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The Index of Labour Costs per Hour (ILCH) is a measure of the cost of having an employee for an hour of work. It represents the total cost of employing an individual, which is primarily the earnings of the employee, but also includes non-wage costs. It is also known as the Labour Cost Index (LCI); the index is produced by all member countries of the EU and collated by Eurostat.
Four versions of ILCH are calculated for each aggregate, measuring changes in:
Total labour costs per hour worked
Wage costs per hour worked
Other labour costs, primarily National Insurance contributions and occupational pensions, as well as sickness, maternity and paternity pay, per hour worked
Total labour costs, excluding bonuses and arrears, per hour worked
The labour cost component of ILCH is mainly drawn from the Monthly Wages and Salaries Survey (MWSS); the hours worked component of ILCH is drawn from the Labour Force Survey (LFS). Other costs are estimated using a range of other sources including the Annual Business Survey (ABS) and Annual Survey of Hours and Earnings (ASHE). ILCH index figures are estimates in current prices, meaning that they are published not adjusted for inflation. ILCH data are not currently seasonally adjusted.
ILCH statistics are currently designated as experimental. Experimental statistics are those official statistics undergoing further development work before they are submitted for assessment as a National Statistic by the UK Statistics Authority.
Whole economy labour costs per hour increased by 0.5% in Q2 2013 compared with the same quarter a year earlier. Total labour costs include wages and salaries, benefits in kind and employer social contributions (pension and national insurance contributions, sickness, maternity and paternity pay).
The growth in wages costs per hour worked was 0.4% while non-wage costs per hour worked increased by 0.5%. Wage costs include benefits in kind, wages and salaries. Non-wage costs include sickness, maternity and paternity pay, national insurance contributions and pension contributions.
Figure 1 shows the annual change in Labour Costs (per hour) for the whole economy, private and public sector. The 0.5% increase in whole economy labour costs in Q2 2013 compares with an increase of 2.1% in Q1 2013.
Private sector labour costs (per hour) increased by 0.6% in Q2 2013, caused by a combination of increases in labour costs and hours worked per job.
Public sector labour costs per hour decreased by 1.4% in Q2 2013 compared with a year earlier. The decline in labour costs (per hour) in the public sector has been caused by modest growth in labour costs being offset by an increase in hours worked per job.
Figure 2 shows the three indices of whole economy labour costs (per hour) referenced to the year 2000. The chart shows that total labour costs at whole economy level has a seasonal pattern, as it tends to peak at quarter one. This is caused by large bonus payments that are paid mainly in the private sector in the first quarter of the calendar year.
Total labour costs per hour worked and wage costs per hour worked are quite similar. This reflects the structure of labour costs in the UK, which is largely driven by wages and salaries.
The path of other labour costs follows that of the total, as might be expected, but at points moves differently, as changes in nonwage costs affect the series. The prominent shift between the first and second quarters of 2003 is a result of an increase in National Insurance contribution rates introduced at the beginning of the financial year.
The industry with the highest growth in labour costs was agriculture, forestry and fishing, with labour costs per hour having increased by 17% compared with a year earlier.
The mining and quarrying industry experienced the second largest growth in labour costs per hour in Q2 2013 with an increase of 10% compared with a year ago. Other industries that experienced growth in Q2 2013 include financial and insurance activities and textiles, leather and clothing manufacturing.
Basic metals and metal products manufacturing experienced the greatest decline in labour costs in Q2 2013 compared with a year earlier. Labour costs (per hour) in this industry declined by 6%. Accommodation and food service activities and professional, scientific and technical activities also experienced decreases in labour costs per hour compared with a year earlier. Labour costs (per hour) worked declined by approximately 3% in each of these industries.
A Quality and Methodology Information Report for ILCH (148.9 Kb Pdf) is available. This report describes, in detail the intended uses of the statistics presented in this publication, their general quality and the methods used to produce them.
The UK Labour Costs Index (LCI) is comparable with other Labour Cost Index numbers produced by other EU member states. Eurostat regularly publishes a news release detailing the key results in each quarter:
The Index of Labour Cost per Hour is not seasonally adjusted. This means that regular variations including effects due to the number of days in a quarter are included in the index.
Experimental statistics are those which are in the testing phase, are not yet fully developed and have not been submitted for assessment to the UK Statistics Authority. ILCH is designated as an experimental statistic. Further information on experimental statistics can be found on the ONS website.
Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: email@example.com
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