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Labour Cost Index (All Labour Costs): June 2015 quarter
Embargoed until 10:45am  –  21 October 2015
Commentary

All labour costs up 1.5 percent

Labour costs increased 1.5 percent in the year to the June 2015 quarter. The salary and wage rates (including overtime) component of the labour cost index (LCI) was up 1.6 percent, while the non-wage labour costs component increased 1.0 percent.

The increase in non-wage labour costs was due to rises in the cost to employers of annual leave and statutory holidays, superannuation, medical insurance, and low-interest loans. These rises were partly offset by falls in the cost of providing workplace accident insurance and motor vehicles for private use.

Annual leave and statutory holidays cost to employers up 1.6 percent

In the year to the June 2015 quarter, the cost of annual leave and statutory holidays to employers increased 1.6 percent. The 1.6 percent rise in salary and wage rates (including overtime) contributed to this increase. Annual leave and statutory holiday costs increased 1.8 percent for private sector employers and 1.1 percent for the public sector.

Employer superannuation up 4.5 percent

In the year to the June 2015 quarter, employer superannuation costs increased 4.5 percent, after a 3.1 percent increase in the year to the June 2014 quarter. The latest increase was largely due to continued growth in the number of employees participating in employer-subsidised KiwiSaver schemes. The 1.6 percent rise in salary and ordinary time wage rates also contributed to this increase.

Employer workplace accident insurance down 14.0 percent

Employers’ workplace accident insurance costs decreased 14.0 percent in the year to the June 2015 quarter, after a 5.8 percent increase in the year to the June 2014 quarter. The recent decrease resulted from reductions in Accident Compensation Corporation (ACC) levy rates, which were partly offset by increases in pay rates (up 1.6 percent).

Other non-wage labour costs up 1.2 percent

Other non-wage labour costs (motor vehicles available for private use, medical insurance, and employer-related low-interest loans) for all sectors increased 1.2 percent in the year to the June 2015 quarter. This compares with a 0.7 percent increase in the previous year. For the public sector, other non-wage labour costs decreased 6.0 percent, influenced by some organisations reducing the number of vehicles available for private use.

In the year to the June 2015 quarter, the cost of providing medical insurance and employer-related low-interest loans rose, while the cost of providing motor vehicles for private use fell. The increase in medical insurance reflected higher premiums. The prescribed interest rate used to calculate the fringe benefit value of low-interest loans increased to 6.7 percent, up from 5.9 percent in the year to June 2014 quarter.

For more detailed data see the Excel tables in the ‘Downloads’ box.

LCI non-wage weights updated

With this release, we reweighted the LCI all labour costs indexes, to reflect changes in the industry and occupation structures of the labour market. The weights were calculated based on shares of expenditure by employers on annual leave and paid statutory holidays, superannuation, ACC premiums, medical insurance, motor vehicles available for private use, and low-interest loans.

The weights were implemented in the June 2015 quarter release, so changes in the LCI all labour cost indexes from the June 2014 quarter to the June 2015 quarter were based on updated weights for the June 2014 quarter. The last time we reweighted the LCI all labour costs indexes was for the June 2010 quarter on the June 2009 quarter.

Overall, the weight for non-wage costs increased from 16.31 percent in 2009 to 17.34 percent in 2014. The increase was mainly due to a higher weight for superannuation (up from 1.84 percent to 2.78 percent), reflecting higher employer expenditure on superannuation subsidies (up 80.2 percent). The weight for annual leave and statutory holiday costs also increased (up from 12.10 percent to 12.45 percent), due to a higher number of paid statutory holidays, up from 10 days in 2009 to 11 days in 2014.

Graph, Base expenditure weights by cost type, all sectors and industries combined, 2009 and 2014.

The data sources we used include the 2013 Census, the Business Register of New Zealand businesses, the Labour Cost Survey, and the Quarterly Employment Survey.

See data quality for more information on the LCI non-wage reweight.

Consultation

As part of this work, we also consulted LCI customers and stakeholders and sought public feedback so we could better understand the value they obtain from the non-wage components of the LCI. This was to ensure the statistics we provide continue to remain relevant to customers.

We are still considering the consultation results. If they show the LCI non-wage data is no longer providing value to customers, we will consider stopping publication of LCI non-wage and all labour costs. If this occurred, it would be after this release.

The LCI salary and wage rates will continue to be published quarterly, and their relevance would continue to be maintained by reviewing the weights following the 2018 Census.

For technical information on the updated expenditure weights contact:

Ludeth Mariposa
Wellington 04 931 4600
Email: info@stats.govt.nz

 

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