Labour Costs, Australia methodology

1 This release contains statistics from the Major Labour Costs (MLC) survey, which is a sample survey of employers conducted for the 2015-16 financial year. The survey is designed to obtain information from employers about the main labour costs incurred as a consequence of employing labour.

2 The MLC survey collects data on the following labour cost components:

• employee earnings;
• employer-funded contributions to superannuation;
• payroll tax;
• workers’ compensation costs; and
• fringe benefits tax.
   

3 Costs were measured on a cash accounting basis, net of any reimbursements, subsidies or rebates.

4 Descriptions of the underlying concepts of MLC statistics, and the sources and methods used in compiling these estimates are presented in Labour Statistics: Concepts, Sources and Methods (cat. no. 6102.0.55.001).

5 The reference period covered by the collection was, in general, the 12 months ending 30 June 2016. Where businesses were unable to supply information on this basis, an accounting period for which data can be provided was used for data other than those relating to employment estimates.

6 The reference period for fringe benefits tax is for the 12 months ending 31 March 2016.

7 Although financial estimates relate to the full twelve months of the reference period, employment estimates relate to the last pay period ending on or before 30 June 2016.

8 Financial data incorporate all units in scope of the MLC survey that were in operation at any time during the year.

9 The scope of the survey consisted of all employing businesses in Australia (private and public sectors), except:

• members of the Australian permanent defence forces;
• enterprises primarily engaged in agriculture, forestry and fishing (except for public sector);
• employees of private households;
• employees of overseas embassies, consulates, etc.; and
• employees based outside Australia.

10 Also excluded are the following persons who are not regarded as employees for the purposes of this survey:

• employees on workers' compensation who are not paid through the payroll;
• directors who are not paid a salary;
• proprietors/partners of unincorporated businesses;
• self-employed persons such as subcontractors, owner/drivers, consultants;
• persons paid solely by commission without a retainer; and
• employees paid under the Australian Government's Paid Parental Leave Scheme.
   

11 A sample of approximately 7,000 employer units is selected from the ABS Business Register (ABSBR) to ensure adequate representation of the population. The statistical unit for the survey comprises all the activities of an employer in a particular state or territory based on the Type of Activity Unit. For further information on the statistical unit see paragraphs 12 to 19.

12 The Economic Units Model is used by the ABS to determine the structure of Australian businesses and other organisations. The model consists of:

• The Enterprise Group (EG)
• Legal Entities (LEs)
• Type of Activity Units (TAUs)
• Location Units.
   

13 The EG and LE are institutional units and the TAU and Location are producing units.

14 The LE and the TAU are the main institutional and producing units used by the ABS to produce statistical outputs.

15 Diagram 1 illustrates the nature of the relationships between the different units within the model.

* The legal entity (LE) statistical unit is generally equivalent to a single Australian Business Number registration

16 The Legal Entity (LE) is an institutional unit covering all the operations in Australia of an entity which possesses some or all of the rights and obligations of individual persons or corporations, or which behaves as such in respect of those matters of concern for economic statistics. Examples of legal entities include companies, partnerships, trusts, sole (business) proprietorships, government departments and statutory authorities. Legal entities are institutional units. In most cases the LE is equivalent to a single Australian Business Number (ABN) registration.

17 The Enterprise Group (EG) is an institutional unit that covers all the operations within Australia's economic territory of legal entities under common control. Control is defined in Corporations legislation. Majority ownership is not required for control to be exercised.

18 The Type of Activity Unit (TAU) comprises one or more Legal Entities, sub-entities or branches of a Legal entity that can report productive and employment activities. TAUs are created if accounts sufficient to approximate Industry Value Added (IVA) are available at the Australian and New Zealand Standard Industrial Classification (ANZSIC) subdivision level.

19 A Location is a producing unit comprised of a single, unbroken physical area from which an organisation is engaged in productive activity on a relatively permanent basis, or at which the organisation is undertaking capital expenditure with the intention of commencing productive activity on a relatively permanent basis at some time in the future.

20 Various classifications are applied to the units in the ABS Economic Units Model. The main classifications applied are:

• Australian and New Zealand Standard Industrial Classification (ANZSIC)
• Type of Legal Organisation (TOLO)
• Type of Business Entity (TOBE)
• Standard Institutional Sector Classification of Australia (SISCA)
• Public / Private classification
   

21 ANZSIC is used to classify the industry in which the TAU has productive activity. Further information on this classification can be found in Australian and New Zealand Standard Industrial Classification (ANZSIC), 2006 (cat. no. 1292.0).

22 SISCA provides a framework for dividing the Australian economy into institutional sectors. Further information on this classification can be found in Standard Economic Sector Classifications of Australia (SESCA), 2008 (cat. no. 1218.0).

23 The ABSBR is a list of businesses and organisations operating in Australia and is based on the Australian Business Register (ABR). Organisations are included on the ABR when they register for an ABN. The Commonwealth government requires all government departments and agencies to make use of the ABR to reduce government imposed reporting load, and to use the ABN as the primary reference number for all dealings between government and business. The ABSBR is used to create frames for the various business surveys run by the ABS.

24 The results of these statistics are based, in part, on ABR data supplied by the Registrar to the ABS under A New Tax System (Australian Business Number) Act 1999 which requires that such data is only used for the purpose of carrying out functions of the ABS. No individual information collected under the Census and Statistics Act 1905 is provided back to the Registrar for administrative or regulatory purposes. Any discussions of data limitations or weaknesses is in the context of using the data for statistical purposes, and is not related to the ability of the data to support the ABR's core operational requirements. Legislative requirements to ensure privacy and secrecy of the data have been followed. Only people authorised under the Australian Bureau of Statistics Act 1975 have been allowed to view data about any particular firm in conducting this survey. In accordance with the Census and Statistics Act 1905, results have been confidentialised to ensure that they are not likely to enable identification of a particular person or organisation.

25 It is not practicable for the ABS Economic Units Model to be applied to all ABR registrants and it is therefore organised into two parts: the profiled population, and the non-profiled population.

26 Profiled Population: Businesses and other organisations which are considered sufficiently complex and significant, are profiled according to the Economic Units Model. These enterprise groups typically have multiple legal entities, multiple TAUs and are among the largest contributors within industries.

27 Non-Profiled population: Businesses and other organisations with less complex structures. They are regarded as an enterprise group with a single legal entity and a single TAU in accordance with the Economic Units Model. Information for units in the non-profiled population is largely sourced from the ABR.

28 The two populations are mutually exclusive and cover all organisations in Australia which have registered for an ABN.

29 Care should be taken when comparing estimates in this release with estimates from previous MLC releases. The MLC survey is designed to produce an accurate 'snapshot' of data at a point in time. It should not be used to compare estimates over time, due to factors such as changes in methodology, accounting standards and sample composition.

30 Information about the main costs incurred by employers as a consequence of employing labour is used for many purposes including monitoring the cost of labour, wage determination, and for employment, prices and income policy development. In addition to MLC, the ABS produces earning statistics from a number of different sources (both household and employer surveys) which provide a wide range of data for a variety of purposes. The decision on which data to draw upon depends on the purpose and type of analysis to be undertaken. For further information on these other sources, please refer to the feature article Understanding Earnings in Australia Using ABS Statistics published in Employee Earnings, Benefits and Trade Union Membership, Australia, August 2013 (cat. no. 6310.0).

31 Where figures have been rounded, discrepancies may occur between totals and the sums of the component items.

32 The following publications contain related information:

• Australian Labour Market Statistics (cat. no. 6105.0);
• Characteristics of Employment, Australia (cat. no. 6333.0);
• Employment and Earnings, Public Sector, Australia (cat. no. 6248.0.55.002) - issued annually;
• Labour Force, Australia (cat. no. 6202.0) - issued monthly; and
• Labour Statistics: Concepts, Sources and Methods (cat. no. 6102.0.55.001).
   

1 As the estimates in this release are based on information relating to a sample of employers, rather than a full enumeration, they are subject to sampling variability. That is, they may differ from the estimates that would have been produced if the information had been obtained from all employers. This difference, called sampling error, should not be confused with inaccuracy that may occur because of imperfections in reporting by respondents or in processing by the ABS. Such inaccuracy is referred to as non-sampling error and may occur in any enumeration whether it be a full count or a sample. Efforts have been made to reduce non-sampling error by careful design of questionnaires, detailed checking of returns and quality control of processing.

2 The sampling error associated with any estimate can be estimated from the sample results. One measure of sampling error is given by the standard error which indicates the degree to which an estimate may vary from the value which would have been obtained from a full enumeration (the 'true value').

3 Another measure of the sampling error is the relative standard error (RSE), which is obtained by expressing the standard error as a percentage of the estimate. The RSE is a useful measure in that it provides an immediate indication of the sampling error in percentage terms, and this avoids the need to refer also to the size of the estimate. RSEs for the published earnings estimate for sector and states and territories are shown in the tables below.

4 To illustrate, the estimate of earnings during 2015-16 for New South Wales was $219.1 billion. The RSE of this estimate is shown as 2.6%, giving a standard error of approximately $5.7 billion. Therefore, there are two chances in three that a full enumeration would have given an estimate in the range of $213.4 billion to $224.8 billion and about 19 chances in 20 (i.e. a confidence interval of 95%) that it would be in the range $207.7 billion to $230.5 billion.