United Kingdom (3)

Title of the survey

The Wages and Salaries Survey, which is used for the compilation of the Average Earnings Index (AEI).

Organization responsible

Employment Department.

Periodicity of the survey

Monthly.

Objectives of the survey

To measure the monthly level, and changes in the level, of earnings of employees in Great Britain, relative to the average level in a base year (at present 1990). The Average Earnings Index is a major economic series used by the Government in monitoring the economy and preparing up-to-date national accounts. It is also used by companies for comparing movements in earnings of their own employees with movements in their industry or industrial sector, and it is used as a measure of the increase of labour costs in long-term legal contracts.

Main labour topics covered by the survey

Earnings.

Reference period

The last pay-week of the month in question for weekly paid employees, and the whole month for monthly paid or four-weekly paid employees.

Coverage of the survey

Geographical

Great Britain.

Industrial

In principle, all branches of economic activity, except the armed forces. Where industries are not represented, this is usually because the majority of firms are small and have less than 25 employees. The main excluded industries are sea transport; commission agents; house and estate agents; legal services; accountants; real estate; education other than school or higher; medical, dental and veterinary practices; hairdressing and other personal services; and charities, religious and community services.

Establishments

Large and medium firms (companies or organizations) with 25 or more employees.

Persons

The survey covers employees in employment. Out of scope are working proprietors and working directors who do not receive a salary, young workers below the age of 16, and unpaid family workers.

Occupations

Not relevant.

Concepts and definitions

Employment

Data refer to employees in employment. They include wage earners and salaried employees; full- and part-time employees; permanent, temporary and casual employees; apprentices, trainees and workers on probation; piece workers, home workers and commission agents; persons temporarily present on payroll during notice period preceding retirement, resignation or dismissal; as well as persons temporarily absent from work because of paid or unpaid vacation, sickness or accident, temporary or indefinite lay off, industrial dispute, or any other reasons, whether authorized or not. Employees sub-contracted from other enterprises and employees from temporary work agencies are included under the enterprise or agency from which they are contracted. The following categories of employees are excluded: those in private domestic service; occupational pensioners; those employed in Enterprise Zones; those employed outside Great Britain; employees on temporary military service; persons on Youth Training without a contract of employment; persons working for their own spouses; and clergymen holding pastoral appointments. The following categories of employees are separately identified: weekly paid employees and monthly paid or four-weekly paid employees. The Wages and Salaries Survey makes no distinction between male and female employees, full-time and part-time employees, juvenile and adult employees, nor the geographical regions in which the employees work.

Earnings

Data are collected on gross wages and salaries in cash, which include basic wages, payments for hours of overtime worked, shift premia, grading increments, bonuses and other productivity or incentive payments, holiday pay, etc. Excluded are payments which were made during the pay-period, but which related to another period (e.g. arrears of pay, overtime or sick pay for sickness absence outside the period); reimbursement or payments of travelling, subsistence and similar expenses incurred in carrying out the employer's business; and tips or gratuities received by the employee, but not shown in the employer's pay records. Also excluded is the value of benefits in kind provided by the employer, except for agricultural, catering and other workers whose employers provide accommodation, meals, etc. for which reckonable values for pay purposes are laid down in the Wages Orders. The corresponding amounts are included in total gross earnings, but not reported separately.

Wage/salary rates

Not relevant.

Hours of work

Not relevant.

International recommendations

The definition of gross wages and salaries conforms to the international recommendations on gross earnings in cash. The value of earnings in kind is excluded from the concept used.

Classifications

Industrial

Data are classified according to 332 groups (i.e. at the three-digit level) of the Standard Industrial Classification (SIC), 1980. This classification is not linked to the International Standard Industrial Classification of all economic activities (ISIC), Rev.2, 1968; however, the forthcoming revision (SIC-1992) will be convertible to ISIC, Rev. 3.

Occupational

Not relevant.

Others

Not relevant.

Sample size and design

Statistical unit

The sampling unit is the firm, i.e. a company or an organization in the private and public sectors.

Survey universe / sample frame

The sample is selected from the register held by the Employment Department from the last Census of Employment. The register is updated every two to three years, on the occasion of each Census of Employment.

Sample design

The Wages and Salaries survey is a probability sample survey which covers, each month, over 8,000 companies and organizations. The probability of sample selection is directly proportional to the size of the firm. In general, firms with more than 1,000 employees are included with certainty in the sample. However, in some industry categories where all firms are large, a one in four sample is taken, because the variation within the particular group does not justify fuller coverage. These categories include the water supply industry, national and local government, education, health authorities, and police and fire authorities. Firms with between 500 and 1,000 employees are sampled on a one in two basis, while those with between 100 and 499 employees have a one in four chance of being selected. Small firms with fewer than 100 employees but more than 24 are sampled on a one in 20 basis. The sample covers about 40 per cent of employees in employment and the index represents 90 per cent of all employees when the survey data are grossed up. Information on earnings in agriculture is not collected by means of the Wages and Salaries Survey. Instead, use is made of the continuous survey of agricultural establishments undertaken by the Ministry of Agriculture, Fisheries and Food (MAFF). From this source, the Ministry compiles an index of earnings for agriculture and horticulture which is then incorporated into the calculation of the AEI for the whole economy.

Field work

Data collection

Data are collected by mailed questionnaires. The Wages and Salaries survey is carried out under the Statistics of Trade Act, 1947, so it is mandatory on selected firms to send in a return each month.

Survey questionnaire

This has been specifically designed so that employers who participate in the survey have to give only the minimum amount of information which is essential for the calculation of an overall average for each industry group. In all, only seven items of information are sought each month:

the total amount of wages and salaries paid to weekly paid employees in the last pay week of the month in question,
the amount included for weekly paid employees in that pay week in respect of holiday pay in advance,
the amount included for weekly paid employees in the same week in respect of arrears of pay,
the total number of weekly paid employees who are paid in that same week,
the total amount of wages and salaries paid to monthly paid or four-weekly paid employees in the month in question,
the amount included in that total in respect of arrears of pay,
the total number of employees whose wages and salaries are included in that total.

There is also a column for the employer to indicate any significant changes reflected in the month's figures, such as new pay rates, bonus payments, and disputes.

Substitution of sampling units

There is no substitution of sampling units in case of total non-response.

Data processing and editing

Data are processed mainly by computer. Coding of industry and occupation is mainly manual. Data checking and editing involves computer-generated queries with respect to credibility or comparison with previous month data.

Types of estimates

Not relevant.

Construction of indices

Two types of indices are constructed: the AEI and the underlying index. Construction of the AEI: Within each industrial group, an average level of wages and salaries is calculated from the sampled firms, taking account of the different sampling fractions for size of firm. Averages for industry groups are then weighted together according to the total numbers in employment in each group to produce weighted average wages and salaries data for industry classes, and ultimately the whole economy. The AEI is a base-weighted index and employment weights are not changed when later employment data become available, because the index would then become a hybrid of changes due to earnings increases and changes due to employment. The whole economy index is formed by calculating the change in the weighted average level of wages and salaries per head from the corresponding average level for 1990 as a whole. Indices for the various industry groups are constructed in the same way. The movement of the AEI is influenced by temporary factors such as inclusion of substantial back-pay in a given month, disputes in progress, etc., which may give a misleading picture when comparing the index for the current month against that for the same month a year before. In order to provide a more precise measure of the trend in earnings growth, the Employment Department has developed a statistic known as the underlying rate of increase in earnings. The underlying rate adjusts the actual rate of increase of average earnings for temporary influences such as arrears of pay, variations in the timing of pay settlements and timing of bonus payments, and industrial disputes. Construction of the underlying index: all significant temporary factors are quantified in terms of their effect on the rate of increase and summed to give a net adjustment. The resultant rate of increase is rounded to the nearest 1/4 percentage point. All the calculations are carried out in terms of the rate of increase. Once a quarter, an underlying index is constructed by applying the underlying rates of increase to the base of 1990=100. The underlying rate does not allow for factors that are not temporary in nature and on which information is not collected by the Wages and Salaries Survey, such as changes in the composition of the workforce, changes in hours worked, especially the amount of overtime worked, or irregular variations in the size of bonuses, absence because of sickness, etc.

Weighting of sample results

See above.

Adjustments

Non-response

Not available.

Other bias

Adjustments for temporary influences on the AEI are made through the construction of the underlying rates of growth. The underlying rates of growth are more prone to revision than the actual indices. The main reasons for revision and adjustment of the rates are as follows:

the underlying rate uses a three-month moving average as a smoothing agent. This smoothing may be influenced by amendments to the previous month's data from provisional to final. Since the smoothing process uses the one month ahead forecast, the current month's underlying increase may also be heavily influenced by the underlying increase forecast for the next month;
the calculation of the underlying increase may be revised in respect of the timing adjustments (particularly when the level of a pay settlement has been estimated);
settlements may or may not have been paid in full, particularly when the employer is large and has employees on a number of different agreements, and thus implies estimating the proportion of employees who have actually been paid on the new basis.

Use of benchmark data

The weights are the employment numbers derived from the Census of Employment.

Seasonal variations

Seasonally adjusted earnings indices are calculated for the whole economy, all manufacturing industries, all production industries, and all service industries, using the X-11 computer package, which arrives at a seasonally adjusted series by the application of moving averages to the original series.

Indicators of reliability of the estimates

Coverage of the sampling frame

Since 1984, the Census of Employment is in fact conducted on a sample basis. Its objective is to have about 300,000 reporting units contributing to its results (about one fourth of all reporting units in Great Britain).

Sampling error / sampling variance

Not available.

Non-response rate

Not available.

Non-sampling errors

Not available.

Conformity with other sources

Not available.

Available series

The following tables appear regularly:

whole economy average index - seasonally adjusted, further adjustments (arrears, timing, etc.), underlying index and underlying percentage increase over last 12 months (monthly figures);
underlying increases in average earnings - percentage increases on a year earlier for the whole economy, manufacturing and services (quarterly figures).

History of the survey

The Employment Department has published a monthly average earnings index since 1963. The first index covered mainly production industries and agriculture, and the contribution from services was limited to areas where most employees were in manual occupations, such as laundries, dry cleaning, motor vehicle servicing and repair, and boot and shoe repair. In 1976, the coverage was extended to include further service occupations, but some areas were still excluded, most notably a large part of business services, higher education and research. In November 1989, a revision of the index was introduced, involving updating and expansion of the supporting sample, reweighting of the index on the basis of the weights taken from the 1987 Census of Employment, and rebasing it to 1988=100. Prior to this revision, the base was 1985=100. New firms have been added to the sample, and the sample has been extended into areas not formerly covered, such as banking, finance, insurance and business services. The overall effect of resampling and reweighting has been to raise the average annual rate of increase for the first seven months of 1989 by less than 0.1 of a percentage point. Weights were updated again on the basis of the 1989 and 1991 Census of Employment.

Documentation

Employment Department: Employment Gazette, Tables 5-1 and 5-3 (monthly, London). The index first becomes available in provisional form about six weeks after the end of the month to which it relates. Data for the most recent month are regarded as provisional; data for the previous month and the months before are regarded as final. Data from MAFF for agriculture is itself sample-based and takes one month longer to process; an estimate is used for the provisional month. A statistical update showing the underlying series and describing the factors affecting average earnings is also published quarterly in the Topics section of the March, June, September and December issues of the Employment Gazette. Methodological details on the Average Earnings Index were also published in the November 1989 issue of this publication.

Confidentiality / Reliability criteria

Not available.

Other information

Data supplied to the ILO for publication

Monthly series of the Average Earnings Index for non-agricultural activities and manufacturing are published in the Bulletin of Labour Statistics, in Tables 7 and 8. Annual averages for non-agricultural activities and manufacturing are published in Tables 16 and 17A of the Yearbook of Labour Statistics.