Overall labour costs
Labour costs increased 3.7 percent in the year to the June 2006 quarter. This is the largest annual increase since the series began in the December 1992 quarter. The salary and wage rates (including overtime) component of the Labour Cost Index (LCI) rose 3.2 percent, while the non-wage labour costs component rose 6.2 percent.
The costs of other business inputs (excluding capital costs), as measured by the Producers Price Index (PPI), rose 7.8 percent from the June 2005 quarter to the June 2006 quarter. The increases in the inputs prices were reflected in the prices charged by businesses for their outputs, which rose 5.6 percent. The Capital Goods Price Index (CGPI) increased 3.4 percent. Over the same period, the Consumers Price Index (CPI) increased 4.0 percent.
Overall non-wage labour costs
Non-wage labour costs rose 6.2 percent between the June 2005 quarter and the June 2006 quarter. This is the largest annual increase since the series began in the December 1992 quarter.
The rise in non-wage labour costs was due to rises in the cost of annual leave and statutory holidays, superannuation, workplace accident insurance and vehicles available for private use. These rises were partly offset by an overall fall in other non-wage labour costs, such as medical insurance and employer-related low interest loans.
Annual leave and statutory holidays
In the year to the June 2006 quarter, the cost of annual leave and statutory holidays to employers increased 7.1 percent. This is the largest annual increase since the series began in the December 1992 quarter.
One of the main reasons for the increase was employers increasing their employees' annual leave entitlement in anticipation of changes to the Holiday Act taking effect in April 2007. Another contributor to the increase was a rise in the number of statutory holidays. There were 11 paid statutory holidays in 2006, compared with 2005 when there were 10, due to Waitangi Day falling on a weekday rather than a weekend as in 2005.
Annual leave and statutory holiday costs increased 6.8 percent for private sector employers, and 7.8 percent for the public sector. These annual increases are the largest since the series began in the December 1992 quarter.
Superannuation
Employer superannuation costs increased 6.6 percent from the June 2005 quarter to the June 2006 quarter. This follows an increase of 7.3 percent in the previous June year. The latest increase in superannuation costs was influenced by a 3.3 percent increase in salary and ordinary time wage rates.
In the public sector, superannuation costs rose 12.3 percent, mainly due to the increase in the employer contribution rate of the State Sector Retirement Savings Scheme (SSRSS), which took effect from 1 July 2005. From the June 2004 quarter to the June 2005 quarter, public sector superannuation costs increased 15.2 percent, mainly reflecting the SSRSS, which was introduced from 1 July 2004.
Superannuation costs for the private sector increased 1.7 percent from the June 2005 quarter to the June 2006 quarter.
Workplace accident insurance costs
Employers' workplace accident insurance costs increased 4.8 percent from the June 2005 quarter to the June 2006 quarter. This follows an increase of 7.2 percent in the year to the June 2005 quarter.
Employers pay residual claims levies (to fund historical injuries) and they also pay base Accident Compensation Corporation (ACC) WorkPlace Cover levies to cover the costs of ongoing injuries. There are two optional programmes offered by ACC: a workplace safety management practices programme and a partnership programme. Under the partnership programme, employers are able to share risk in return for reductions in base premium rates. Under both programmes, employers passing safety audits at one of three levels are eligible for safety management practice discounts of 10, 15 or 20 percent off the standard base premium rates.
For the June 2006 quarter index, residual claims levy rates (applicable to earnings for the year to March 2006 and collected in arrears) were, at the disaggregated industry level, added to ACC WorkPlace Cover levy rates (applicable to earnings for the year to March 2006 and collected during the period), which were discounted to reflect actual eligibility for safety management discounts for the period to 31 March 2006.
The 2006 increase in the ACC Employer Premiums Index reflects rises in pay rates and increases in ACC levy rates. Workplace accident insurance costs in the June 2006 quarter were higher than in the June 2005 quarter for 21 of the 27 industry groups.
Workplace accident insurance costs rose 3.0 percent for the private sector, and 10.3 percent for the public sector.
Other non-wage labour costs
Other non-wage labour costs rose 0.7 percent from the June 2005 quarter to the June 2006 quarter. This compares with a fall of 2.8 percent from the June 2004 quarter to the June 2005 quarter. The other non-wage labour costs component of the LCI includes medical insurance, motor vehicles available for private use, and employment-related low interest loans.
The cost of providing a motor vehicle for private use rose from the June 2005 quarter to the June 2006 quarter, while the cost of providing medical insurance and employer-related low interest loans fell. The prescribed interest rate that is used to calculate the fringe benefit value of low interest loans increased from 8.76 percent to 9.55 percent, and this would have had a slight upwards influence on the costs.
Fringe benefit tax (FBT) rates derived from FBT data for the year to March 2006 were used to calculate the June 2006 quarter indexes for medical insurance, motor vehicles available for private use, and low interest loans. Employers have the choice of using either a flat 64 percent FBT rate or multi-level FBT rules, whereby rates are based on the actual remuneration levels of employees receiving the benefits. Employers providing about 75 percent of fringe benefits by value chose the latter option for the year to March 2006. In the year to March 2005, this figure was about 74 percent, and about 75 percent in the year to March 2004.
Sectors and industries
Labour costs in the private sector rose 3.3 percent from the June 2005 quarter to the June 2006 quarter, and 5.0 percent in the public sector. Within the public sector, central government sector labour costs rose 5.1 percent, and local government costs rose 4.4 percent.
Increases for individual industry groups' labour costs ranged from 1.1 percent (for forestry and logging) to 5.9 percent (for education) in the year to the June 2006 quarter. The increases for education were driven by increases in salary and wage rates (including overtime), annual leave and statutory holidays, superannuation and workplace accident insurance, and were partly offset by decreases in other non-wage costs.
Central government administration and defence costs increased 5.0 percent. This was driven by increases in the cost of salary and wage rates (including overtime), annual leave and statutory holidays, superannuation, and workplace accident insurance. These increases were partly offset by decreases in other non-wage costs.
Local government administration costs increased 4.7 percent from the June 2005 quarter to the June 2006 quarter. Increases in salary and wage rates (including overtime), annual leave and statutory holidays, and other non-wage costs were partly offset by decreases in superannuation and workplace accident insurance.
For technical information contact:
Sharlene Turner or Peter Batra
Wellington 04 931 4600
Email: info@stats.govt.nz.