Index of labour costs per hour, UK: January to March 2017 (experimental statistics)

• The whole economy Index of Labour Costs per Hour (ILCH), seasonally adjusted, increased by 1.1% in Quarter 1 (Jan to Mar) of 2017, compared with Quarter 1 2016 but decreased by 0.2% compared with the previous quarter, Quarter 4 (Oct to Dec) 2016.

• Wage costs per hour worked increased by 1.0% in Quarter 1 2017 compared with Quarter 1 2016 and non-wage costs per hour worked increased by 0.2%.

• Private sector labour costs per hour increased by 1.4% in Quarter 1 2017 compared with Quarter 1 2016, while public sector labour costs per hour decreased by 0.9%.

• The arts, entertainment and recreation industry had the largest increase in Quarter 1 2017 compared with Quarter 1 2016, with an increase of 7.4%.

• The chemicals and man-made fibres industry in the manufacturing sector had the largest decrease in Quarter 1 2017 compared with Quarter 1 2016, with a decline of 9.9%.

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 Cost Index (LCI); the index is produced by all member countries of the EU and collated by Eurostat.

All estimates discussed in this statistical bulletin are seasonally adjusted except where otherwise stated.

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 the Annual Survey of Hours and Earnings (ASHE).

ILCH index figures are estimates in current prices, meaning that they are published not adjusted for inflation.

ILCH statistics are currently designated as experimental. Experimental Statistics are those that are in the testing phase, are not yet fully developed and have not been submitted for assessment to the UK Statistics Authority. Further information on Experimental Statistics is available.

There are no methodological changes in this release.

Year-on-year

Whole economy labour costs per hour increased by 1.1% in Quarter 1 (Jan to Mar) 2017 compared with Quarter 1 2016, before inflation is taken into account. Total labour costs include wages and salaries (including bonuses and arrears), benefits in kind and employer social contributions (pension and National Insurance contributions, sickness, maternity and paternity pay).

The growth in wage costs per hour worked in Quarter 1 2017 compared with the same quarter a year earlier was 1.0% and non-wage costs per hour worked increased by 0.2%, as seen in Figure 1. The increase in non-wage costs is partly a result of an increase in pension and National Insurance contributions. Wage costs include benefits in kind, wages and salaries. Non-wage costs include sickness, maternity and paternity pay, National Insurance contributions and pension contributions.

Private sector labour costs per hour increased by 1.4% in Quarter 1 2017 compared with the same quarter a year earlier and public sector labour costs per hour decreased by 0.9%; this latter series can be volatile due to small numbers included in the sample.

Quarter-on-quarter

Compared with the previous quarter, Quarter 4 (Oct to Dec) 2016, whole economy labour costs per hour decreased by 0.2% in Quarter 1 2017. Private sector labour costs increased by 0.3%, while public sector labour costs decreased by 1.3%, as seen in Figure 2.

Total wage costs decreased by 0.3% in Quarter 1 2017 compared with the previous quarter and total other costs increased by 0.9%.

Total labour costs per hour worked and wage costs per hour worked are quite similar, as shown in Figure 3, with an increase of 65.8% and 61.7% since 2000 respectively. This reflects the structure of labour costs in the UK, which is largely driven by wages and salaries.

The path of other labour costs follows that of the total, as might be expected, but at points moves differently, as changes in non-wage costs affect the series. The largest move away from wage costs occurred in Quarter 2 (Apr to June) 2003, when new National Insurance contribution (NIC) rates were introduced. Total other costs per hour have increased by 93.8% since 2000.

Year-on-year

The industry with the highest growth in labour costs was the arts, entertainment and recreation industry, with labour costs per hour having increased by 7.4% in Quarter 1 (Jan to Mar) 2017 compared with a year earlier (Figure 4). This growth in labour costs is a combination of increases to wage costs and other costs such as pensions and National Insurance contributions.

The financial and insurance activities industry experienced the second-largest growth in labour costs per hour in Quarter 1 2017, with an increase of 7.1% compared with a year ago.

The chemicals and man-made fibres industry in the manufacturing sector experienced the largest decline in labour costs in Quarter 1 2017 compared with a year earlier; labour costs per hour in this industry decreased by 9.9%. The real estate industry experienced the next largest decrease in labour costs compared with Quarter 1 2016, with a decrease of 7.2%.

Quarter-on-quarter

The industry with the highest quarterly growth in labour costs was the real estate industry, with labour costs per hour having increased by 6.3% in Quarter 1 2017 compared with Quarter 4 (Oct to Dec) 2016 (Figure 5).

The basic metals and metal products industry in the manufacturing sector experienced the second-largest growth in labour costs per hour in Quarter 1 2017, with an increase of 3.7% compared with the previous quarter.

The other service activities industry experienced the greatest decline in labour costs in Quarter 1 2017 compared with Quarter 4 2016. Labour costs per hour in this industry decreased by 7.4% on the previous quarter. The second-largest decrease in labour costs per hour compared with the previous quarter was in the chemicals and man-made fibres industry, which declined by 4.8%.

We aim to constantly improve this release and its associated commentary. We welcome any feedback you might have and are particularly interested to know how you make use of these data to inform our work.

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1. Quality

The Index of UK Labour Costs per Hour estimates Quality and Methodology Information document contains important information on:

• the strengths and limitations of the data and how it compares with related data

• users and uses of the data

• the quality of the output

• how the output was created including the accuracy of the data

2. International comparisons

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 main results in each quarter.