Index of labour costs per hour, UK: January to March 2015 (experimental statistics)

• The whole economy Index of Labour Costs per Hour (ILCH), seasonally adjusted, increased by 2.6% in quarter 1 Jan to Mar 2015 compared with the same quarter of 2014 and 0.7% compared with the previous quarter, quarter 4 Oct to Dec 2014

• Wage costs per hour worked increased by 2.3% on the previous year, and non-wage costs per hour worked increased by 4.5% in quarter 1 Jan to Mar 2015

• Private sector labour costs per hour increased by 2.2% on the previous year in quarter 1 Jan to Mar 2015, while public sector labour costs per hour increased by 2.0%

• The mining and quarrying industry had the largest positive growth in quarter 1 Jan to Mar 2015 compared with quarter 1 Jan to Mar 2014 with an increase of 14.4%

• The textiles, leather and clothing industry had the largest negative growth in quarter 1 Jan to Mar 2015 on the previous year with a decline of 8.5%

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, both seasonally adjusted and non-seasonally adjusted, measuring changes in:

1. total labour costs per hour worked

2. wage costs per hour worked

3. other labour costs, including benefits in kind and employer social contributions (pension and national insurance contributions, sickness, maternity and paternity pay) per hour worked

4. 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 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.

This bulletin provides information on the seasonally adjusted ILCH series. Seasonally adjusted results were first published in March 2015 in the quarter 4 Oct to Dec 2014 bulletin, for the full series from quarter 1 Jan to Mar 2000, and this will continue to be the case in all future ILCH bulletins. Non-seasonally adjusted data can be found on our website.

Year on year

Whole economy labour costs per hour increased by 2.6% in quarter 1 Jan to Mar 2015 compared with the same quarter a year earlier. This means the cost of labour increased year on year in quarter 1 Jan to Mar 2015, before inflation is taken into account. 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 wage costs per hour worked was 2.3% and non-wage costs per hour worked increased by 4.5%. The increase in non-wage costs is partly a result of an increase in pension costs, particularly in the construction industry. Wage costs include benefits in kind, wages and salaries. Non-wage costs include sickness, maternity and paternity pay, national insurance contributions and pension contributions.

Private sector labour costs (per hour) increased by 2.2% in quarter 1 Jan to Mar 2015. Public sector labour costs (per hour) increased by 2.0% in quarter 1 Jan to Mar 2015 compared with a year earlier; this series can be volatile due to small numbers included in the sample.

Figure 1.1 shows the annual change in labour costs (per hour) for the whole economy, private and public sector.

As a result of seasonally adjusting ILCH, it is possible to analyse quarter on quarter growth.

Whole economy labour costs per hour increased by 0.7% in quarter 1 Jan to Mar 2015 compared with quarter 4 Oct to Dec 2014. Private and public sector labour costs increased by 0.4% and 0.6% respectively.

Total wage costs grew by 0.6% in quarter 1 Jan to Mar 2015 compared with the previous quarter and total other costs increased by 1.5%. This is the largest growth in total other costs since quarter 2 Apr to June 2012.

Figure 1.2 highlights the quarterly change in labour costs per hour for the whole economy, private secor and public sector.

Figure 2 shows the 3 indices of whole economy labour costs (per hour) referenced to the year 2000: total labour costs, total wage costs and total other costs.

Total labour costs per hour worked and wage costs per hour worked continue to increase and are quite similar, with an increase of 58.2% and 54.2% since 2000 respectively. 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 non-wage costs affect the series. Total other costs per hour have increased by 87.6% since 2000; the largest growth in the series.

Figure 3: Whole economy Index of Labour Costs per Hour, by component, UK, quarter 1 Jan to Mar 2000 to quarter 1 Jan to Mar 2015

UK

Source: Annual Business Survey (ABS), Annual Survey of Hours and Earnings (ASHE), Labour Force Survey, Monthly Wages and Salaries Survey - Office for National Statistics

Notes:

1. Throughout this release Q1 refers to Quarter 1 (January to March), Q2 refers to Quarter 2 (April to June), Q3 refers to Quarter 3 (July to September) and Q4 refers to Quarter 4 (October to December).

Download this image Figure 3: Whole economy Index of Labour Costs per Hour, by component, UK, quarter 1 Jan to Mar 2000 to quarter 1 Jan to Mar 2015

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Year on year

The industry with the highest growth in labour costs was mining and quarrying, with labour costs per hour having increased by 14.4% in quarter 1 Jan to Mar 2015 compared with a year earlier.

Electricity, gas and water supply experienced the second largest growth in labour costs per hour in quarter 1 Jan to Mar 2015 with an increase of 9.5% compared with a year ago. Other industries that experienced growth in quarter 1 Jan to Mar 2015 include information and communication, retail, trade and repairs and financial and insurance services.

Textiles, leather and clothing experienced a large decline in labour costs in quarter 1 Jan to Mar 2015 compared with a year earlier; labour costs (per hour) in this industry decreased by 8.5%. This decline was driven largely by a decrease in the costs of wages and salaries and pensions per hour.

Other service activities and transport and storage also experienced a decrease in labour costs compared with quarter 1 Jan to Mar 2014. Other service activities include membership organisations such as trade unions; repair of computers and personal and household goods and other personal service activities.

The industry with the highest quarterly growth in labour costs was mining and quarrying, with labour costs per hour having increased by 7.8% in Q1 2015 compared with quarter 4 Oct to Dec 2014. This growth was largely driven by an increase in wage costs.

Electricity, gas and water supply experienced the second largest growth in labour costs per hour in quarter 1 Jan to Mar 2015 with an increase of 6.3% compared with the previous quarter. Other industries that experienced growth in quarter 1 Jan to Mar 2015 include textiles, leather and clothing, information and communication and other manufacturing. Other manufacturing includes the manufacture of plastic, glass, furniture, sports equipment and toys, and the repair and maintenance of machinery, electrical equipment and transport equipment.

Other service activities experienced the greatest decline in labour costs in quarter 1 Jan to Mar 2015 compared with quarter 4 Oct to Dec 2014. Labour costs (per hour) in this industry decreased by 4.3% on the quarter, which was largely driven by a decrease in wage costs. Labour costs per hour in the food products, beverage and tobacco, industry declined by 3.9%. Basic metals and metal products and financial and insurance services also experienced decreases in labour costs compared with the previous quarter.