. |
| Machinery and Metal Products | Production group 12. ANZSIC division 38. |
| Other Manufacturing | Production group 13. ANZSIC division 39. Not published. |
| All Manufacturing Groups | Production groups 5-13 |
| Electricity, Gas and Water | Production groups 14. ANZSIC major division 4. |
| Construction | Production group 15. ANZSIC major division 5. |
| Trade, Restaurants and Hotels | Production group 16. ANZSIC major division 6 . |
| Transport and Storage | Production group 17. ANZSIC division 71. |
| Communication | Production group 18. ANZSIC division 72. |
| Insurance and Financing | Production group 19. ANZSIC major division 8. |
| Community and Personal Services | Production group 21. ANZSIC major division 9, excluding division 91 and group 9530. |
| All Market Groups | Production groups 1-19 and 21 |
| Central Government Services | Production group 22. NZSIC group 9101 plus any other economic activity from NZSIC 111 to 959 which is provided as a government service by a central government organisation. |
| Local Government Services | Production group 23. NZSIC group 9102 plus any other economic activity from NZSIC 111 to 959 which is provided as a government service by a local government organisation. |
| Private Non-profit Services | Production group 24. Activity classified from NZSIC 111 to 959 which is provided by non-profit organisations. In practice, almost all establishments are classified to major division 9. |
| All Non-market Groups | Production groups 1-19 and 21-24 |
| |
| Distribution of increases in surveyed pay rates | Surveyed salary and ordinary time wage rates (and overtime wage rates) are compared with those of the previous quarter and the same quarter of the previous year, and grouped according to whether they decreased, showed no change, or increased. In the case of ordinary time rates, the increases are divided into the following ranges: increases of up to 2 percent, more than 2 but not more than 3 percent, more than 3 but not more than 5 percent, and more than 5 percent.
|
| Average increase | The unweighted arithmetic mean increase of those surveyed salary and ordinary time wage rates that rose from the previous quarter and from the same quarter of the previous year.
|
| Median increase | The unweighted median (i.e. middle) increase of those surveyed salary and ordinary time wage rates that rose from the previous quarter and from the same quarter of the previous year. |
The publicly available INFOS outputs and identifiers follow.
Base: June 2001 quarter (=1000)
Local Government Sector and Industry Group
LCIQ.SE1 is Quarterly |
| Cost | | Industry Group |
| 1 | Salary and Ordinary Time Wage Rates | M2 | Local Government Administration |
| 2* | Overtime Wage Rates | Z9 | All Industries Combined |
| 3 | All Salary and Wage Rates | | |
| 8* | All Non-wage Labour Costs | | |
| 9 | All Labour Costs | | |
| For example, LCIQ.SE13Z9 gives the Local Government Sector index of All Salary and Wage Rates for All Industries Combined. |
| | | |
| | | |
Central Government Sector and Industry Group
LCIQ.SE2 is Quarterly |
| Cost | | Industry Group |
| 1 | Salary and Ordinary Time Wage Rates | | |
| 2* | Overtime Wage Rates | M1 | Central Govt Admin and Defence |
| 3 | All Salary and Wage Rates | N9 | Education |
| 8* | All Non-wage Labour Costs | O9 | Health and Community Services |
| 9 | All Labour Costs | Z9 | All Industries Combined |
Public Sector and Industry Group
LCIQ.SE3 is Quarterly |
| Cost | | Industry Group |
| 1 | Salary and Ordinary Time Wage Rates | D9 | Electricity, Gas and Water |
| 2* | Overtime Wage Rates | M1 | Central Govt Admin and Defence |
| 3 | All Salary and Wage Rates | M2 | Local Govt Administration |
| 4* | Annual Leave and Statutory Holidays | M9 | Govt Administration and Defence |
| 5* | Superannuation | N9 | Education |
| 6* | ACC Employer Premiums | O9 | Health and Community Services |
| 7* | Other Non-wage Labour Costs | Z9 | All Industries Combined |
| 8* | All Non-wage Labour Costs | | |
| 9 | All Labour Costs | | |
| | | |
Private Sector and Industry Group
LCIQ.SE4 is Quarterly |
| Cost | | Industry Group |
| 1 | Salary and Ordinary Time Wage Rates | A1 | Agriculture |
| 2* | Overtime Wage Rates | A2 | Forestry and Logging |
| 3 | All Salary and Wage Rates | A9 | Agriculture, Forestry and Fishing |
| 4* | Annual Leave and Statutory Holidays | B9 | Mining |
| 5* | Superannuation | C0 | Food, Beverages and Tobacco |
| 6* | ACC Employer Premiums | C1 | Textiles & Apparel Manufacturing |
| 7* | Other Non-wage labour Costs | C2 | Wood and Paper Product Manufacturing |
| 8* | All Non-wage Labour Costs | C3 | Printing, Publishing and Recoeded Media |
| 9 | All Labour Costs | C4 | Petrol, Coal, Chemical and Assoc Mfg |
| | C5 | Non-metallic Mineral Product Mfg |
| | C6 | Metal Product Manufacturing |
| | C7 | Machinery and Equipment Manufacturing |
| | C8 | Furniture and Other Manufacturing |
| | C9 | Manufacturing |
| | D9 | Electricity, Gas and Water Supply |
| | E9 | Construction |
| | F9 | Wholesale Trade |
| | G9 | Retail Trade |
| | H9 | Accommodation, Cafes and Restaurants |
| | I9 | Transport and Storage |
| | J9 | Communication Services |
| | K9 | Finance and Insurance |
| | L9 | Property and Business Services |
| | N9 | Education |
| | O9 | Health and Community Services |
| | P9 | Cultural and Recreational Services |
| | Q9 | Personal and Other Services |
| | Z9 | All Industries Combined |
All Sectors Combined and Industry Group
LCIQ.SE5 is Quarterly |
| Cost | | Industry Group |
| 1 | Salary and Ordinary Time Wage Rates | A1 | Agriculture |
| 2* | Overtime Wage Rates | A2 | Forestry and Logging |
| 3 | All Salary and Wage Rates | A9 | Agriculture, Forestry and Fishing |
| 4* | Annual Leave and Statutory Holidays | B9 | Mining |
| 5* | Superannuation | C0 | Food, Beverages and Tobacco |
| 6* | ACC Employer Premiums | C1 | Textiles & Apparel Manufacturing |
| 7* | Other Non-wage Labour Costs | C2 | Wood and Paper Product Manufacturing |
| 8* | All Non-wage Labour Costs | C3 | Printing, Publishing and Recoeded Media |
| 9 | All Labour Costs | C4 | Petrol, Coal, Chemical and Assoc Mfg |
| | C5 | Non-metallic Mineral Product Mfg |
| | C6 | Metal Product Manufacturing |
| | C7 | Machinery and Equipment Manufacturing |
| | C8 | Furniture and Other Manufacturing |
| | C9 | Manufacturing |
| | D9 | Electricity, Gas and Water Supply |
| | E9 | Construction |
| | F9 | Wholesale Trade |
| | G9 | Retail Trade |
| | H9 | Accommodation, Cafes and Restaurants |
| | I9 | Transport and Storage |
| | J9 | Communication Services |
| | K9 | Finance and Insurance |
| | L9 | Property and Business Services |
| | M01 | Central Govt Admin and Defence |
| | M02 | Local Govt Administration |
| | M9 | Govt Administration and Defence |
| | N9 | Education |
| | O9 | Health and Community Services |
| | P9 | Cultural and Recreational Services |
| | Q9 | Personal and Other Services |
| | Z9 | All Industries Combined |
* Series for these costs exist only for All Industries Combined (Industry Group Z9).
Local Government Sector and Occupation Group
LCIQ.SF1 is Quarterly |
| Cost | | Occupation Group |
| 1 | Salary and Ordinary Time Wage Rates | D9 | Managers, Professionals and Technicians |
| 2** | Overtime Wage Rates | G9 | Clerks, Service and Sales Workers |
| 3 | All Salary and Wage Rates | L9 | Other Occupations |
| | Z9 | All Occupations Combined |
| | | |
| | | |
Central Government Sector and Occupation Group
LCIQ.SF2 is Quarterly |
| Cost | | Occupation Group |
| 1 | Salary and Ordinary Time Wage Rates | D9 | Managers, Professionals and Technicians |
| 2** | Overtime Wage Rates | G9 | Clerks, Service and Sales Workers |
| 3 | All Salary and Wage Rates | L9 | Other Occupations |
| | Z9 | All Occupations Combined |
| | | |
| | | |
Public Sector and Occupation Group
LCIQ.SF3 is Quarterly |
| Cost | | Occupation Group |
| 1 | Salary and Ordinary Time Wage Rates | A9 | Legislators, Administrators and Managers |
| 2** | Overtime Wage Rates | B9 | Professionals |
| 3 | All Salary and Wage Rates | C9 | Technicians and Associate Professionals |
| | D9 | Managers, Professionals and Technicians |
| | E9 | Clerks |
| | F9 | Service and Sales Workers |
| | G9 | Clerks, Service and Sales Workers |
| | H9 | Agriculture and Fishery Workers |
| | I9 | Trades Workers |
| | J9 | Plant and Machine Operators and Assemblers |
| | K9 | Elementary Occupations |
| | L9 | Other Occupations |
| | Z9 | All Occupations Combined |
| | | |
Private Sector and Occupation Group
LCIQ.SF4 is Quarterly |
| Cost | | Occupation Group |
| 1 | Salary and Ordinary Time Wage Rates | A9 | Legislators, Administrators and Managers |
| 2** | Overtime Wage Rates | B9 | Professionals |
| 3 | All Salary and Wage Rates | C9 | Technicians and Associate Professionals |
| | D9 | Managers, Professionals and Technicians |
| | E9 | Clerks |
| | F9 | Service and Sales Workers |
| | G9 | Clerks, Service and Sales Workers |
| | H9 | Agriculture and Fishery Workers |
| | I9 | Trades Workers |
| | J9 | Plant and Machine Operators and Assemblers |
| | K9 | Elementary Occupations |
| | L9 | Other Occupations |
| | Z9 | All Occupations Combined |
All Sectors Combined and Occupation Group
LCIQ.SF5 is Quarterly |
| Cost | | Occupation Group |
| 1 | Salary and Ordinary Time Wage Rates | A9 | Legislators, Administrators and Managers |
| 2** | Overtime Wage Rates | B1 | Physical, Mathematical and Engineering Science Professionals |
| 3 | All Salary and Wage Rates | B2 | Health Professionals |
| | B3 | Teaching Professionals |
| | B5 | Other Professionals |
| | B9 | Professionals |
| | C1 | Physical Science and Engineering Associate Professionals |
| | C2 | Other Associate Professionals |
| | C9 | Technicians and Associate Professionals |
| | D9 | Managers, Professionals and Technicians |
| | E3 | Office Clerks |
| | E4 | Customer Services Clerks |
| | E9 | Clerks |
| | F1 | Personal and Protective Services Workers |
| | F2 | Salespersons, Demonstrators and Models |
| | F9 | Service and Sales Workers |
| | G9 | Clerks, Service and Sales Workers |
| | H9 | Agriculture and Fishery Workers |
| | I3 | Building Trades Workers |
| | I5 | Metal and Machinery Trades Workers |
| | I9 | Trades Workers |
| | J1 | Industrial Plant Operators |
| | J2 | Stationary Machine Operators and Assemblers |
| | J4 | Drivers and Mobile Machinery Operators |
| | J9 | Plant and Machine Operators and Assemblers |
| | K9 | Elementary Occupations |
| | L9 | Other Occupations |
| | Z9 | All Occupations Combined |
** Series for this cost exist only for All Occupations Combined (Occupation Group Z9).
All Sectors Combined, Industry Group and Occupation Group
Base: December 1999 quarter (=1000)
LCIQ.SD5 is Quarterly |
| Cost | | Industry Group | | |
| | | | | |
| 3 | All Salary and Wage Rates | Z9 | All Industries Combined | | |
 Discontinued Series
Changes in Output Variables over time
Guide to Interpreting Data
Summary of Changes to Survey/Output ..Labour Cost Index replaced Prevailing Weekly Wage Rates Index
In 1993, the Labour Cost Index replaced the Prevailing Weekly Wage Rates Index (PWWRI). For 15 years the PWWRI measured movements in ordinary time wage and salary rates being paid to full-time adult employees. The index measured movements in pay rates of people covered by awards and agreements registered with the Arbitration Commission. About 60 percent of the paid workforce was covered by these awards and agreements.
When the Employment Contracts Act came into effect in May 1991, the award system and the Arbitration Commission were abolished. This had major implications for the index. Clearly, there was a need to redefine coverage of the index if it was to continue and remain relevant.
The year before the Employment Contracts Act came into effect, a committee of major users met to review the range of macroeconomic statistics produced by Statistics New Zealand. The committee noted that "an evolving trend for employee compensation packages to increasingly include non-wage and salary benefits" was not being measured in existing wage rate statistics, and recommended development of an index of total employment costs.
In order to implement the committee's recommendation and at the same time address the need to redefine coverage of the Prevailing Weekly Wage Rates Index, it was decided to use the wage rates index as a basis for the development of the Labour Cost Index.
The PWWRI was last published for the June 1993 quarter, providing a three-quarter overlap with the Labour Cost Index, which started with indexes for the December 1992 quarter.
Two releases per quarter
Until the September 1994 quarter (inclusive), full Labour Cost Index results were released in the third month after the end of the reference quarter.
From the June 1994 quarter to the June 1999 quarter, there were two releases per quarter; salary and wage rate indexes were released by the 23rd of the second month after the end of the reference quarter, and the non-wage and overall labour cost indexes were released in the third month after the end of the reference quarter (by the 14th, until the March 1997 quarter; and by the 23rd, from the June 1997 quarter onwards).
From the June 2000 quarter onwards, the salary and wage rates indexes are still released quarterly, however the indexes of non-wage labour costs and all labour costs are available for only the June quarter of each year.
Calculation rebases
The index's calculation base is periodically updated to reflect changes in the sector of ownership of organisations. There have been four calculation rebases to date. The calculation base periods have been the December 1992 quarter, the September 1993 quarter, the September 1995 quarter, the December 1996 quarter and the December 2003 quarter.
Usage and Limitations of the Data ..Some benefits of the index
The Labour Cost Index provides employers, employer organisations, employees and employee organisations with an economy-wide measure of changes in pay rates and non-wage labour costs.
The index measures changes in labour costs at a sector, sector by industry, sector by occupation, and industry by occupation level, providing users with a level of detail to meet most requirements.
The salary and wage rates index is a quality-controlled measure which provides a “pure” indicator of changes in pay rates not affected by compositional changes such as industry employment shifts.
The index quantifies the impact on employers’ labour costs of changes in the labour market such as the emergence of skill shortages, the trading off of overtime rates, shifts between non-wage and wage remuneration, and the impact of economic growth, consumer inflation, and changes in government charges such as in ACC employer premium rates.
The index provides information on the distribution of changes in pay rates (such as what proportion remain unchanged on an annual basis, what proportion increase by up to 2 percent, etc.
The index provides information on the composition of labour costs (i.e. what proportion of costs is made up of salary and wage rates, and each of the non-wage labour costs).
Some uses of the index
The index is used in wage negotiations.
The index is used in contract escalation clauses (also referred to as cost fluctuation adjustment clauses). In these, the salary and wage rates index or the all labour costs index for the appropriate industry (or occupation) group is used together with the corresponding Producers Price Inputs Index (which measures movements in the price of non-labour production costs), to determine an appropriate cost fluctuation adjustment.
This allows both parties to a contract to have an agreed procedure for adjusting the originally tendered price, therefore compensating the party providing the goods and services for ongoing changes in labour and non-labour input costs.
The index is used by economic forecasters and policy makers to monitor and forecast wage movements. The Reserve Bank uses the Labour Cost Index, in conjunction with the Quarterly Employment Survey, to monitor and forecast changes in unit labour costs and nominal wage inflation, which feed into monetary policy settings.
The index is used within Statistics New Zealand, such as in the National Accounts, in the Producers Price Index and in calculating the now discontinued Real Wage Rate Index (which adjusted changes in pay rates for changes in tax rates and consumer prices).
Some limitations of the index
The index excludes irregular salary and wage payments such as irregular bonuses, commissions and one-off payments in lieu of wage increases.
The index excludes performance-based increases in salaries and wages, promotions and service increments.
There are no regional or gender breakdowns.
There is no information available on the average dollar value of wages. This is because the sample is not randomly selected, is relatively small and is designed to measure changes not levels.
Related Data Sources ..Related measures include:
The Quarterly Employment Survey, which measures average weekly and hourly earnings.
The Producers Price Input and Output Indexes. The input indexes measure changes in the price of production costs, excluding labour and depreciation costs. The output indexes measure changes in prices received by producers.
The Capital Goods Price Index, which measures changes in the prices of fixed capital assets.
The Consumers Price Index, which measures changes in the prices of goods and services purchased by private New Zealand households.
The Real Wage Rate Index, which, until discontinued after publication of the index for the September 1996 quarter, measured changes in nominal pay rates, adjusted for changes in consumer prices and changes in tax rates and benefits available to wage and salary earners.
Sampling Errors ..Sampling error is a measure of the variability that occurs by chance because a sample rather than an entire population is surveyed.
The Labour Cost Index sample was not selected statistically, so sampling errors can not be calculated. The sample of employers in the Labour Cost Survey was selected purposively. This means that judgement, rather than statistical sampling techniques, was used to select a sample of employers in each relevant industry group, within each sector of ownership (central government, local government and private). Care was taken to select a range of small, medium and large organisations, in a range of regional locations.
Employers were asked, on a best-guess basis, whether they had employees in specific occupations. For occupations where this was the case, respondents selected individual employees to report on.
Non-sampling errors Non-sampling errors which have the potential to affect the index include those arising from non-response, inaccuracies in reporting by respondents and inaccuracies in processing responses.
Caveats on Release ..The index excludes irregular salary and wage payments such as irregular bonuses, commissions and one-off payments in lieu of wage increases.
The index also excludes performance-based increases in salaries and wages, promotions and service increments.
The salary and wage rates (including overtime) index reflects the overall impact of any trading off of overtime wage rates.
Any change in the number of paid statutory holidays in a year is reflected in the index for the March quarter of that year.
Changes in ACC employer premium rates are first reflected in the June quarter of each year. As these premium rates relate to salary and wage payments for the previous March year, the index's measure of changes in ACC employer premium costs is, in effect, lagged a year. No account is taken of employer discount or loading payments under the experience rating system, or of premium rebates under the accredited workplace scheme.
Customised Output
There is a wider range of occupation indexes calculated than that which is publicly available on INFOS.
As each job description in the survey is classified to the New Zealand Standard Classification of Occupations (NZSCO99) at the five-digit level, disaggregated occupation indexes can be prepared to meet specific needs, subject to sample size.
More detailed information on the distribution of annual movements in surveyed pay rates than appears in Table 5 of the salary and wage rates Hot Off The Press can be prepared.
Catalogue & Reference Numbers
Other Comments
Classification(s) used
Glossary of Terms
| Term | Description |
| |
| Labour costs | Labour costs represent the costs incurred in employing labour. Conceptually, they cover:
- wage and non-wage labour costs
- costs for time worked and time not worked
and extend to such costs as recruitment and training costs. |
| Surveyed labour costs | The term surveyed labour costs refers to the range of wage and non-wage labour costs included in the Labour Cost Index. The costs which are included are salary and ordinary time wage rates, overtime wage rates, annual leave and statutory holidays, ACC employer premiums, superannuation, medical insurance, motor vehicles available for private use and low interest loans. |
| Sector (of ownership) | Each organisation in the Labour Cost Survey is classified to the central government, local government or private sector of ownership, based on ownership or control of the organisation. The Labour Cost Index's calculation base is periodically updated to reflect changes in the sector of ownership of organisations (most notably, the sale of state owned enterprises to private sector interests). |
| Occupation | Job descriptions in the Labour Cost Survey are classified at the five-digit level to the New Zealand Standard Classification of Occupations 1990 (NZSCO99). The classification groups occupations into 10 broad skill-based major groups. |
| Industry | Organisations in the Labour Cost Survey are classified to one of 27 New Zealand System of National Accounts production groups, which are based on the Australian and New Zealand Standard Industrial Classification (ANZSIC). |
| Market groups | Industry groups that comprise profit-oriented organisations which operate in the market are grouped together into an aggregation of all market industry groups. |
| Non-market groups | Non-trading organisations that provide services at little or no charge and are funded by general taxation, donations or subscriptions are grouped together as all non-market industry groups. Organisations in the three component non-market groups provide central government services, local government services and private non-profit services. |
| Job description | Each position in the Labour Cost Survey has a job description which, typically, specifies the job title, tasks and duties, hours worked, years’ service, qualifications, unit of measure (e.g. per week), and possibly an employee name or number, and/or a point on a salary or wage scale. Each job description is classified to the New Zealand Standard Classification of Occupations 1990 (NZSCO99), at the five-digit level. Each job description was assigned a weight which reflected the relative importance of the job description within its sector of ownership, industry and occupation group. |
| Salary and ordinary time wage rates | This component of the Labour Cost Index covers gross base salaries (usually surveyed in per annum, per month, per fortnight or per week form) and base ordinary rime wage rates (usually surveyed in per hour or per week form). Some regular, fixed taxable allowances, some penal rates and some regular, fixed bonuses (such as production bonuses) are included. Commissions and irregular payments are excluded. In the index's expression base period, salary and ordinary time wage rates accounted for 81.33 percent of the overall expenditure on surveyed labour costs. |
| Overtime wage rates | This component of the Labour Cost Index covers overtime wage rates. Overtime descriptions in the survey represent hours actually worked by employees in excess of the standard working week, in the index base period of the June 2001 quarter. Some of these pay rates have fallen to ordinary time levels in subsequent quarters, with such decreases often being partly or fully offset by related increases in ordinary time wage rates. The overtime wage rates index measures changes in rates paid for the same number of overtime hours as were worked in the base period. These hours are held constant, and the index is not affected by the varying number of overtime hours that may be worked from quarter to quarter. In the index's expression base period, overtime wage rates accounted for 2.36 percent of the overall expenditure on surveyed labour costs. |
| All salary and wage rates | This component of the Labour Cost Index covers salary and wage rates, including overtime (i.e. it covers base salaries, ordinary time wage rates and overtime wage rates). It measures the overall impact of any trading off of overtime wage rates. In the index's expression base period, salary and wage rates (including overtime) accounted for 83.69 percent of the overall expenditure on surveyed labour costs. |
| Quality control | The salary and wage rates component of the Labour Cost Index is a quality-controlled measure. This involves keeping the quantity and quality of labour input fixed, so that the index measures only “pure” price change. Quality-control procedures are used to remove the effect of changes in reported salaries and wages which are due in part or in full to changes in the amount of time worked or to changes in the quality of work. |
| Irregular payment | Irregular payments such as annual bonuses are excluded from the Labour Cost Index, as these payments are usually performance-based. |
| Performance-related payment | Performance-related salary and wage payments such as annual performance bonuses and performance-related changes in base salary and wage rates are not included in the Labour Cost Index as they represent changes in quality, not changes in price. |
| One-off payment | One-off salary and wage payments such as payments in lieu of pay increases or payments to induce employees to accept reduced conditions are excluded from the Labour Cost Index, as they do not result in changes to pay rates, as such.
|
| Service increment | A service increment involves an increase in salary or wage based on an increase in the number of years’ service. Service increments are not reflected in the index, as they are considered to represent a change in quality, not a change in price. |
| Merit promotion | Increases in salaries and wages which are the result of merit promotions are not reflected in the index, as they are considered to represent a change in quality, not a change in price. |
| Cost of living | Changes in salaries and wages to reflect the cost of living are treated as changes in price and are reflected in the index. |
| Match market rates | Changes in salaries and wages to match market rates are considered to represent price change and are reflected in the index. |
| Retain or attract staff | Changes in salaries and wages to retain or attract staff are considered to represent price change and are reflected in the index. |
| Profitability | Changes in salaries and wages which are the result of changes in the profitability of the organisation are reflected in the index. |
| Ordinary time/overtime trade-off | Some contract negotiations in recent years have resulted in time in excess of the standard working week being worked at lower premiums than in the past (e.g. at time and a quarter, not time and a half) or at a flat rate (i.e. all hours worked are now paid at the same rate). Such trade-offs often involve a partly or fully compensating increase in ordinary time wage rates. |
| Flat rate | Some contract negotiations in recent years have resulted in time in excess of the standard working week that was previously worked at overtime wage rates (such as double time or time and a half) being worked at a flat rate (i.e. all hours worked are now paid at the same rate). |
| Cashing up a non-wage benefit | If an employee cashes up the value of a non-wage benefit such as medical insurance cover (i.e. he or she now receives the value of the benefit in cash form as part of a salary or wage), this is reflected in the index, providing the non-wage benefit is being surveyed from the same organisation. |
| Non-wage labour costs | Non-wage labour costs include benefits provided in non-cash form (such as medical insurance cover) and payments for time not worked (e.g. paid annual leave). The non-wage labour costs included in the Labour Cost Index are annual leave and statutory holidays, ACC employer premiums, superannuation, medical insurance, motor vehicles available for private use and low interest loans. In the index's expression base period, non-wage labour costs accounted for 16.31 percent of the expenditure on surveyed labour costs. |
| Other non-wage labour costs | This component of the Labour Cost Index groups together the three fringe benefit tax related non-wage labour costs in the survey (i.e. medical insurance, motor vehicles available for private use and low interest loans). In the index's expression base period, other non-wage labour costs accounted for 1.83 percent of the overall expenditure on surveyed labour costs. |
| ACC employer premiums | Accident Compensation Corporation employer premiums are compulsory levies paid by employers and collected by Inland Revenue on behalf of the Accident Rehabilitation and Compensation Insurance Corporation to cover the cost of workplace accidents. They are paid annually by 31 May in respect of March year salaries and wages. Changes in employer premium rates are first reflected in the June quarter index of each year. As these premium rates relate to salary and wage payments for the previous March year, the index's measure of changes in ACC employer premium costs is, in effect, lagged a year. Also influencing the index are changes in salary and wage rates, as the appropriate premium rates are applied to surveyed (ordinary time plus overtime) pay rates. In the index's expression base period, ACC employer premium costs accounted for 1.63 percent of the overall expenditure on surveyed labour costs. |
| ACC employer premium rates | The rates per $100 of liable gross earnings paid by employers to cover the cost of workplace accidents. |
| Classification unit numbers | Organisations classify their businesses to relevant classification unit(s) of industrial activity. The classification unit numbers and descriptions, administered by ACC, are based on the Australian and New Zealand Standard Industrial Classification (ANZSIC). Premium rates reflect the risk of workplace accidents for organisations in similar industries. |
| ACC earner premiums | ACC earner premiums are compulsory levies paid by the employed to cover the cost of non-work accidents. They are included in the gross salary and wage rates collected in the Labour Cost Survey. |
| Annual leave and statutory holidays | Annual leave entitlements and the numbers of employees with each entitlement are surveyed each quarter, allowing calculation of the average annual number of leave days per employee. This is added to the number of statutory holidays falling on weekdays in the current calendar year. The total, as a percentage of the number of weekdays in the year (i.e. 261), is the annual leave proportion, and this is applied to surveyed (ordinary time plus overtime) pay rates in order to determine the cost to employers of annual leave and statutory holidays. In the index's expression base period, annual leave and statutory holiday costs accounted for 11.49 percent of the overall expenditure on surveyed labour costs. |
| Annual leave entitlement | The annual leave entitlement of employees (e.g. 17 days), including departmental, company and recreational holidays. |
| Statutory holiday | There are nine, 10 or 11 paid public holidays each year, depending on whether Waitangi and ANZAC Days fall on weekdays. Waitangi and ANZAC Days are on fixed dates and sometimes fall on weekends. Changes in the number of statutory holidays available in a calendar year are reflected in the index for the March quarter of that year. |
| Annual leave proportion | The average annual number of leave days per employee plus the number of statutory holidays falling on weekdays in the current calendar year, expressed as a percentage of the number of weekdays in the year (i.e. 261). |
| Superannuation | Employer contributions to superannuation schemes for employees are subject to withholding tax of 33 percent. The superannuation contribution rate (including withholding tax) is multiplied by the participation rate and applied to the relevant salary or ordinary time wage rate in order to calculate the superannuation cost used in the index. In the index's expression base period, superannuation costs accounted for 1.37 percent of the overall expenditure on surveyed labour costs.
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| Superannuation contribution rate | The rate at which employers contribute towards superannuation schemes for employees. Contributions are usually in terms of a percentage of gross ordinary time (or total) earnings (e.g. 6 percent, including withholding tax) or a flat dollar amount (e.g. $20 per week). |
| Superannuation participation rate | The superannuation participation rate is calculated as the full-time equivalent number of employees receiving an employer superannuation contribution divided by the total full-time equivalent number of employees (e.g. 50 percent). |
| GSF | Government Superannuation Fund schemes were closed to new members from 30 June, 1992. |
| Defined-contribution scheme | Superannuation scheme in which contributions are defined and benefits depend on scheme performance. |
| Defined-benefit scheme | Superannuation scheme in which benefits are defined (usually as a percentage of final salary) and contributions are subject to ongoing actuarial review and depend on scheme performance. |
| Superannuation holiday | The term used when an employer contributing to a defined-benefit scheme is exempted from contributing for a period of time. |
| Fringe benefit tax (FBT) | Non-wage benefits received by employees are subject to fringe benefit tax. Under legislation enacted in late September 2000, employers were given the choice of either continuing to use the flat 64 percent FBT rate; or opting to use new multi-rate FBT rules.
The multi-rate FBT regime allows fringe benefits attributed to individual employees to be subject to FBT rates based on the remuneration levels of employees receiving the benefits, thereby reducing the effect of the increase in the FBT rate to 64 percent. |
| Taxable value | The value of the non-wage benefit received by employees that is subject to fringe benefit tax is deemed to be the taxable value. Fringe benefit tax is levied on the GST-inclusive value of the benefit. |
| GST | Most non-wage benefits subject to fringe benefit tax are also subject to goods and services tax (GST), which is levied at the rate of 12.5 percent. An exception is low interest loans, which are not subject to GST. |
| Medical insurance | Providing employees (and dependants) with medical insurance cover is subject to fringe benefit tax. The taxable value of the benefit is deemed to be the GST-inclusive employer contribution towards medical insurance premiums. The taxable value of the benefit plus fringe benefit tax and excluding GST is averaged over all employees or specific occupations, to give the average medical insurance cost per employee per week. In the index's expression base period, medical insurance accounted for 0.28 percent of the overall expenditure on surveyed labour costs. |
| Motor vehicles available for private use | Providing employees with motor vehicles for private use is deemed to be a benefit which is subject to fringe benefit tax. The taxable value of the benefit is 6 percent of the original cost of the vehicle per quarter, adjusted for the number of days during the quarter, if any, in which the vehicle was not available for private use. The taxable value of the benefit plus fringe benefit tax and excluding GST is averaged over employees in specific occupations, to give the average cost per employee per week of providing motor vehicles for private use. In the index's expression base period, motor vehicles available for private use accounted for 1.52 percent of the overall expenditure on surveyed labour costs.
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| Available days | Days in which a vehicle is available for private use by an employee. If a manager provided with a vehicle for private use is away overseas and the vehicle is not available for private use during the time of the trip, the relevant days are exempt from fringe benefit tax. |
| Low interest loans | Loans to employees at interest rates which are lower than the “prescribed interest rate” are deemed to be low interest loans, which are subject to fringe benefit tax. The value of the benefit is deemed to be the margin below the prescribed interest rate at which employees are provided with loans. The taxable value of the benefit plus fringe benefit tax is averaged over all employees or specific occupations, to give the average low interest loan cost per employee per week. In the index's expression base period, low interest loans accounted for only 0.02 percent of the overall expenditure on surveyed labour costs.
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| Prescribed interest rate | The interest rate, prescribed by regulation, below which loans to employees are deemed to be low interest loans which are subject to fringe benefit tax. The prescribed rate, based on market rates, is periodically reviewed and, if changed, applies from the first day of the calendar quarter. |
| Laspeyres index | The Laspeyres index formula used in the Labour Cost Index measures the change in the cost to employers of purchasing the same basket of labour input as was purchased in the base period. Quantities are held fixed at base period levels – in the context of a labour cost index this means keeping the numbers of employees in occupations and industries fixed, the numbers of hours worked by employees fixed and the quality of labour input fixed. The price-relative form of the Laspeyres index formula is used in calculating the Labour Cost Index. |
| Price relative | The price for the current period divided by the price for the base period (i.e. a price movement in ratio form). For example, a price relative of 1.05 indicates that the price in the current period is 5 percent higher than in the base period. A price relative of 0.95 indicates that the price in the current period is 5 percent lower than in the base period. |
| Expenditure | The expenditure, in dollar terms, on a good or service. In the context of a labour cost index, an expenditure is the amount spent by employers on labour costs, or on a specific labour cost such as ACC employer premiums. |
| Weight (or expenditure weight) | An expenditure weight reflects the relative importance of expenditure on a good or service in relation to expenditure on other goods or services. In the Labour Cost Index, the expenditure weight of the salary and wage rates component, expressed in percentage terms, is 83.69 percent and the weight of the non-wage labour costs component is 16.31 percent. A given percentage increase in salary and wage rates has nearly five times the effect on the index of all labour costs as the same percentage change in non-wage costs, as the expenditure weight for salary and wage rates is nearly five times that for non-wage labour costs. |
| Expression base | The expression base period is the period for which the index number of a series is set to 1000. Currently, the expression base period used for the Labour Cost Index series is the June 2001 quarter (=1000). |
| Calculation base | The calculation base period is the period with which prices for the current period are compared when calculating the index for the current period. Resulting price relatives between the calculation base and current period are weighted by expenditure weights applying at the calculation base period. The calculation base period is usually the same as, or more recent than, the expression base period. Labour Cost Index calculation base periods to date have been the December 1992 quarter, the September 1993 quarter, the September 1995 quarter and the December 1996 quarter. |
| Points effect | This is the term given to the number of index points that a component of a wider index caused the wider index to move by. For example, the index of all labour costs may have increased from one quarter to the next by 5 index points. Salary and wage rates may have made an upward contribution of 4 index points and non-wage labour costs may have accounted for the remaining 1 index point. The index point contributions of the components to the wider index may be upward or downward and they add to the change (in index points) of the wider index. The contribution of a component to a change in a wider index is dependent on both the size of the percentage change for the component and the relative weight of the component. |
| Percentage contribution | This is the term given to the number of index points that a component of a wider index caused the wider index to move by, divided by the number of index points that the wider index moved by in total, expressed as a percentage. For example, the index of all labour costs may have increased from one quarter to the next by 5 index points. Salary and wage rates may have made an upward contribution of 4 index points and non-wage labour costs may have accounted for the remaining 1 index point. Therefore, the increase in salary and wage rates accounted for 80 percent of the increase in labour costs and the rise in non-wage labour costs accounted for the remaining 20 percent. The percentage contributions of the components of the wider index may be upward or downward, and add to 100 percent. Percentage contributions can not be calculated if the wider index shows no change. The percentage contribution of a component to a change in a wider index is dependent on both the size of the percentage change for the component and the relative weight of the component. |
| Paid employee | The Labour Cost Index covers paid employees, aged 15 years and over. It does not cover the self-employed or independent contractors. A paid employee usually has an employment contract (of service) to the effect that the person is an employee, has PAYE tax deducted by the employer, and is entitled to paid leave or holiday pay, paid statutory holidays, paid sick leave and the statutory minimum wage rate. Control is exercised over when and how the person's work is done. |
| Self-employed | The self-employed and independent contractors are not covered by the index. The self-employed provide their own tools or equipment, are able to hire and fire staff, control when and how work is done and are responsible for profits and face financial risk. The self-employed undertake contracts for services and are paid GST-inclusive fees. |
| Full-time | Full-time paid employees regularly work 30 or more hours per week. |
| Part-time | Part-time paid employees regularly work fewer than 30 hours per week. |
| Full-time equivalent | Index weights were based on the number of full-time equivalent employees, and the average costs per week for superannuation, medical insurance, motor vehicles available for private use and low interest loans are calculated as averages per full-time equivalent employee. Part-time employees are converted to full-time equivalents by multiplying the number of part-time employees by the ratio of the average number of hours worked per week by part-time employees in their main job, to 40 (from the 1991 Census). |
| Contract escalation clause | The Labour Cost Index is widely used by the business community in commercial contract escalation clauses. In these, the salary and wage rates index or the all labour costs index for the appropriate industry (or occupation) group is used together with the corresponding Producers Price Inputs Index (which measures movements in the price of non-labour production costs), to determine an appropriate cost fluctuation adjustment. This allows both parties to a contract to have an agreed procedure for adjusting the originally tendered price, therefore compensating the party providing the goods and services for ongoing changes in labour and non-labour input costs. |
| Population Census | In the five-yearly Census of Population and Dwellings, employed people are asked to indicate their status in employment (i.e. whether self-employed or paid employee), their occupation, the main activity and name and address of their workplace. Answers to these questions allow numbers of employees in each occupation within each industry within each sector of ownership to be determined. The mix of occupations in each industry within each sector of ownership from the 2001 Census was used, along with information from Statistics New Zealand's Business Frame and information obtained from government departments, in determining Labour Cost Index weights. |
| Business Frame | Statistics New Zealand's register of businesses. The Business Frame, which is updated by way of the Annual Business Frame Update Survey, is used as a sampling frame for selecting survey samples and is a source of structural information about businesses. |
| INFOS | Statistics New Zealand's on-line database of publicly available statistical time series. The Labour Cost Index series have INFOS identifiers which start with LCIQ.S. |
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Statistics New Zealand gives no warranty that the information or data supplied contains no errors. However, all care and diligence has been used in processing, analysing and extracting the information. Statistics New Zealand shall not be liable for any loss or damage suffered by the customer consequent upon the use directly, or indirectly, of the information supplied in this product.
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