Index of labour costs per hour, UK: April to June 2015 (experimental statistics)

• The whole economy Index of Labour Costs per Hour (ILCH), seasonally adjusted, increased by 3.1% in Quarter 2 Apr to June of 2015 compared with the same quarter of 2014, and 0.5% compared with the previous quarter, Quarter 1 Jan to Mar 2015

• Wage costs per hour worked increased by 2.6% in the second quarter of 2015 on the same quarter in the previous year, and non-wage costs per hour worked increased by 5.8%

• Private sector labour costs per hour increased by 3.1% in the second quarter of 2015 on the same quarter in the previous year, while public sector labour costs per hour increased by 0.6%

• The finance and insurance industry had the largest positive growth in Quarter 2 2015 compared with Quarter 2 2014, with an increase of 9.0%

• The mining and quarrying industry had the largest negative growth in Quarter 2 2015 compared with Quarter 2 2014, with a decline of 8.1%

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.

Four versions of ILCH are calculated for each aggregate, both seasonally adjusted and non-seasonally adjusted, measuring changes in:

1. total labour costs per hour worked

2. wage costs per hour worked

3. other labour costs, including benefits in kind and employer social contributions (pension and national insurance contributions, sickness, maternity and paternity pay) per hour worked

4. 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 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 official statistics undergoing further development work before they are submitted for assessment as a National Statistic by the UK Statistics Authority.

This bulletin provides information on the seasonally adjusted ILCH series. Seasonally adjusted results were first published in March 2015 in the Quarter 4 Oct to Dec 2014 bulletin, for the full series from Quarter 1 Jan to Mar 2000, and this will continue to be the case in all future ILCH bulletins. Non-seasonally adjusted data can be found on our website.

Year on year

Whole economy labour costs per hour increased by 3.1% in Quarter 2 Apr to June 2015 compared with the same quarter a year earlier, before inflation is taken into account. 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 wage costs per hour worked on the same quarter a year earlier was 2.6% and non-wage costs per hour worked increased by 5.8%. The increase in non-wage costs is partly a result of an increase in pension costs, particularly in the services industry. 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 3.1% in Quarter 2 Apr to June 2015 and public sector labour costs (per hour) increased by 0.6% in Quarter 2 Apr to June 2015 compared with the same quarter a year earlier. This series can be volatile due to small numbers included in the sample.

Figure 1.1 shows the annual change in labour costs (per hour) for the whole economy, private and public sector.

Quarter on quarter

Compared to the previous quarter, Quarter 1 Jan to Mar 2015, whole economy labour costs per hour increased by 0.5% in Quarter 2 Apr to June 2015. Private sector labour costs increased by 0.9% and public sector labour costs decreased by 0.2%.

Total wage costs grew by 0.3% in Quarter 2 Apr to June 2015 compared with the previous quarter and total other costs increased by 1.1%.

Figure 1.2 highlights the quarterly change in labour costs per hour for the whole economy, private sector and public sector.

Figure 2.1 shows the 3 indices of whole economy labour costs (per hour) referenced to the year 2000: total labour costs, total wage costs and total other costs.

Total labour costs per hour worked and wage costs per hour worked continue to increase and are quite similar, with increases of 59.5% and 55.2% 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 91.1% since 2000; the largest growth in the series.

Figure 2.1: Whole economy Index of Labour Costs per Hour, by component

UK, Quarter 1 2000 to Quarter 2 2015

Source: Annual Business Survey (ABS), Annual Survey of Hours and Earnings (ASHE), Labour Force Survey, Monthly Wages and Salaries Survey - Office for National Statistics

Notes:

1.Q1 refers to Quarter 1 (January to March), Q2 refers to Quarter 2 (April to June), Q3 refers to Quarter 3 (July to September) and Q4 refers to Quarter 4 (October to December).

Download this image Figure 2.1: Whole economy Index of Labour Costs per Hour, by component

.png (27.5 kB) .xls (33.8 kB)

Year on year

The industry with the highest growth in labour costs was finance and insurance, with labour costs per hour having increased by 9.0% in Quarter 2 Apr to June 2015 compared with a year earlier. This growth in labour costs is in part due to increases in costs of wages and pensions per hour.

The retail, trade and repairs industry experienced the second largest growth in labour costs per hour in Quarter 2 2015 with an increase of 6.4% compared with a year ago. Other industries that experienced growth in Quarter 2 2015 include education, construction and agriculture, forestry and fishing.

Mining and quarrying experienced a large decline in labour costs in Quarter 2 2015 compared with a year earlier; labour costs (per hour) in this industry decreased by 8.1%. This decline was driven largely by a decrease in the costs of wages and salaries.

Textiles, leather and clothing, real estate and wholesale trade also experienced decreases in labour costs compared with Quarter 2 Apr to June 2014.

Quarter on quarter

The industry with the highest quarterly growth in labour costs was agriculture, forestry and fishing, with labour costs per hour having increased by 4.5% in Quarter 2 Apr to June 2015 compared with Quarter 1 Jan to Mar 2015. This growth was largely driven by an increase in wage costs per hour.

Basic metals and metal products experienced the second largest growth in labour costs per hour in Quarter 2 2015, with an increase of 3.8% compared with the previous quarter. Other industries that experienced growth in Quarter 2 2015 include other service activities, arts, entertainment and recreation, and retail trade and repairs. Other service activities include membership organisations such as trade unions, repair of computers and personal and household goods, and other personal service activities.

Mining and quarrying experienced the greatest decline in labour costs in Quarter 2 2015 compared with Quarter 1 2015. Labour costs (per hour) in this industry decreased by 9.4% on the quarter. Labour costs per hour in the textiles, leather and clothing, industry declined by 3.8%. Information and communication, and real estate also experienced decreases in labour costs compared with the previous quarter.