14.8.2022 valid documentation

Basic data of the statistics

Data description

The Labour Cost Index measures the quarterly change in average labour costs for hour worked in the private, central government and local government sectors. The data are collected from different sources and published quarterly.

Statistical presentation

The Labour Cost Index measures the change in wage and salary costs calculated per hour worked. Hours actually worked refer to the working hours an employee has spent on his/her actual duties. Hours worked include Sunday and overtime work but not paid hours off work, like the hours of annual leaves, national holidays or paid sickness absences.

In the index, hours worked or the structure of personnel have not been standardised. The cost of an hour worked is calculated directly as the ratio of industry-specific wages and salaries subject to preliminary withholding tax and social insurance contributions to the hours worked for each quarter. The change in average labour costs is affected by changes in regular earnings, performance-based bonuses and other one-off pay components, social insurance contributions, as well as changes in the number of hours worked and the structure of the labour force.

Starting from the first quarter of 2019, the wages and salaries sum of the labour cost index is based on the Incomes Register. The wages and salaries sum is used to raise the labour costs reported by the data providers to the industry level.

Statistical population

The data of the statistics are collected from the private and local government sectors with a sample. The sampling frame is formed from Statistics Finland's Business Register. Enterprises employing at least 30 persons are generally selected to the frame. However, in industries (TOL 2008) dominated by small enterprises, such as construction (F), wholesale and retail trade (G), hotel and restaurant activities (I), real estate activities (L), professional, scientific and technical activities (M), and administrative and support services (N), enterprises employing at least 20 persons are included in the sample. In the local government sector, the data were collected from 2008 to 2010 in the municipalities in Greater Helsinki, and from 2011 onwards, from the biggest municipalities, with more than 50,000 residents, and the biggest joint municipal authorities. As of the beginning of 2012, data have also been collected by random sampling from selected municipalities with fewer than 50,000 residents. In total, the sample comprises more than 100 municipalities and joint municipal authorities. The central government has supplied basic data in terms of the entire central government since 2007.

Statistical unit

The statistical unit of the labour cost index is an enterprise. The inquiry concerns the whole paid personnel of the enterprise, municipality or joint municipal authority. The central government data are based on total data, and the data are obtained from the Tahti system. The central government data cover salary earners in government agencies and institutions.

Unit of measure

The labour cost index measures the quarterly change (in per cent) in average labour costs per hour worked on the character level of an industry.

Base period

The base year of the labour cost index is 2016 (2016=100).

Reference period

The reference period for the labour cost index is a quarter. The data are released four times a year, within 70 days of the end of a quarter.

Reference area

The statistics cover the private and public sectors, excluding agriculture, forestry and fishing. Geographically, they cover the whole of Finland.

Sector coverage

The statistics cover the private and public sectors almost in their entirety. Agriculture, forestry and fishing are excluded from the statistics. Since 2007, the basic data of the statistics in terms of the private sector have been collected with a sample comprising more than 2,000 enterprises. The central government has supplied basic data in terms of the entire central government since 2007. In the local government sector, the data were collected from 2008 to 2010 in the municipalities in Greater Helsinki, and from 2011 onwards, from the biggest municipalities, with more than 50,000 residents, and the biggest joint municipal authorities. As of the beginning of 2012, data have also been collected by random sampling from selected municipalities with fewer than 50,000 residents. In total, the sample comprises more than 100 municipalities and joint municipal authorities.

Time coverage

The time series begins from 2007. The statistics are updated normally in terms of the current and previous year when the statistics are published.

Frequency of dissemination

The labour cost index is published four times a year, 70 days after the end of each quarter. The statistics are updated normally in terms of the current and previous year when the statistics are published. In the event of methodological or other major changes, the index scores may also be revised over a longer period.

Concepts

Base index

In the base index the price of the calculation period is always compared with the base period. In the base index weights are usually changed less often than yearly, for example, at intervals of five years.

Bonuses and allowances not paid in each pay period

Bonuses and allowances not paid in each pay period are such as performance-based bonuses, holiday bonus and holiday supplement and seniority increments paid in some hourly paid fields. Payment of one-off pay components can also be based on collectively bargained agreements.

Structural statistics on wages and salaries:
Holiday supplement paid for days off not taken is not included in these bonuscomponents in the structural statistics on wages and salaries.

Index of wage and salary earnings:
The index of wage and salary earnings measures the development of earnings from regular working hours regardless of the mode of payment. Components paid on the basis of performance are included in the earnings concept so that they are divided evenly over the whole calendar year. Similarly, bonuses and allowances not paid in each pay period based on collective agreements are evenly divided for the whole year. All these components belonging to the concept of index of wage and salary earnings, such as holiday bonuses are not included in data on wages and salaries used in the calculation of the index, but they are taken into consideration in index calculation only in case changes in their relative share are agreed in collective bargaining. In the index of wage and salary earnings contractual pay increases paid retrospectively are also taken to the quarter when they were earned.

Labour cost survey:
In the concepts of the labour cost survey compensations for termination of an employment relationship belonging to bonuses and allowances not paid in each pay period are included in social costs.

Labour cost index:
In the labour cost index bonuses and allowances not paid in each pay period also include contractual pay increases paid retrospectively from previous pay periods. The labour cost index also contains incentive stock options according to their exercise value.
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Bonuses and allowances not paid in each pay period are not published in the statistics on private sector and local government wages and salaries. These components are not included in the index of regular earnings.

Chain index

In the chain index the comparison takes place always between successive calculation periods. In the chain index the change in two calculation periods is used to take forward the index point figure of the desired base period. In the chain index the weights are changed in principle in each calculation period.

At times the chain index is also mentioned in such cases where the comparison period is retained fixed in comparisons within the year, but the comparison period and the weight structure of the index is changed whenever the year changes.

Employer sector

Employer sector describes the structure of the labour market and is determined by the decision-making unit. The classification of employer sectors used in statistics on wages and salaries and in statistics on labour costs is a national adaptation of the Classification of Sectors that is used in economic and social statistics (Classification of Sectors 2000).

The classification used in statistics on wages and salaries has the following structure:

Local government sector
Operating units of municipalities and joint municipal boards, and municipal enterprises
Central government sector
Agencies and institution financed from the State budget

Private sector
Private enterprises, enterprises with central or local government majority holding and state enterprises
Non-profit corporations, parishes, and organisations and foundations are also included in the private sector in statistics on wages and salaries.

The structure of the classification of sectors used in statistics on labour costs and in the labour cost index is similar to that of the classification used in statistics on wages and salaries.

In the index of wage and salary earnings, non-profit corporations, parishes and organisations form a separate employer sector of their own (Others).

Hours paid

Hours paid refer to those hours of total working time for which wage and salary earners are paid. Hours paid can be hours worked or not worked, or absences (annual leaves, sick leaves, public holidays, other time off).

Index formula

Index formula is a mathematical function by means of which an individual key figure describing change is calculated from observation values (e.g. Fischer, Laspeyres and Paasche index formulas).

Index of wage costs

The index of wage costs,
The wage and salary index, which is part of the labour cost index, measures the change in wage and salary costs calculated per hour worked. Wage and salary costs include all pay and bonuses according to Section 13 of the pre-liminary tax withholding act, thus also costs incurred by payments in kind and incentive stock options.

Labour costs

Labour costs describe all costs incurred by an employer from the employment of labour. Labour costs are usually presented as costs for an hour worked. Costs arising from work premises, commuting or untaxed daily allowances are not included in labour costs.

Total labour costs are obtained by deducting employer's subsidies from the sum of labour cost items. Employer's subsidies are intended for full or partial financing of costs arising from direct compensations paid by the employer. Such subsidies comprise employment subsidies and training compensations paid to employers.

In the labour cost index, labour cost items are grouped as follows:
- remuneration exclusive of one-off pay components
- one-off pay components
- social security costs

In the labour cost survey, labour cost items are divided into the following main groups:
- direct earnings
- one-off pay components
- remuneration for days off
- contributions to personnel funds
- costs of fringe benefits and company products
- social security costs
- training costs
- other labour force costs

Direct earnings refer to wages and salaries paid for hours worked in each pay period. Direct earnings comprise
- direct compensations paid on the basis of hours worked, output produced or amount of work performed
- compensations for overtime, shift work and the like
- additional bonuses and compensations paid regularly in each pay period.

One-off pay components refer to items that are not paid regularly in each pay period. Such bonuses that are often paid only once a year include performance-based bonuses and holiday pay, and seniority increments paid in some hourly paid fields. Payment of one-off pay components can also be based on collectively bargained agreements.

Pay for days off refers to compensations paid for statutory, agreement-based or voluntarily granted leaves, national holidays or other paid days of leave. Typical items of this group are pay during annual holiday entitlement, monthly paid employees' pay during national holidays, hourly paid employees' compensation during national holidays and days of leave in compensation of shortened working hours.

Payments to personnel funds refer to the sums enterprises may annually contribute to their employees' saving systems, such as personnel funds.

Costs of fringe benefits and company products include all costs incurred by an employer from the goods and services it provides for to its employees. Such goods and services include e.g. company car and subsidised meals, incentive stock options and personnel's recreational and social activities. Own personnel's pay is not included.

Social security costs refer to the sum employers pay for the social security benefits of its employees. Such statutory, agreement-based or voluntary payments include employment pension, social security and unemployment insurance contributions. Additionally, this group comprises as imputed social security funding items pay during illness and parental leave (net, i.e. less compensations paid to the employee by the Social Insurance Institution) and occupational health care costs (likewise, net), as well as compensations arising from the termination of an employment relationship.

Training costs include e.g. costs of professional training services, costs of course participations, fees of instructors hired from outside the enterprise and payments to organisations arranging training. By contrast, pay for the participants during training is not counted as training costs but as pay for hours worked.

Other labour costs include e.g. costs arising from protective and working clothes and from the procurement of labour.

Employer's taxes paid on the basis of the sum of wages and salaries or the employed labour force that the labour cost concept of the European Union contains do not exist in Finland.

The concept of labour costs partly equals the national accounts concept of compensation of employees but exclusive of e.g. occupational health care, training and recruitment costs.

Point figure

Point figure is a change quantity used in price indices, which expresses the price, average price or index of the comparison period relative to the price, average price or index of the base period. The point figure of the base period is usually denoted by the number hundred. For example, if the point figure for a commodity at a certain point in time is 105.3, it means that the price of that commodity has risen by 5.3 per cent from the base period.

Quarterly change

Quarterly change refers to the relative change in the index of the quarter compared with the index of the previous quarter. The change is usually expressed in percentages.

Sosial cost index

The social cost index, which is part of the labour cost index, measures the development of employers' statutory and voluntary social insurance contri-butions calculated per hour worked.
See more about social security costs under the concept of labour costs.
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Weight structure

Describes what meaning each sub-index (commodity, employee group, etc.) belonging to the index has for total index.

Accuracy, reliability and timeliness

Overall accuracy

When measuring the cost of an hour worked, the requirements of the EU legislation have been complied with. The objective has been that the average relative error of the cost estimate derived from the whole sample would be approximately 1%. In any industry stratum, the relative average error should not rise above 5%.

Timeliness

The labour cost index is published 70 days after the end of quarter.

Punctuality

No time delay

Sampling error

The survey frame for the private sector is stratified by the number of wage and salary earners into five size categories. When determining the sampling ratios of strata the sample is allocated so that as accurate and unbiased estimates as possible could be produced for the population so that useful estimates could be obtained for the output variable from each subgroup. When using the Neyman allocation, the coefficients of variation for the estimates of some industries would become large especially on the main group level of the new Standard Classification of Industries. If the aim was to have as small coefficients of variation as possible for the estimates of all industries, the coefficient of variation for the estimate of the whole population would then rise. The allocation of stratum-wise sampling rates was based on two-phase power allocation. Choosing the power 0.5 (i.e. square root) was used to ensure results fit for publication both on the levels of the national economy and main industries while the aim of performing the allocation in two phases was to guarantee optimal allocation of the sample with respect to different size enterprises.

Coverage error

The risk is that the selection ratios are not realised and under-coverage is possible, for example, if the required number of responses are not received. So far, the selection ratios have been very close to the desired selection relations. Secondly, the under-coverage of cost components. There may be under-coverage in some respects, attributable to respondents’ difficulties in responding to the breakdowns of labour costs. Obtaining or missing of data on hours worked. The imputation of labour input data patches up this potential deficiency.

Comparability

Comparability - geographical

The data concern the entire country by industry, which is also the goal of Eurostat.

Comparability - over time

The data of the labour cost index pertains to a quarter, and the content of the data is the same every year. The statistics are generally comparable with the statistics of previous years.

Coherence - cross domain

The labour cost index is also part of the index of wage and salary earnings (earnings and other extraordinary and one-off bonuses are included in the index of wage and salary earnings). The index’s frame is likewise selected from the same frame as the frame of the statistics on private sector wages and salaries.

Source data and data collections

Source data

A sample is drawn in the private and public sectors, the central government data are obtained from the Tahti system and these data constitute total data (although the labour cost index does not include the central government’s hourly paid salary earners). The index calculation method was revised in terms of estimation and industry determination as of 2009 in connection with the release of the second quarter data in 2012. As of then, the estimation has been based on the wages and salaries sums in the wage and salary index of each quarter. In publications preceding this, the estimation is based on the data of the Business Register’s wages and salaries sums. In this context, the industries of enterprises were fixed in such a way that an enterprise-specific industry remains unchanged in the index calculation, regardless of industry changes in accordance with the Business Register. As of the first quarter of 2019, the wages and salaries sums are obtained from the Incomes Register, which is a national electronic database. It includes extensive pay, pension and benefit data at an individual level. The Incomes Register is maintained by the Finnish Tax Administration’s Incomes Register Unit, which is the authority responsible for the register.

The average unit costs of an hour worked are known to vary to some degree, depending on the size of an enterprise. In terms of size, enterprises are unevenly divided – the expected nonresponse of smaller enterprises is greater and large enterprises cover a great deal of the wages and salaries sum. The sample design aims to ensure that enterprises of all sizes are represented in the collected data. This is why the private sector’s sampling frame is stratified into five size categories depending on the number of salary earners. The determination of a sample’s selection ratios is based on a two-phase square root quota (quota to the power of 0.5). The square root quota aims to ensure results fir for publication at the level of both the national economy and an industry’s main category. The two-phase quota aims to ensure a sample’s optimal allocation to enterprises of different sizes within an industry.

Data collection

The private sector and local government sector data in the labour cost index are collected with online forms through Statistics Finland’s data collection pages. Data obtained from the Incomes Register have been pre-filled on the industry and service forms if the data needed for forming the data have been reported to the Incomes Register and the data of the Incomes Register and data collection do not differ significantly. The inquiries are sent to all enterprises, municipalities and joint municipal authorities included in the sample. The forms are designed by Statistics Finland. Non-response is monitored on a quarterly basis and covered for once a year. On the other hand, non-response is also accounted for in estimation. The central government data are total data.

Frequency of data collection

The basic data of labour costs are collected continuously during each quarter.

Methods

Data compilation

The labour cost index measures the change of labour costs per hour worked. Apart from a few exceptions, the data suppliers are able to report the labour input of hourly paid employees as hours worked. In contrast, more than half of the labour input of monthly paid employees are reported as hours paid, rather than as hours worked. The imputation application pertaining to working hours ensures that, in terms of each data supplier, data on the number of both hours worked and paid, determined with a regression model, are always available in addition to empirical data on working hours (worked vs. paid).

If there are any obscurities in the data, the respondent will be requested to provide additional information and, if necessary, to correct the data. The data processing is carried out using the labour cost application, and the SAS and SQL tools. When necessary, observations that do not belong in the final statistics (outliers or incomplete responses) are removed from the data.

Data validation

When data collection in terms of an individual enterprise begins, the goal is to ensure the  logic and level of the basic data (the number of salary earners, the number of working hours, the wages and salaries sum). Some checks have been added to the form. The possibility for commenting has been added to some of the checks. The checks of enterprises that have previously responses to the inquiry are based on the quarterly change in the data concerning each enterprise. The data imported in the database are checked for the following:
  • the quarterly change of the unit cost calculated for an hour worked/paid
  • a change in the grounds for determining hours
  • the summation of the pay breakdown of the hourly paid
  • a change in the tariff of social insurance contributions
The checking process concerning a quarterly change in the unit costs of an hour worked proceeds as follows:
  1. The labour cost of an enterprise’s hour worked/paid without one-off components is compared to the enterprise’s corresponding value from the previous quarter.
  2. The enterprise’s reference group is determined in accordance with the industry stratum defined for the enterprise.
  3. Verifying limits are defined for each reference group on the basis of decile division pertaining to the labour costs’ unit change. The change limit corresponding with the smallest change – the first decile (D10) – is defined as the lower limit for a change in labour costs. Correspondingly, the change limit corresponding with the greatest quarterly change – the last decile (D90) – is used as the upper limit.
  4. An observation value remaining within limits is accepted. Observations falling below the lower limit and exceeding the upper limit are marked as deviant and printed out on a control list.
In the local government sector, the data of all respondents are checked with a program developed for this purpose. The data provided are compared with the data of the previous quarter and the respective period of the year before. In the central government sector, similar checks are also made to the data.

Documentation on methodology

Principles and outlines

Contact organisation

Statistics Finland

Contact organisation unit

Social Statistics

Institutional mandate

Since 2003 the compilation of the index has been decreed by Regulation No 450/2003 of the European Parliament and of the Council and by related Commission Regulation No 1216/2003 on its implementation. In the first phase the regulation-based statistical obligation related only to manufacturing and private service sector industries. The industry coverage of the index was enlarged by the Commission's new implementing Regulation No 224/2007 to concern from 2007 onwards the industries of so-called welfare services for which the public sector is mainly responsible. The concepts and classifications of the labour cost index are defined in the Commission's implementing Regulation. The index series based on the years 1996 to 2008 is based on the EU's Standard Industrial Classification NACE Rev. 1 of that time. From 2009 the index is based on the EU's present Standard Industrial Classification NACE Rev. 2.

Legal acts and other agreements

The compilation of statistics is guided by the Statistics Act. The Statistics Act contains provisions on collection of data, processing of data and the obligation to provide data. Besides the Statistics Act, the Data Protection Act and the Act on the Openness of Government Activities are applied to processing of data when producing statistics.

Statistics Finland compiles statistics in line with the EU’s regulations applicable to statistics, which steer the statistical agencies of all EU Member States.

Further information: Statistical legislation

The labour cost index was developed by order of the European Union as part of a community-wide project. The compiling of the labour cost index is provided for in Regulation (EC) No 450/2003 of the European Parliament and of the Council, and the related Commission Regulation (EC) No 1216/2003 implementing it. The implementing Commission Regulation was amended in terms of the industries it covers by Commission Regulation (EC) No 224/2007. Only the necessary data that are not available from administrative data sources are collected from data suppliers. The index series are published so that the data or development of no individual enterprise, local government, joint municipal authority or central government agency or institution can be deduced from them.

Confidentiality - policy

The data protection of data collected for statistical purposes is guaranteed in accordance with the requirements of the Statistics Act (280/2004), the Act on the Openness of Government Activities (621/1999), the EU's General Data Protection Regulation (EU) 2016/679 and the Data Protection Act (1050/2018). The data materials are protected at all stages of processing with the necessary physical and technical solutions. Statistics Finland has compiled detailed directions and instructions for confidential processing of the data. Employees have access only to the data essential for their duties. The premises where unit-level data are processed are not accessible to outsiders. Members of the personnel have signed a pledge of secrecy upon entering the service. Violation of data protection is punishable.

Further information: Data protection | Statistics Finland (stat.fi)

Confidentiality - data treatment

A key rule of data protection is to avoid publishing statistical data in a form that could reveal the identity of an individual or organisation or an attribute relating to them. The data of enterprises or municipalities/joint municipal authorities or central government agencies or institutions are not generally available; only industry-specific point figures are part of the release policy.

Release policy

Statistics Finland publishes new statistical data at 8 am on weekdays in its web service. The release times of statistics are given in advance in the release calendar available in the web service. The data are public after they have been updated in the web service.

Further information: Publication principles for statistics at Statistics Finland

Data sharing

The national data is transmitted to Eurostat. The labour cost index is also used as a data source for the index of wage and salary earnings. Likewise, the data are used/monitored from the perspective of the coherence of statistics in national accounts, for example.

Accessibility and clarity

Statistical data are published as database tables in the StatFin database. The database is the primary publishing site of data, and new data are updated first there. When releasing statistical data, existing database tables can be updated with new data or completely new database tables can be published.

In addition to statistical data published in the StatFin database, a release on the key data is usually published in the web service. If the release contains data concerning several reference periods (e.g. monthly and annual data), a review bringing together these data is published in the web service. Database tables updated at the time of publication are listed both in the release and in the review. In some cases, statistical data can also be published as mere database releases in the StatFin database. No release or review is published in connection with these database releases.

Releases and database tables are published in three languages, in Finnish, Swedish and English. The language versions of releases may have more limited content than in Finnish. 

Information about changes in the publication schedules of releases and database tables and about corrections are given as change releases in the web service.

Data revision - policy

Revisions – i.e. improvements in the accuracy of statistical data already published – are a normal feature of statistical production and result in improved quality of statistics. The principle is that statistical data are based on the best available data and information concerning the statistical phenomenon. On the other hand, the revisions are communicated as transparently as possible in advance. Advance communication ensures that the users can prepare for the data revisions.

The reason why data in statistical releases become revised is often caused by the data becoming supplemented. Then the new, revised statistical figure is based on a wider information basis and describes the phenomenon more accurately than before.

Revisions of statistical data may also be caused by the calculation method used, such as annual benchmarking or updating of weight structures. Changes of base years and used classifications may also cause revisions to data.

Seasonally adjusted data in statistics on economic trends become revised because of the calculation method used. Additional information on a new time series observation is exploited in model-based calculation methods and this is reflected as changes in previous releases. Revisions of the latest figures to be seasonally adjusted are elaborated on in the releases and quality reports of statistics.

A summary table of the revisions that have taken place is also published in connection with key statistics on economic trends and some annual statistics. The table shows how the data for the statistical reference periods have changed between the first and the most recent statistical release.

Quality assessment

The quality of the data is assessed at different stages of the statistical process. The data are compared quarterly with other statistics.

Quality assurance

Quality management requires comprehensive guidance of activities. The quality management framework of the field of statistics is the European Statistics Code of Practice (CoP). The frameworks complement each other. The quality criteria of Official Statistics of Finland are also compatible with the European Statistics Code of Practice.

Further information: Quality management | Statistics Finland (stat.fi)

User access

Data are released to all users at the same time. Statistical data may only be handled at Statistics Finland and information on them may be given before release only by persons involved in the production of the statistics concerned or who need the data of the statistics concerned in their own work before the data are published.

Further information: Publication principles for statistics

Unless otherwise separately stated in connection with the product, data or service concerned, Statistics Finland is the producer of the data and the owner of the copyright. The terms of use for statistical data.

Statistical experts

Pekka Haapala
Planning Officer
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