Monthly Employee Earnings Indicator methodology

Most businesses included on the ABSBR are in the non-profiled population. These businesses usually have simple structures that are suitable for ABS statistical purposes at the Australian Business Number (ABN) level. Businesses included in the non-profiled population have homogeneous activity (i.e., operate predominantly in one industry sub-division), however, they can have large employment.  For the non-profiled population, one ABN equates to one business.

For some businesses, the ABN unit is not suitable for ABS economic statistics purposes. The ABS maintains its own economic units structure through direct contact with businesses and these businesses constitute the profiled population which consists of large, complex and diverse groups of businesses. This population is represented by Type of Activity Units (TAUs) which consist of one or more business entities, sub entities or branches of a business that can be grouped according to production activity and can report a minimum set of data items. These TAUs are classified according to the industry of the main activity. The relationship between TAUs and their associated legal entities (ABNs) may be one-to-one, many-to-one, or one-to-many.

The initial step in converting transactions to data that can be used for statistical purposes is to convert transactions to daily pay events for individual employees.

The STP data are reported on a cash basis (the time when the payment was made) rather than an accrual basis (the time when the payment was earned). Production of real time estimates of labour market activity require the conversion of STP data from a cash basis to an accrual basis. This is done through a “calendarisation” method. This method breaks down all records to a common period (daily), which then allows the data to be aggregated to a longer period (e.g., calendar month).

There are some types of payments that cannot be attributed to a defined pay cycle period, these are shown when the payment is made. For the data included in this release, the individual pay events are aggregated to a calendar month reference period.

STP reporting may be incomplete for a reference period for a range of reasons including, but not limited to:

• Different business reporting habits
• Different pay cycle period reporting.

To account for incomplete reporting by an employer during the reference period, imputation is applied when an employer has reported for some employees or part reported during the reference month. Employers who have not reported at all during the reference period are accounted for in a later process (weight adjustment).

Imputation occurs if an employee has not yet had payment data reported for the period and a termination date and/or a termination payment does not exist. It is assumed that their payment status (pay frequency) is consistent with their previous reporting record. The median of a previous calculated daily rate will be imputed for the reference period, up to 42 days forward.

No imputation is applied for new employees without historical payment information, until a pattern can be determined. This means that there can be a lag before a new employee contributes to the estimates (after their initial pay period). The lag is longer for new jobs with employers who have less frequent payment and reporting periods. No adjustment is applied to account for this new job lag.

Imputation is only applied to in scope earnings payments (wages and salaries cash). Other earnings payments such as lump sum leave, termination and redundancy payments are not imputed.

Once calendarisation and imputation are applied, the employee level data for the reference period is aggregated to the ABN used by the employer for STP reporting. This forms the core employer level data that are transformed to statistical unit level data.

For the non-profiled population (i.e. businesses with a simple structure), the ABN is directly mapped to the statistical unit.

For the profiled population (i.e. businesses with a complex structure), there can be many ABNs and the mapping of employer level data to the statistical unit is more complex. ABN level data is aggregated to the highest level of the ABS economic units model, the Enterprise Group (EG). The EG level data are then apportioned into one or more TAUs using a proration factor based on total wages and salaries and ABSBR employment.

All wages and salaries for statistical units in the non-profiled population (or ABN units) are attributed to the main state of operation of that business. For complex businesses (or TAUs) the employee earnings are further attributed to each state and/or territory in which they operate.

Statistical units are stratified by state, industry and employment size.  When employing businesses do not report to STP during the reference period (i.e., full non-response), a non-response adjustment (weighting) is applied to the data received from responding businesses to fully account for the employee earnings of the target population (all employing businesses).

Statistical unit level data are aggregated to the output classifications of state/territory, industry division, employment size groups and sector.

FBT adjustment

Towards the end of the financial year, unadjusted STP data includes higher than usual changes in total wages and salaries paid. Most employers report lumped fringe benefits tax (FBT) payment amounts for eligible employees at the end of the financial year as part of FBT reporting obligations (particularly common in the Health care and social assistance industry). The inclusion of unadjusted FBT data in May and June reference months would significantly distort the wages and salaries paid for those months. Therefore, to remove the effect of the reporting arrangements, the ABS creates an adjustment factor to accrue the FBT amounts across all months over the relevant financial year. The adjustment is based at the stratum level (state/territory, industry, employment size).

Calendar adjustment

To improve the comparability of estimates between calendar months, an adjustment has been applied to account for the differing number of days in each month. The adjustment standardises all months to an average length of days and is known as calendar adjustment. This type of adjustment is usually done as part of seasonal adjustment, however the statistics in this release are not yet fully seasonally adjusted.

Percentage change movements within this release are calculated from rounded level estimates.

STP is a dynamic administrative data source, hence these estimates may be subject to the following sources of error:

• Conceptual misalignment - The Australian tax system is purpose-built and complex, and in some cases, it is difficult to determine how a particular STP item should be used to describe impact on wages and salaries. While all care is taken, some income items are subject to this type of validity error. Coherence with other sources indicates that this has a low impact on the aggregates.
• Reporting error - This is likely to be present in both employee and employer information used. While only the most significant reporting errors are identified or adjusted, some reporting errors may remain. These errors are considered to have a low impact on the aggregate series, given their coherence with other similar statistics, and can also be corrected through subsequent reporting.

Changes to the structure of profiled businesses may also cause error in the data due to the lag between real-world change and in applying the updates to the ABSBR.

Revisions are a change in the value of a published value and may arise due to a variety of reasons. They reflect both the complexity of measurement, and the need to balance precision and timeliness to maximise the utility of the indicator.

Revisions will occur to the MEEI due to:

• Revisions to the source STP data including receipt of updated or more complete data.
• Refinements to decisions made around the treatment of data anomalies in the series.
• Quarterly frame updates including updates to the structure of profiled businesses.
• Implementation of methodological and process improvements.

The methods adopted for the MEEI have been aligned as closely as possible to similar earnings statistics produced by the ABS. Changes in wages and salaries in these estimates may differ to other statistics due to differences in the concepts, scope and methodology used. For example, these estimates:

• contain a combination of administrative data collected for taxation purposes from employers, whereas other ABS data sources are compiled for the explicit purpose of producing statistics;
• exclude unreported cash in hand payments which may be included in household and business surveys;
• are not yet adjusted with respect to seasonality, unlike other Labour market releases; and
• do not account for hours worked, hours paid for, job attachment where a payment has not been made, or jobholders temporarily stood down without pay, or employment status of employees (i.e., full time or part time), which are considerations in other Labour statistical survey measures.

Recording wages when they are earned, accrued or incurred regardless of when payment is made or received.

A register of all Australian businesses and organisations maintained by the Australian Bureau of Statistics (ABS) for the purpose of producing statistical frames and business demography outputs. It contains identifying and classificatory data for each business and organisation.

Information to populate the ABS Business Register is largely sourced from the Australian Business Register.

The ABS Business Register consists of two subpopulations, the profiled population and the non-profiled population. The ABS Business Register uses an economic units model to describe the characteristics of businesses and the structural relationships between related businesses.

A unique identifier. To be entitled to an Australian Business Number (ABN), an organisation must be one or more of the following:

• a company registered under the Corporations Act 2001
• an entity carrying on an enterprise in Australia
• a government entity
• a non-profit sub-entity for Goods and Services Tax purposes
• a superannuation fund.

A non-resident entity may be entitled to an ABN if they are carrying on an enterprise in Australia and/or, in the course of carrying on an enterprise, the entity makes sales that are connected with Australia.

The data store containing details about businesses and organisations that have registered for an Australian Business Number. More information can be found on the ABR website.

Recording the wage payment in the pay period when the payment was received by the employee.

Persons who work for a private or public sector employer, where the employee has received payment in the reference month through Single Touch Payroll (STP) enabled software and reported to the Australian Taxation Office (ATO).

An organisation with an Australian Business Number that provides employment income to one or more people, and reports through the ATO STP system.

An institutional unit covering 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. An enterprise group may have one or more TAUs.

Based on a business’ employing locations sourced from the ABR or STP data.

A homogenous grouping of economic activities undertaken to produce goods and services. The Australian and New Zealand Standard Industrial Classification is used to classify an entity to an industry based on its dominant activity.

The broadest grouping of industries within the Australian and New Zealand Standard Industrial Classification. The main purpose of the industry division level is to provide a limited number of categories, which give a broad overall picture of the economy. There are 19 mutually exclusive divisions. For more information see the Australian and New Zealand Standard Industrial Classification.

The vast majority of businesses included on the ABSBR are in the non-profiled population. Most of these businesses have simple structures that are suitable for ABS statistical purposes at the Australian Business Number (ABN) level. For the non-profiled population, one ABN equates to one business.

For a small number of businesses, the ABN unit is not suitable for ABS economic statistics purposes and the ABS maintains its own economic units structure through direct contact with businesses. These businesses constitute the profiled population and are represented by Type of Activity Units (TAUs). This population consists of large, complex and diverse groups of businesses (known as enterprise groups).

The Public/Private classification divides the economy into two sectors: Public (government units and units controlled by government); and Private (all other units). For more information, see the Standard Economic Sector Classifications of Australia (SESCA) release.

The Single Touch Payroll (STP) system sends taxation and superannuation information from a business' STP-enabled payroll or accounting software to the ATO as a business runs its payroll.

Termination dates associated with each employee as reported through Single Touch Payroll.

A TAU consists of one or more business entities, sub entities or branches of a business that can be grouped according to production activity, and can report a minimum set of data items. TAUs are classified according to the industry of their main activity. The relationship between TAUs and their associated legal entities (ABNs) may be one-to-one, many-to-one, or one-to-many.

Wages and salaries include wages, salary payments and allowances, labour hire payments and foreign income, as well as the value of payments in kind (where a fringe benefit amount is recorded). Bonuses are typically included where they are reported in the same field as normal payments. Wages are calculated as gross amounts, prior to taxation and deductions.

Wages exclude payments to employee's superannuation as well as severance and termination payments. Wages are only available for payroll jobs and do not include income from own businesses or other sources.