Overall labour costs
Labour costs increased 3.9 percent in the year to the June 2007 quarter, 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 8.1 percent.
The costs of other business inputs (excluding capital costs), as measured by the Producers Price Index (PPI), rose 1.2 percent from the June 2006 quarter to the June 2007 quarter. The increases in the inputs prices were reflected in the prices charged by businesses for their outputs, which rose 1.5 percent. The Capital Goods Price Index (CGPI) increased 2.8 percent. Over the same period, the Consumers Price Index (CPI) increased 2.0 percent.
Overall non-wage labour costs
Non-wage labour costs rose 8.1 percent between the June 2006 quarter and the June 2007 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 other non-wage labour costs (such as motor vehicles available for private use, medical insurance and employer-related low interest loans).
Annual leave and statutory holidays
From the June 2006 quarter to the June 2007 quarter, the cost of annual leave and statutory holidays to employers increased 9.3 percent. This follows an increase of 7.1 percent in the year to the June 2006 quarter and is the largest annual increase recorded since the series began in the December 1992 quarter.
The main reason for the increase was the change in minimum annual leave entitlements from three weeks per year to four weeks per year which took effect on 1 April 2007. Within the sample, the unweighted proportion of employees entitled to four weeks or more annual leave has increased from less than 2 in 3 employees in the June 2006 quarter, to about 9 in 10 employees in the June 2007 quarter. Some respondents reported that those employees who were receiving less than four weeks annual leave will move to the increased minimum entitlement on their next anniversary date. In 2007, there were 11 paid statutory holidays, the same number as in 2006. Therefore statutory holidays did not have an impact on the latest results.
Annual leave and statutory holiday costs increased 6.3 percent for public sector employees, down from the record 7.8 percent increase in the year to the June 2006 quarter. For the private sector, annual leave and statutory holiday costs rose 10.6 percent, the largest increase recorded for the private sector since the series began in the December 1992 quarter. One reason for the private sector increase being greater than the public sector increase was that fewer employees in the private sector were previously entitled to four weeks or more annual leave than in the public sector.
Superannuation
In the year to the June 2007 quarter, employer superannuation costs increased 4.2 percent following a 6.6 percent rise in the year to the June 2006 quarter. The latest increase was influenced by a 3.1 percent increase in salary and ordinary wage rates.
Employer superannuation costs in the private sector increased 5.2 percent in the year to the June 2007 quarter. This is the largest annual increase recorded in the index since the series began in the December 1992 quarter and follows a rise of 1.7 percent in the year to the June 2006 quarter.
For the public sector, superannuation costs rose 3.2 percent in the year to the June 2007 quarter following rises of 12.3 percent and 15.2 percent in the years to the June 2006 and June 2005 quarters, respectively.
Workplace accident insurance costs
Employers’ workplace accident insurance costs increased 9.3 percent from the June 2006 quarter to the June 2007 quarter. This follows a rise of 4.8 percent in the year to the June 2006 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 2007 quarter index, residual claims levy rates (applicable to earnings for the year to March 2007 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 2007 and collected during the period), which were discounted to reflect actual eligibility for safety management discounts for the period to 31 March 2007.
The 2007 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 2007 quarter were higher than in the June 2006 quarter for all of the 27 industry groups.
Workplace accident insurance costs rose 11.2 percent for the public sector and 8.7 percent for the private sector in the year to the June 2007 quarter. This follows increases of 10.3 percent for the public sector and 3.0 percent for the private sector in the year to the June 2006 quarter.
Other non-wage labour costs
Other non-wage labour costs rose 1.8 percent in the year to the June 2007 quarter. This is the largest annual increase from a 2.1 percent rise recorded in the year to the June 2002 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.
From the June 2006 quarter to the June 2007 quarter, the cost of providing motor vehicles for private use and medical insurance rose, while the cost of providing employer-related low interest loans fell. The prescribed interest rate that is used to calculate the fringe benefit value of low interest loans remained at 9.55 percent, the same as in the June 2006 quarter.
Fringe benefit tax (FBT) rates derived from FBT data for the year to March 2007 were used to calculate the June 2007 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.
Sectors and industries
Increases for individual industry groups’ labour costs ranged from 1.3 percent (for accommodation, cafes and restaurants) to 5.8 percent (for health and community services). The increase for health and community services was driven by increases in salary and wage rates (including overtime), annual leave and statutory holidays, workplace accident insurance and other non-wage labour costs. The increase was partly offset by a decrease in superannuation.
Finance and insurance labour costs increased 5.5 percent in the year to the June 2007 quarter. This was driven by increases in salary and wage rates (including overtime), annual leave and statutory holidays, workplace accident insurance and superannuation and was partly offset by decreases in other non-wage labour costs.
Labour costs in the private sector rose 4.0 percent in the year to the June 2007 quarter, the largest annual increase since the series began in the December 1992 quarter. This follows rises of 3.3 percent and 2.6 percent in the years to the June 2006 and June 2005 quarters, respectively.
In the year to the June 2007 quarter, labour costs in the public sector increased 3.7 percent, following a 5.0 percent rise in the year to the June 2006 quarter. Within the public sector, central government sector labour costs rose 3.6 percent, and local government costs rose 3.7 percent.
For technical information contact:
Nicola Argyle or Karla Gardiner
Wellington 04 931 4600
Email: info@stats.govt.nz.