Index of Labour Costs per Hour (ILCH)

The Index of Labour Costs per Hour (ILCH) is an experimental quarterly measure to estimate the changes in the cost incurred for an hourly unit of labour provided by an employee to an employer. It is calculated using information based on the Monthly Wages and Salaries Survey, which samples 8,500 firms in Great Britain.

It is produced by the Office for National Statistics (ONS) and provides a key measure of inflation, alongside the established indicator, the Average Earnings Index, and the experimental Average Weekly Earnings measure. It is produced to European standard definitions and enables international comparison of labour costs.

The ILCH extends the scope of existing earnings indicators. As well as including wages and salaries, the Index of Labour Costs per Hour also includes employer social contributions; National Insurance and pensions, sickness, maternity and paternity payments and benefits in kind (which includes company cars, company mobile phones and accommodation).

The ILCH is the first earnings per hour measure produced by ONS, and provides information on the cost of labour, per hour worked, removing the effects of changes in work patterns. As it is a per hour measure, it is more sensitive to movements in the amount of time employees are working and hence more representative of the real change in the cost of labour.

The ILCH reflects changes in wages and salaries, non-wage costs, and the quantity of hours worked over time and will assist users in monitoring inflationary pressures emanating from the labour market.

Movements in labour costs are weighted to reflect the relative importance of the costs in a given year (the 'base year' is currently 2000, although the weights used in the ILCH are updated annually) and are then aggregated for each of the individual industries within each industrial sector and within the whole economy. The resulting indices show overall labour cost movements, relative to the base year. The whole economy and sector series are derived by weighting together the cost indices to reflect the relative size of the companies in each industry.

Series are published for the whole economy, private and public sectors, manufacturing, production, services and private sector services. Series are also available at a more detailed industry level.