Australia (3)

Title of the survey

Major Labour Costs Survey (MLC) Wage Costs Survey (WCS)

Organization responsible

Australian Bureau of Statistics (ABS)

Periodicity of the survey

MLC: annual, until 1991-92; biennial since 1993-94. WCS: every five years until 1991-92. Future frequency is under review.

Objectives of the survey

To obtain a measure of costs incurred by employers in the employment of labour. These statistics are requested by employers' organizations, government bodies and trade unions. They are used by employers and unions to support wage case submissions, and by the government in the formulation, the evaluation and the monitoring of labour market trends and policies.

Main labour topics covered by the survey

Employment, earnings and labour cost. The WCS also covers hours of work.

Reference period

The whole financial year.

Coverage of the survey

Geographical

The whole country.

Industrial

All branches of economic activity, except: agriculture, hunting, forestry and fishing, household services, embassies and consulates, and the Australian permanent defence forces.

Establishments

All types and sizes of establishments which have paid employees.

Persons

All employees in the branches of economic activity covered. Employees based outside Australia are excluded. Excluded are the following persons who are not considered as employees: directors who are not paid a salary; proprietors and partners of unincorporated businesses; self-employed persons such as contractors, subcontractors, owner-drivers, consultants and persons paid solely by commission without a retainer; and unpaid family workers.

Occupations

All occupations are covered, but data are not collected by occupation.

Concepts and definitions

Employment

The number of employees refers to the average of the number of wage and salary earners who received pay for a specified pay period in August, November, February and May of the reference year. Included are all permanent, temporary, casual and part-time employees; managerial and executive employees; employees on paid or prepaid leave or on workers' compensation; employees paid from interstate or overseas; and employees who commenced or terminated employment during the selected pay periods. Excluded are employees on leave without pay, on strike or stood down who did not receive pay during the selected pay periods and employees based outside Australia.

Labour cost

It is defined in terms of all costs incurred by employers in the employment of labour. The full range of labour costs comprises:

earnings of employees,
payroll tax,
superannuation,
workers' compensation,
fringe benefits tax,
fringe benefits,
welfare services,
training,
recruitment.

The MLC survey covers only components (a) to (f), and these are defined as follows:

Total gross wage and salary payments (excluding termination payments) include ordinary time and overtime earnings, overaward payments, penalty payments, shift and other remunerative allowances, leave loadings, bonuses and similar payments, retainers and commissions paid to persons who received a retainer, payments made under incentive, piece-work or profit-sharing schemes, annual, long-service and sick leave payments (except those paid on termination), salary payments made to directors, fees to directors or office holders who are paid a salary, payments made for time on standby or reporting time, amounts paid from interstate or overseas, and amounts paid through the payroll to employees on workers' compensation. Wages and salaries exclude allowances which are reimbursements to employees for travel, entertainment, meals and other expenditure incurred in conducting the business of their employer; drawings from profits by directors or office holders; payments made for wages and salaries to persons under schemes such as Jobstart and Craft which were reimbursed under a government programme; and the value of fringe benefits.
Total termination payments include severance, termination and redundancy payments as recorded on group certificates, statements of earnings or tax stamp sheets.
Payroll tax refers to the amounts paid during the reference year in respect of the gross wages and salaries of employees, net of any rebates (e.g. for apprentices and trainees, for decentralised industry incentive and youth employment schemes). It includes adjustments made during the year and payroll tax surcharge. It excludes Pay-As-You-Earn (PAYE) income tax deducted from employees' wages and salaries, payroll tax assessed for payments to contractors or subcontractors and payroll tax fines.
Superannuation covers the total employer's contributions paid to all superannuation schemes, including productivity schemes. It includes the contributions paid to a superannuation fund on a regular basis (ongoing costs), and the payments of pension or lump sum benefits as superannuation liabilities occur, where no funds have been set aside during the employee's service (emerging costs).
Workers' compensation covers the total amount of premiums or levies paid in relation to workers' compensation. It includes premiums paid during the reference year; workers' compensation costs not reimbursed by the insurer, including excess and make-up payments (i.e. payments made by employers directly to employees as part of earnings, over and above the amount paid by the insurer); lump sum payments to employees; any other workers' compensation costs including legal, accounting, medical and administrative costs and catastrophe insurance premiums and expenditure. Costs which have been reimbursed from a workers' compensation insurer are excluded.
Fringe benefits tax relates to the tax actually paid in respect of employees reported.

From the 1991-92 survey an estimate for the value of fringe benefits (payments in kind) has been included in earnings. Estimates of the cost of fringe benefits to employers have been based on survey estimates of fringe benefits tax. The Survey of Wage Costs (WCS) collects information on the following components of gross wages and salaries:

payments for time worked,
annual leave payments,
sick leave payments,
other leave payments (maternity, long service, study, compassionate and special leave),
payments for public holidays,
annual leave loading,
infrequent bonuses (performance, production, Christmas, staff suggestion and profit-sharing bonuses).

Estimates of payments for time worked are derived by deducting from total gross wages and salaries those payments for time not worked (paid leave) and infrequent bonuses. Neither survey collects data on welfare services, training or recruitment costs as these costs are considered to make a relatively small contribution to total labour costs. Training costs are however collected by another ABS survey, the Training Expenditure Survey.

Hours of work

Hours of work are not covered by the MLC survey, but by the WCS, every five years. Data are collected on total hours paid for and hours paid for but not worked, and a measure of hours actually worked is derived by subtracting the latter from the former. Total hours paid for comprise normal hours and paid overtime, inactive periods of time spent at the workplace (while workers are waiting or standing by, hours during which no work is done but for which payment is made under a guaranteed employment contract, short rest periods, study and training periods, trade union and employers' organizations activities, etc.), time spent on paid leave (i.e. annual, sick, long service, maternity, accident or occupational injury, parental, personal, military or civil service, and other special leave), and public holidays. Excluded from hours paid for are meal breaks, unpaid work stoppages due to industrial disputes, time spent on travel from home to work and vice versa, and time spent on workers' compensation. Hours paid for but not worked refer to all paid periods of time spent outside the workplace, for vacation or holidays, sickness or accident, occupational injury or illness, maternity or parental leave, personal leave, military or civil service, industrial disputes (where paid), etc. Estimates of hours actually worked are derived by deducting from the total number of hours paid for, hours not worked for paid leave. Hours actually worked therefore include normal and paid overtime hours. Normal hours include wash-up time, tea breaks and other paid breaks during normal work hours. They also include unrecorded leave, such as short periods of sick or other leave (less than a day), and inactive periods of time spent at the workplace, when workers are waiting or standing by, or when payment is made under a guaranteed employment contract.

International recommendations

The concept used in both the MLC and WCS surveys does not cover all the elements of labour cost. It corresponds to the guidelines contained in the System of National Accounts (SNA) concerning compensation of employees. The concept of hours actually worked, derived from the collection of data on total hours paid for and hours paid for but not worked, conforms to the international guidelines on hours of work and on the measurement of hourly labour cost.

Classifications

Components of labour cost / compensation of employees

Data on compensation of employees are classified by main component (see above, under Concepts and definitions). This classification can be linked to groups I to III, VI and X of the International Standard Classification of Labour Cost (ISCLC-1966).

Industrial

Up to and including the 1991-92 survey, the Australian Standard Industrial Classification (ASIC-1983) was used. This classification is convertible to the International Standard Industrial Classification of all economic activities (ISIC), Rev. 2, 1968 at the four-digit level. All units were coded at that level (ASIC class). Starting with the 1993-94 survey, the Australian and New Zealand Standard Industrial Classification (ANZSIC), 1993, is being used. This classification is convertible to ISIC, Rev. 3, 1990 at the four-digit level.

Occupational

Not relevant.

Others

Data are classified by:

region (eight states and territories),
employment size of reporting units (three ranges are published - less than 20 employees, from 20 to 99, 100 and more - but data are available on any size range), and
sector (public or private, institutional sector: trading or non-trading, level of government (Commonwealth, state or local), according to the Standard Institutional Sector Classification of Australia (SISCA)).

Sample size and design

Statistical unit

The statistical unit used to compile MLC and WCS statistics is termed the state management unit. It comprises all activities of a business within a particular state or territory. Each unit is classified to an industry which reflects the predominant activity of the business in the state or territory. Generally the sampling unit and the reporting unit are the same. However, in some instances, the reporting unit can differ from the sampling unit: (i) sampling units can be split into two or more reporting units based on predominant industry classification (these are the industry dissected units); (ii) sampling units can be split into reporting units based on a location of payroll data.

Survey universe / sample frame

The survey sample is selected from a common statistical frame, the ABS Business Register, which covers all sectors of the economy and most forms of entities engaged in economic activity. It includes companies, sole proprietorships, self-employed professionals, all government agencies, community service organizations, religious organizations, etc. However, businesses are usually only included in the register if they have paid employees, with one major exception: agriculture, where establishments are included if they have an estimated value of agricultural operations of at least 5,000 dollars, even if they have no paid employees. The register is regularly updated to take account of new businesses, takeovers and mergers, changes in industry classification, changes in employment and businesses which have ceased operation. Major sources for updating the information on the register include the Australian Taxation Office, group employer registrations, unit surveys carried out by the ABS Business Register, updating of large enterprise groups by the ABS Business Register and feedback from ABS collection areas. The unit recorded on the ABS Business Register and used in creating the population framework for the MLC and WCS, is called the management unit. This unit is the highest level accounting unit within a business, having regard for industry homogeneity, for which accounts are maintained. In nearly all cases, it coincides with the legal entity owning the business (company, partnership, trust, sole proprietorship, etc.). The operations of the management unit are dissected by state, using location and establishment ASIC and employment information stored on the ABS Business Register, to form state-management units (SMUs). The SMUs are then used to compile MLC and WCS statistics. The framework population consists of all management units on the register at a point of time, except for those activities which are excluded from the scope of the survey, as noted under Coverage of the survey. The management units are then replaced with management-state-industry units. The framework population is approximately 600,000 units. This includes units which are in scope and found to be defunct or have permanently no paid employees.

Sample design

The MLC and WCS are conducted using a common single stage, single phase, stratified sample. Statistical units are stratified by state, sector, industry and employment size. The sector stratification is on the basis of private or public trading enterprises, Commonwealth non-trading, state government non-trading and local government non-trading enterprises. Industry is classified according to state and ASIC group. Approximately 657 strata are used. The selected sample consists of some 6,650 units: 5,000 employer units in the private sector and 1,500 in the public sector. This represents 1.08 per cent of units on the sample frame, and accounts for 42.4 per cent of the benchmark employment. Large units (in terms of employment) are completely enumerated, and smaller units are sampled. Sampling fractions vary between 1.0 (for completely enumerated strata) and approximately 1/1,240. An equal probability sample is selected from each stratum, using a selection technique called synchronized sampling which ensures that the same unit is not selected for too many surveys. Employers in the 1991-92 Wage Costs Survey who had difficulties providing a response for their organization as a whole were offered the option of reporting for a random sample of their employees. Approximately 11 per cent of employer units in the survey reported this way. The sample design policy provides for approximately 20 per cent of the total sample to be replaced each survey. Thus units will remain in the survey for not more than five years. This policy is being reviewed in light of the MLC survey now being conducted every two years rather than annually.

Field work

Data collection

The survey is predominantly conducted by mail questionnaire. A permanent survey organization exists, with officers in each capital city, extra staff recruited for peak processing periods and for the conduct of the WCS. Data collection is conducted in three stages:

An Information Advice Form is used to establish reporting arrangements which ensure that the surveys cover all employees at various locations within the organization. In addition, it determines whether an organization can report for the whole organization or whether a sample of employees needs to be selected.
Separate collection forms are used for each survey (see below).
Superannuation Boards and Treasury Departments provide details directly to the ABS for superannuation and workers' compensation, for some government organizations. Additional information is obtained from the public accounts of the Commonwealth and the states and from the annual reports of certain agencies.

The questionnaires are mailed to the respondents within two months of the end of the reference period (30 June) and are due to be returned at the beginning of September.

Survey questionnaire

The MLC questionnaire collects information on total earnings and the other labour cost items, i.e. superannuation, workers' compensation, payroll tax, fringe benefits, tax. The WCS collects information on hours paid for, together with the cost of certain components of earnings. The questionnaires include a page of notes on the purpose of data collection, the authority under which the survey is conducted, the confidentiality of the data, due date and help available, and consist of sets of questions relating to the number of employees and the cost under each of the main groups of components of labour cost and compensation of employees. Instructions on definitions, inclusions and exclusions appear next to each question.

Substitution of sampling units

There is no substitution of sampling units in the case of total non-response. A sampled unit which is a non-respondent unit is considered to be not in the sample for the current survey, though still in the population. Values for fully enumerated non-respondents are imputed.

Data processing and editing

Data are processed by computer and there is no coding. The editing procedure includes the following steps: clerical scrutiny of the forms for completeness of response and some consistency checks; computer edits on unit record data for consistency and size of movement from previous year; clerical scrutiny of unit record data listed by strata for outstanding anomalies; computer edits and clerical scrutiny of aggregated results. Follow-up letters and telephone calls are used in the case of missing or inconsistent data.

Types of estimates

From the MLC survey:

totals per year,
averages per employee per year,
cost as a percentage of total labour costs,
cost as a ratio to earnings (other labour costs only),

and from the WCS,

averages per employee per hour worked,
averages per employee per hour paid for.

Construction of indices

None.

Weighting of sample results

Final estimates for the MLC survey are derived using the ratio estimation method, with ABS Business Register employment as the benchmark for all sampled strata for which the benchmark is known and non-zero and for which the design population is not zero. In the remaining strata, the number raised estimation method is used.

Adjustments

Non-response

Non-response is taken into account in the weighting procedure.

Other bias

If a unit's reported data are considered not to be representative of the distribution from which it was taken, and has an unusually large effect on the estimates of interest, this unit is made an outlier. This will give the unit a weighting of 1.0 and consequently reduces the irregular effect.

Use of benchmark data

Benchmark employment data are used in the weighting procedure (see above). No other adjustments are made.

Use of other surveys

Units common to the Survey of Employment and Earnings are checked for accuracy and to assist in estimation in instances of non-response.

Indicators of reliability of the estimates

Coverage of the sampling frame

The target population is all employees of all industries within the scope of the survey. Coverage of the sampling frame is virtually complete.

Sampling error / sampling variance

Both the standard error and the relative standard error of estimates are used to measure the reliability of the estimates. They are computed for each component of labour cost, by state and territory, sector, major division of economic activity, and for Australia as a whole.

Non-response rate

For the 1991-92 MLC, the non-response rate was 0.5 per cent in terms of units (39 units) and 0.6 per cent in terms of employees (representing 34,600 employees).

Non-sampling errors

Estimates subject to non-sampling error are known to occur with respect to the following items:

fringe benefits: estimates may understate the cost to the employer because some exemptions apply to fringe benefits tax from which the estimates are calculated;
payroll tax and fringe benefits tax: a small proportion of employers may report payroll tax and fringe benefits tax paid for some employees not in scope of the survey, thus slightly overstating the total cost of payroll tax and fringe benefits tax.

Other inaccuracies may occur because of incomplete coverage of the underlying survey population, imperfections in reporting by respondents, errors made in data collection such as in recording and entry of data, etc. Efforts have been made to reduce non-sampling error by careful design of the questionnaires, detailed checking of returns and quality control of processing.

Conformity with other sources

Three types of checks are made: (a) the aggregate results of the MLC survey are checked against the results of other labour surveys (employees, earnings) and an industry survey (at the broad level on each labour cost item); (b) estimates of fringe benefits tax are checked against data on revenue received by the Australian Taxation Office at broad industry level; (c) public sector superannuation and workers' compensation estimates are checked against the relevant annual reports from Superannuation Funds and Workers' Compensation Authorities and budget papers from state Treasuries.

Estimates for non-survey years

Not relevant.

Available series

For 1991-92, the results of both surveys provide for detailed estimates on the following basis:

total labour costs,
average costs per employee,
cost per hour worked,
superannuation - percentage of employees covered.

and cross-classifications by type of labour cost and by state, territory and sector, industry and sector, employment size and sector, etc.

History of the survey

The MLC survey started in 1985-86 and covered the private sector only. In 1986-87, the Wage Costs Survey (WCS) was conducted as a supplementary survey to the MLC, both covering the private and public sectors. Since 1987-88, the MLC has been conducted on a regular basis, except for the years in which the WCS takes place, the latest being 1991-92. Data from the WCS provide the basis for the calculation of labour cost per hour paid for and per hour actually worked, and allows an estimate to be made of employers' on-costs, i.e. total labour cost less gross wages and salaries for time worked. Other changes which were brought to the surveys include:

In the 1991-92 survey, the addition of fringe benefits as a component of earnings: estimates have been derived by applying the fringe benefits tax rate to survey estimates of fringe benefits tax. This produced the value of fringe benefits that attracted the tax.
A complete presentation of all superannuation costs in the public sector; these range from fully funding employer contributions to only meeting costs as they emerge.
A move to a two-yearly survey for the MLC from 1991-92.
Reviewing the frequency of the WCS.

Documentation

Australian Bureau of Statistics: Major Labour Costs, Australia (catalogue No. 6348.0) (annual; Canberra); published some 14 months after the end of the survey reference period. idem: Labour Costs, Australia (catalogue No. 6349.0) (five-yearly; ibid.); this publication was used to publish results from the WCS separately, but it is no longer available. The results of both MLC and WCS surveys are now combined in Catalogue No. 6348, renamed Labour Costs, Australia, which also contains methodological information on the surveys. Additional data are usually only made available as computer printout or clerically-extracted tabulations. These data can be as fine as state by industry by employment by size by sector, depending on confidentiality requirements and standard error considerations. For additional information on training costs, see: idem: Employer Training Expenditure, Australia (catalogue No. 6353.0).

Confidentiality / Reliability criteria

Generally, confidentiality provisions are such that no statistical data are released where they allow the identification of a particular respondent or details of their operations. The following rules are applied to test whether data in a confidential cell (considered to be important to explaining the overall statistical result) should be published or otherwise released: (i) the Australian Statistician can exercise the right to release confidential data relating to General Government (e.g. an official body other than a Government business undertaking), except where the minister responsible for the body has shown that such disclosure would be likely to enable the identification of that particular organization; (ii) confidential data relating to other enterprises (including Government business undertakings) are subject to different rules. The respondent(s) contributing to the confidential cell are approached, through a formal legal process, to obtain permission to publish. If permission is given, the authority to publish lasts three years, at the end of which the authority must be renewed. Under no circumstances does the ABS publish confidential data in this category without the permission of the respondent.

Other information

Data supplied to the ILO for publication

Statistics of average compensation of employees in manufacturing, per employee and per year since 1986 are published in Tables 22A and 22B of the Yearbook of Labour Statistics.