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19.1 This component consists of the value of entitlements earned by employees from their employers for services rendered during the accounting period. It covers wages and salaries received by employees in cash and in kind, changes in provisions for future employee entitlements (although estimates of these are not yet included in the ASNA), and employers' social contributions.
19.2 Employees are defined as all persons engaged in the activities of incorporated business units, in the production of general government services and the services of non-profit organisations, members of the defence forces, and all persons engaged in the activities of unincorporated enterprises except the proprietors and unpaid members of the family. Trainee teachers are deemed to be outside the labour force, and therefore payments to them are excluded from wages and salaries and included instead as social assistance benefits.
19.7 Annual estimates for wages and salaries for Australia, and by State, are an aggregation of the quarterly estimates. Industry estimates for Australia are derived annually from the balanced S-U tables, except for the latest financial year, for which estimates are obtained by extrapolation using movements based on the quarterly data sources outlined below. Wages and salaries in relation to annual and long service leave are generally recorded on a payments basis. However, where long service leave arrangements are organised through separately constituted industry funds, such as those for the building and construction industry, it is the employers' payments into those funds which are included in compensation of employees. In effect, such long service leave funds are treated in a similar fashion to superannuation funds.
19.12 Estimates of wages and salaries are made for each State and Territory by summing the following elements:
19.13 For quarters and years up to and including 1980-81, estimates for civilian wages and salaries paid in cash were based principally on monthly payroll tax returns and government returns, with an adjustment for businesses exempt from payroll tax. Estimates for the quarters of 1981-82 and 1982-83 were based on data from the interim Quarterly Survey of Earnings and numbers of wage and salary earners from the Labour Force Survey (LFS). Estimates for quarters from September quarter 1983 are based on the large scale Survey of Employment and Earnings (SEE) together with quarterly information from the LFS.
19.14 The SEE collects employment and earnings data from a sample of both private employers and public sector units (prior to September quarter 1988 the collection covered all government sector units rather than a sample). Excluded from the survey are employees in the private sector primarily engaged in agriculture, forestry and fishing; persons employed in private households; employees of foreign embassies, consulates etc. in Australia; employees based outside Australia; and members of the Australian permanent defence forces. As the SEE is an employer based survey, it provides data on the number of jobs held and earnings derived from jobs held. However, due to unavoidable delays in recording new businesses on the ABS business register (from which the SEE sample is drawn), and other deficiencies in the coverage of the business register, the SEE tends to understate total employment and earnings. The extent of the coverage problems was significantly reduced from December quarter 1996 when adjustments were made to the whole time series to allow for missing businesses and an ongoing new business provision was introduced.
19.15 The LFS is based on a sample of dwellings, and provides information on the number of people in jobs (as opposed to SEE which provides estimates for the number of jobs held). All civilians aged 15 and over are represented in the sample except for diplomatic personnel of foreign governments and other foreign residents in Australia. Although the LFS does not provide the information on earnings required for national accounts purposes, it provides a more complete estimate of the number of wage and salary earners than does the SEE. As a result, the employment and earnings estimates obtained from the SEE are used in conjunction with the LFS estimates (and various other sources) to obtain an estimate of total wages and salaries on a quarterly basis.
19.16 From 1983-84, civilian wages and salaries paid in cash are estimated in the following way. Estimates of farm wages and salaries and non-farm 'unrecorded' wages and salaries are added to wages and salaries derived from the SEE. Farm wages and salaries are derived from the Agricultural Finance Survey (AFS). For those years when the AFS was not conducted, estimates were interpolated using other indicators such as Australian Bureau of Agricultural and Resource Economics indexes of prices paid for hired labour. Non-farm 'unrecorded' wages and salaries are estimated as the difference between the number of employee jobs from the SEE and the number of non-farm employed wage and salary earners from the LFS (adjusted for multiple jobholding, employees on strike, employees on worker's compensation not paid through the payroll, employees on unpaid absences and employees overseas), multiplied by the average wage rate from SEE. The adjustment for multiple jobholding converts the LFS employment estimate to a jobs basis which is consistent with the SEE number of jobs measure. The estimates for multiple jobholding are based on data from the periodic Survey of Multiple Jobholding which is conducted as a supplementary component of the Labour Force Survey.
19.17 Salaries and allowances for members of the defence forces are derived from annual information supplied by the Department of Defence and allocated to quarters using data for defence wages paid, from the Department of Finance and Administration ledger. The Department of Finance and Administration is also the source for estimates of wages and salaries paid to Australian residents employed overseas in Australian embassies and consulates. The value of income paid in kind is estimated using annual data relating to the value of fringe benefits which are supplied by the Australian Taxation Office and allocated to quarters using linear interpolation and extrapolation. Labour income to and from overseas is obtained from the balance of payments statistics.
19.18 SNA93 is explicit in recommending that compensation of employees be measured on an accrual basis. In principle, this requires that the total cost of employee compensation be reflected in the periods in which the employee provided services to the employer. Provisions for employee entitlements which qualify as wages and salaries include provisions for long service leave and annual leave. An important aspect of accrual accounting is that wages and salaries should be recorded on a time worked basis rather than on the number of paydays in an accounting period. The methods used to implement this treatment vary over the time period covered by the estimates for wages and salaries. In the quarterly national accounts, data for compensation of employees for all periods are published on a basis adjusted for pay periodicity.
19.19 From the September quarter 1996, a significant step in the direction of accrual accounting was implemented in the SEE, with the collection of data to enable accurate pay-day adjustment of earnings to a 'payable' basis. A pay-day adjustment based on data from the Pay Periodicity Survey had previously been applied in the seasonal adjustment process, but not in the derivation of original estimates. This survey was last conducted in respect of September quarter 1992, and adjustment factors for subsequent quarters were calculated using these benchmark data and calendar information. Pay Periodicity Surveys were previously conducted in respect of the September quarter 1984 and the September quarter 1988. Prior to the introduction of the SEE, pay periodicity factors were derived using regression analysis.
19.20 Quarterly estimates of employers' social contributions are usually obtained for each State and Territory by distributing the annual estimates according to the quarterly distribution of private wages and salaries and public civilian wages and salaries. For incomplete years, the quarterly estimates of employers' social contributions are generally calculated by using the proportion of social contributions to civilian wages and salaries in the previous year adjusted as appropriate for any expected change in this proportion. The quarterly allocation of employers' social contributions has been adjusted for some recent years to allow for the impact of the introduction of the Superannuation Guarantee Levy legislation.