8165.0 - Counts of Australian Businesses, including Entries and Exits, Jun 2010 to Jun 2014 Quality Declaration 
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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 and the previous edition of Counts of Australian Businesses, including Entries and Exits (CABEE). Prior to the previous 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 113,147 of the total 2,100,162 businesses (5.4%) changing employment size categories for the 2013-14 financial year.
  • The majority of this movement was businesses moving from the:
      • '5-19' range to the '1-4' range (69,414 businesses)
      • '20-199' range to the '5-19' range (34,770 businesses)
  • The 'Accommodation and Food Services' and 'Retail Trade' industries exhibited the greatest percentage movement in numbers (15,553 - 18.2% and 14,098 - 10.5% respectively).


TOTAL IMPACT ON BUSINESS SIZE RANGES

5 Table 1 shows that the bulk of total movement (92.1%) is due to businesses moving from the '5-19' to the '1-4' employment size range (69,414 businesses) and businesses moving from the '20-199' to '5-19' employment size range (34,770 businesses).

6 A small number of businesses moved from the '1-4' to '200+' range (113 businesses) and also from the '200+' range to the '1-4' (597 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 2013-14 financial year and showed minimal relative change when entries were excluded from the analysis.

Table 1. Impact upon business size range - derived employment method: 2013-14

Number of
businesses
changing
size
Movements
Direction of Movement
no.
%

Did not change categories
1 987 015
94.6
Moved from (1-4 to 5-19)
2 500
0.1
Moved from (1-4 to 20-199)
1 422
0.1
Moved from (1-4 to 200+)
113
-
Moved from (5-19 to 1-4)
69 414
3.3
Moved from (5-19 to 20-199)
64
-
Moved from (5-19 to 200+)
7
-
Moved from (20-199 to 1-4)
1 891
0.1
Moved from (20-199 to 5-19)
34 770
1.7
Moved from (20-199 to 200+)
11
-
Moved from (200+ to 1-4)
597
-
Moved from (200+ to 5-19)
59
-
Moved from (200+ to 20-199)
2 299
0.1
Total Movement
113 147
5.4
Total
2 100 162
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, 2012-13 and 2013-14. The '1-4' employment size range increased in each of the four years analysed (2011, 2012, 2013, 2014) 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 2,824 businesses were categorised to smaller size ranges on the basis of the revised methodology (See Table 2, 2013-14).

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
-
-

2013-14

1-4
503 309
571 176
67 867
13.5
5-19
232 071
199 915
-32 156
-13.9
20-199
84 575
51 688
-32 887
-38.9
200+
6 438
3 614
-2 824
-43.9
Total Employing
826 393
826 393
-
-

- 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 (18.2%). In this industry, 45.4% of the changes were from the '5-19' to '1-4' range and 48.6% were from the '20-199' to '5-19' employment size range.

10 Approximately 8.0% of businesses in the 'Administrative and Support Services' industry were subject to a change in business size range, with 7.3% changing from the '200+' range to the '20-199' range. Similarly, 8.4% of businesses in the 'Public Administration and Safety' industry had a change in their business size and 8.9% of these changes were from the '200+' category to the '20-199' category.

11 The least affected industry was 'Financial and Insurance 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: 2013-14

Industry
Code
Label
Total
Movement
% of
businesses
changing
size

AAgriculture, Forestry and Fishing
8 513
4.6
BMining
563
6.8
CManufacturing
6 699
8.0
DElectricity, Gas, Water and Waste Services
402
6.8
EConstruction
14 997
4.4
FWholesale Trade
4 467
5.9
GRetail Trade
14 098
10.5
HAccommodation and Food Services
15 553
18.2
ITransport, Postal and Warehousing
4 378
3.5
JInformation, Media and Telecommunications
886
4.6
KFinancial and Insurance Services
4 013
2.3
LRental, Hiring and Real Estate Services
5 450
2.4
MProfessional, Scientific and Technical Services
8 767
3.5
NAdministrative and Support Services
6 304
8.0
OPublic Administration and Safety
616
8.4
PEducation and Training
2 134
8.1
QHealth Care and Social Assistance
5 270
4.7
RArts and Recreation Services
1 422
5.4
SOther Services
7 127
8.1
XCurrently Unknown
1 488
3.4
All Industries
113 147
5.4




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 2013-14 financial year (284,153), approximately 3.6% or 10,273 were impacted by the new employment derivation. The '1-4' employment size range increased by approximately 10.6% across the four 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 384 businesses in 2013-14, with an average decrease of 75.8% over the four 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
-
-

2013-14

1-4
73 779
82 021
8 242
11.2
5-19
16 751
10 546
-6 205
-37.0
20-199
3 339
1 686
-1 653
-49.5
200+
515
131
-384
-74.6
Total Employing
94 384
94 384
-
-

- nil or rounded to zero (including null cells)



ANALYSIS OF EXITS

14 The impact on businesses exits was slightly lower than for business entries, with 7,274 or 2.8% of business exits being impacted by the derived employment method in 2013-14. The number of business exits increased in the '1-4' employment size range for each of the four years analysed, by an average of 10.9%. 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
-
-

2013-14

1-4
50 077
54 745
4 668
9.3
5-19
13 638
10 720
-2 918
-21.4
20-199
3 659
2 075
-1 584
-43.3
200+
368
202
-166
-45.1
Total Employing
67 742
67 742
-
-

- 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 (113,147 business or 5.4%). 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 2010 to June 2014 release of CABEE, with releases earlier than the June 2009 to June 2013 release of CABEE.