The Index of Labour Costs per Hour (ILCH) is a measure of the cost of having an employee for an hour of work. It represents the total cost of employing an individual, which is primarily the earnings of the employee, but also includes non-wage costs. It is also known as the Labour Costs Index (LCI); the index is produced by all member countries of the EU and collated by Eurostat. Four versions of ILCH are calculated for each aggregate.
Average total labour costs per hour worked.
Average wages and salaries per hour worked.
Average other labour costs, primarily National Insurance contributions and occupational pensions, as well as sickness, maternity and paternity pay, per hour worked.
Average total labour costs, excluding bonuses and arrears, per hour worked.
The labour cost component of ILCH is mainly drawn from the Monthly Wages and Salaries Survey (MWSS); the hours worked component of ILCH is drawn from the Labour Force Survey (LFS). Other costs are estimated using a range of other sources including the Annual Business Survey (ABS) and Annual Survey of Hours and Earnings (ASHE).
ILCH statistics are currently designated as experimental. Experimental statistics are those official statistics undergoing further development work before they are submitted for assessment as a National Statistic by the UK Statistics Authority.
Whole economy labour costs per hour increased by 0.8 per cent in Q3 2012 compared with the same quarter a year earlier. Total labour costs include wages and salaries, benefits in kind and employer social contributions (pension and national insurance contributions, sickness, maternity and paternity pay).
The growth in wages and salaries per hour worked was 0.6 per cent while non-wage costs per hour worked increased by 1.9 per cent. Wage costs include benefits in kind, wages and salaries. Sickness, maternity and paternity pay are excluded from wage costs. Non-wage costs include sickness, maternity and paternity pay, national insurance and pension contributions.
Private sector labour costs (per hour) increased, while public sector labour costs decreased. The growth in labour costs per hour in the private sector was 1.4 per cent in the third quarter of 2012, compared with -1.0 per cent in the public sector. This reflects more hours being worked in the public sector, compared with a year earlier.
Figure 1 shows the annual change in Labour Costs (per hour) for the whole economy, private and public sector. Whole economy labour costs rose by 0.8 per cent in Q3 2012 compared with a rise of 0.7 per cent in Q2 2012.
Figure 2 shows whole economy labour costs (per hour) referenced to 2000. The chart shows that labour costs at whole economy level has a seasonal pattern; total labour costs per hour tend to peak at quarter one. This is caused by large bonus payments that are paid mainly in the private sector in the first quarter of the calendar year.
Between 2000 and 2008, the trend for the economy as a whole was one of steady growth as labour costs per hour increased by approximately 5 per cent a year. This means that the cost of employing a worker rose during this period.
Between Q1 2008 and Q1 2009, total labour costs decreased by 5 per cent. This was caused in part by lower bonuses in 2009 brought on by the 2008 UK economic recession. Since the recession, the growth in whole economy labour costs has increased but more slowly compared with the earlier years. Between 2009 and 2011, whole economy labour costs increased by around 2 per cent a year.
The main industry with the highest growth was the arts, entertainment and recreation industry, with an annual growth rate of 9 per cent compared to a year earlier. Labour costs increased by 11 per cent in this industry while total hours worked also increased by 2 per cent in Q3 2012.
The chemical and man-made fibres industry experienced the lowest growth, compared with a year earlier. Chemical and man-made fibres labour costs (per hour) declined by 7 per cent. Labour costs in this industry increased by 3 per cent while hours worked increased by 12 per cent.
A Quality and Methodology Information Report for ILCH (148.9 Kb Pdf) is available. This report describes, in detail the intended uses of the statistics presented in this publication, their general quality and the methods used to produce them.
The UK Labour Costs Index (LCI) is comparable with other Labour Cost Index numbers produced by other EU member states. Eurostat regularly publishes a news release detailing the key results in each quarter.
The Index of Labour Cost per Hour is not seasonally adjusted.
Experimental statistics are those which are in the testing phase, are not yet fully developed and have not been submitted for assessment to the UK Statistics Authority. ILCH is designated as an experimental statistic. Further information on experimental statistics can be found on the ONS website.
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