This document was added or updated on 23/04/2015.

TECHNICAL NOTE 2 IMPROVED EMPLOYMENT RANGE


BACKGROUND

1 The methodology used to derive business counts, based upon employment size ranges, has changed on the ABS Business Register and is reflected in this edition of Counts of Australian Businesses, including Entries and Exits (CABEE). Prior to this edition, employment size ranges were based on businesses' payee information, which is the estimated number of employees to whom payment summaries are issued during the financial year. That number reflects the total number of people employed by a business throughout a given year, rather than the number of people employed by a business at a point in time (end of the financial year). Hence, business size will be overstated if there is any turnover of employees during the year.

2 The new employment derivation method uses a statistical adjustment to provide the ABS' best estimate of the number of employees at the end of the financial year. This statistical adjustment is based on the most recent and consistent information from surveys, the Australian Business Register (ABR) and the Australian Tax Office (ATO). As such, the new derivation is a more representative view of business size than a cumulative total number of employees throughout the year. The adjustment is applied to the payees data using Business Activity Statement (BAS) wages and salaries data and ABS survey information to bring the counts closer into alignment with the target variable (i.e. number of employees at the end of the financial year). Adjustment factors are calculated, based upon unit record differences between reported employment in ABS business surveys and information from the ATO, including payment summaries. These factors, along with payment summary information, form the inputs into the derived employment variable and, in turn, the employment size range. For a minor proportion of businesses, the employment estimate derived from BAS data will be higher than that derived from payees.

3 The new employment derivation method has no impact on the number of 'Non-employing' businesses.


OVERVIEW OF RESULTS

4 The use of this new employment derivation method has resulted in changes in the number of businesses allocated to the various employment range categories.

• The revised methodology for calculating employment size ranges has resulted in 110,451 of the total 2,079,666 businesses (5.3%) changing employment size categories for the 2012-13 financial year.
• The majority of this movement was businesses moving from the:
  • '5-19' range to the '1-4' range (67,146 businesses)
  • '20-199' range to the '5-19' range (33,863 businesses)
• The 'Accommodation and Food Services' and 'Retail Trade' industries exhibited the greatest percentage movement in numbers (14,763 - 18.4% and 13,862 - 10.4% respectively).

TOTAL IMPACT ON BUSINESS SIZE RANGES

5 Table 1 shows that the bulk of total movement (91.5%) is due to businesses moving from the '5-19' to the '1-4' employment size range (67,146 businesses) and businesses moving from the '20-199' to '5-19' employment size range (33,863 businesses).

6 A small number of businesses moved from the '1-4' to '200+' range (115 businesses) and also from the '200+' range to the '1-4' (458 businesses). These changes reflect the wider range of additional information sources (particularly Business Activity Statement wages and salaries), used to derive the employment variable and in turn, calculate a more accurate business size range.

7 The results in Table 1 included business entries in the 2012-13 financial year and showed minimal relative change when entries were excluded from the analysis.

Table 1. Impact upon business size range - derived employment method: 2012-13
	Number of businesses changing size	Movements
Direction of Movement	no.	%
Did not change categories	1 969 215	94.7
Moved from (1-4 to 5-19)	2 599	0.1
Moved from (1-4 to 20-199)	1 454	0.1
Moved from (1-4 to 200+)	115	-
Moved from (5-19 to 1-4)	67 146	3.2
Moved from (5-19 to 20-199)	78	-
Moved from (5-19 to 200+)	6	-
Moved from (20-199 to 1-4)	2 400	0.1
Moved from (20-199 to 5-19)	33 863	1.6
Moved from (20-199 to 200+)	12	-
Moved from (200+ to 1-4)	458	-
Moved from (200+ to 5-19)	88	-
Moved from (200+ to 20-199)	2 232	0.1
Total Movement	110 451	5.3
Total	2 079 666	100.0
- nil or rounded to zero (including null cells)

NET IMPACT ON BUSINESS SIZE RANGES

8 The net impact upon business size ranges was analysed for the financial years 2010-11, 2011-12 and 2012-13. The '1-4' employment size range increased in each of the three years analysed (2011, 2012, 2013) on average by 13.6%. The '5-19', '20-199' and '200+' employment size ranges all resulted in a decrease in business counts. These decreases are proportionally consistent through the '5-19', '20-199' and '200+' employment size ranges. The smallest number of businesses changing size categories was the '200+' size range, where 2,645 businesses were categorised to smaller size ranges on the basis of the revised methodology (See Table 2, 2012-13).

Table 2. Comparison of employment size range allocation, Total Number of Businesses
Size Category	Payees Data	New Employment Derivation Method	Difference	% Difference
2010-11
1-4	508 579	581 741	73 162	14.4
5-19	230 583	191 812	-38 771	-16.8
20-199	81 006	49 302	-31 704	-39.1
200+	6 221	3 534	-2 687	-43.2
Total Employing	826 389	826 389	-	-
2011-12
1-4	514 859	582 719	67 860	13.2
5-19	231 591	198 340	-33 251	-14.4
20-199	82 326	50 522	-31 804	-38.6
200+	6 411	3 606	-2 805	-43.8
Total Employing	835 187	835 187	-	-
2012-13
1-4	497 576	563 412	65 836	13.2
5-19	228 092	197 412	-30 680	-13.5
20-199	83 457	50 946	-32 511	-39.0
200+	6 243	3 598	-2 645	-42.4
Total Employing	815 368	815 368	-	-
- nil or rounded to zero (including null cells)

INDUSTRY ANALYSIS

9 The impact of the new employment derivation method was analysed at the industry level, where the largest changes occurred in the 'Accommodation and Food Services', 'Construction', 'Retail Trade', and 'Professional, Scientific and Technical Services' industries. Table 3 shows the 'Accommodation and Food Services' industry had the highest number of businesses changing employment size ranges. The largest percentage movement for businesses changing employment size ranges was also in the 'Accommodation and Food Services' industry (18.4%). In this industry, 44.7% of the changes were from the '5-19' to '1-4' range and 48.3% were from the '20-199' to '5-19' employment size range.

10 Approximately 8.2% of businesses in the 'Administrative and Support Services' industry were subject to a change in business size range, with 7.5% changing from the '200+' range to the '20-199' range. Similarly, 8.7% of businesses in the 'Public Administration and Safety' industry had a change in their business size and 6.5% of these changes were from the '200+' category to the '20-199' category.

11 The least affected industry was 'Rental, Hiring and Real Estate Services', where only 2.3% of businesses changed employment size range.

Table 3. Impact of new employment derivation method at the industry level, Summary Analysis: 2012-13
Industry Code	Label	Total Movement	% of businesses changing size
A	Agriculture, Forestry and Fishing	8 127	4.4
B	Mining	584	7.2
C	Manufacturing	6 934	8.3
D	Electricity, Gas, Water and Waste Services	376	6.7
E	Construction	14 617	4.4
F	Wholesale Trade	4 615	6.2
G	Retail Trade	13 862	10.4
H	Accommodation and Food Services	14 763	18.4
I	Transport, Postal and Warehousing	4 215	3.4
J	Information Media and Telecommunications	883	5.0
K	Financial and Insurance Services	4 059	2.4
L	Rental, Hiring and Real Estate Services	5 160	2.3
M	Professional, Scientific and Technical Services	8 320	3.4
N	Administrative and Support Services	6 303	8.2
O	Public Administration and Safety	630	8.7
P	Education and Training	2 085	8.3
Q	Health Care and Social Assistance	5 126	4.9
R	Arts and Recreation Services	1 406	5.5
S	Other Services	6 949	8.1
X	Currently Unknown	1 437	1.7
	All Industries	110 451	5.3

ANALYSIS OF ENTRIES

12 The business entries and exit subpopulations were also analysed to assess the impact of the new employment derivation method, with the results presented in Tables 4 and 5 respectively. The impact on business entries and exits is consistent over time, and also consistent with the impact on the total business stock, presented in Table 2.

13 Of the total business entries in the 2012-13 financial year (239,229), approximately 3.3% or 7,781 were impacted by the new employment derivation. The '1-4' employment size range increased by approximately 10.4% across the three years analysed, with the larger business size categories all decreasing. The '5-19', '20-199' and '200+' employment ranges decreased in a manner consistent with the total business stock impacts presented in Table 2. The '200+' category decreased by 173 businesses in 2012-13, with an average decrease of 76.2% over the three years, however these large percentage changes reflect the much smaller business counts in this size category.

Table 4. Comparison of employment size range allocation for business entries, Total Number of Entries
Size Category	Payees Data	New Employment Derivation Method	Difference	% Difference
2010-11
1-4	76 390	84 737	8 347	10.9
5-19	15 778	9 273	-6 505	-41.2
20-199	2 804	1 334	-1 470	-52.4
200+	469	97	-372	-79.3
Total Employing	95 441	95 441	-	-
2011-12
1-4	77 042	84 605	7 563	9.8
5-19	15 410	9 580	-5 830	-37.8
20-199	2 729	1 352	-1 377	-50.5
200+	436	80	-356	-81.7
Total Employing	95 617	95 617	-	-
2012-13
1-4	61 631	68 054	6 423	10.4
5-19	13 519	8 499	-5 020	-37.1
20-199	2 532	1 302	-1 230	-48.6
200+	256	83	-173	-67.6
Total Employing	77 938	77 938	-	-
- nil or rounded to zero (including null cells)

ANALYSIS OF EXITS

14 The impact on businesses exits was slightly different to the impact on business entries, with 8,297 or 2.8% of business exits being impacted by the derived employment method in 2012-13. The number of business exits increased in the '1-4' employment size range for each of the three years analysed, by an average of 11.5%. This result reflects higher business counts in the '1-4' business size range, based upon the new derived employment method and therefore business exits also reflect this higher ratio. There was a corresponding decrease in the number of business exits in the '5-19', '20-199' and '200+' categories, consistent with the results for business entries and total business stock.

Table 5. Comparison of employment size range allocation for business exits, Total Number of Exits
Size Category	Payees Data	New Employment Derivation Method	Difference	% Difference
2010-11
1-4	48 254	54 070	5 816	12.1
5-19	14 548	10 676	-3 872	-26.6
20-199	3 734	1 989	-1 745	-46.7
200+	338	139	-199	-58.9
Total Employing	66 874	66 874	-	-
2011-12
1-4	48 175	53 861	5 686	11.8
5-19	14 253	10 595	-3 658	-25.7
20-199	3 769	1 947	-1 822	-48.3
200+	336	130	-206	-61.3
Total Employing	66 533	66 533	-	-
2012-13
1-4	53 800	59 479	5 679	10.6
5-19	15 375	11 644	-3 731	-24.3
20-199	3 684	1 961	-1 723	-46.8
200+	382	157	-225	-58.9
Total Employing	73 241	73 241	-	-
- nil or rounded to zero (including null cells)

CONCLUSION FOR USERS

15 There has been a relatively modest overall impact on the number of businesses allocated to the various employment size categories resulting from the introduction of the derived employment method (110,451 business or 5.3%). The impact is consistent across existing businesses, business entries, business exits and consistent across time.

16 In light of these results, the ABS does not recommend comparing employment based business size counts within this June 2009 to June 2013 release of CABEE, with earlier releases.