6348.0.55.001 - Labour Costs, Australia, 2002-03  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 11/06/2004   
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1 This publication presents estimates obtained from the Major Labour Costs Survey, which is a sample survey of employers conducted for the 2002-03 financial year. The survey was designed to obtain information from employers about the main labour costs incurred as a consequence of employing labour. Similar surveys were conducted annually in respect of the financial years 1985-86 to 1991-92, then in 1993-94 and 1996-97.

2 The Major Labour Costs Survey collects data on the following labour cost components:

  • employee earnings
  • superannuation
  • payroll tax
  • workers’ compensation
  • fringe benefits tax.

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

4 A number of other labour costs have not been covered by this survey. These include training; costs associated with employee welfare services; and recruitment. With the exception of training costs, these items are not considered to make a significant contribution to total labour costs.

5 Training costs were collected in the ABS's Training Expenditure and Practices Survey, conducted for financial year 2001-02, and in the earlier Training Expenditure Survey conducted for September quarters of 1989, 1990, 1993 and 1996. Costs covered in these surveys are for structured training provided by employers. For information see Employer Training Expenditure and Practices, Australia (cat. no. 6362.0).


6 Descriptions of the underlying concepts of Australia's labour costs statistics, and the sources and methods used in compiling these estimates, are presented in Labour Statistics: Concepts, Sources and Methods, 2001 (cat. no. 6102.0) which is also available on this web site (About Statistics - Concepts and Classifications).


7 The survey covered all employing organisations in Australia (public and private sectors) except:

  • enterprises primarily engaged in Agriculture, forestry and fishing
  • private households employing staff
  • foreign embassies, consulates, etc.

8 The employees of employers covered in the survey are in scope if they received pay for any part of the year, except:
  • members of the Australian permanent defence forces
  • employees based outside Australia
  • employees on workers' compensation who are not paid through the payroll.


9 The sample for the 2002-03 Major Labour Costs Survey was selected from the ABS Business Register. A sample of approximately 7,500 employer units was selected to ensure adequate industry and state/territory representation. Of these, approximately 5,600 units were in the private sector and 1,900 units were in the public sector.

10 The statistical unit for the survey comprises all the activities of an employer in a particular state or territory based on the Australian Business Number (ABN) unit or Type of Activity Unit (TAU) (see paragraphs 14-18). Each statistical unit is classified to an industry which reflects the predominant activity of the business. The statistical units were stratified by state and territory, industry, and employment size. For the public sector, level of government and general government/public enterprise status were also used as stratification variables. Within each stratum, statistical units were selected with equal probability.


11 Each statistical unit selected in this survey is classified to an industry which reflects the primary activity of the organisation. The industry classification is the Australian and New Zealand Standard Industrial Classification (ANZSIC); for more details refer to Australian and New Zealand Standard Industrial Classification, 1993 (cat. no. 1292.0).


12 The ABS uses an economic statistics units model on the ABS Business Register to describe the characteristics of businesses (and other organisations, including government departments), and the structural relationships between related businesses. The units model is also used to break groups of related businesses into relatively homogeneous components that can provide data to the ABS.

13 In mid 2002, to better use the information available as a result of The New Tax System, the ABS changed its economic statistics units model. The new units model allocates businesses to one of two sub-populations. The vast majority of businesses are in what is called the ATO Maintained Population, while the remaining businesses are in the ABS Maintained Population. Together, these two sub-populations make up the ABS Business Register population.


14 Most businesses and organisations in Australia need to obtain an Australian Business Number (ABN), and are then included on the ATO Australian Business Register. Most of these businesses have simple structures; therefore the unit registered for an ABN will satisfy ABS statistical requirements. For these businesses, the ABS has aligned its statistical units structure with the ABN unit. The businesses with simple structures constitute the ATO Maintained Population, and the ABN unit is used for these businesses as the statistical unit for all economic collections.


15 For the population of businesses where the ABN unit is not suitable for ABS statistical requirements, the ABS maintains its own units structure through direct contact with the business. These businesses constitute the ABS Maintained Population. This population consists typically of large, complex and diverse businesses. The new statistical units model described below has been introduced to cover such businesses.

16 Enterprise Group: This is a unit covering all the operations in Australia of one or more legal entities under common ownership and/or control. It covers all the operations in Australia of legal entities which are related in terms of the current Corporations Law (as amended by the Corporations Legislation Amendment Act 1991), including legal entities such as companies, trusts, and partnerships. Majority ownership is not required for control to be exercised.

17 Enterprise: The enterprise is an institutional unit comprising (i) a single legal entity or business entity, or (ii) more than one legal entity or business entity within the same Enterprise Group and in the same institutional sub-sector (ie they are all classified to a single Standard Institutional Sector Classification of Australia sub-sector).

18 Type of Activity Unit (TAU): The TAU comprises one or more business entities, sub-entities or branches of a business entity within an Enterprise Group that can report production and employment data for similar economic activities. When a minimum set of data items is available, a TAU is created which covers all the operations within an industry sub-division (and the TAU is classified to the relevant sub-division of ANZSIC). Where a business cannot supply adequate data for each industry, a TAU is formed which contains activity in more than one industry sub-division.

19 For more information on the impacts of the introduction of the new economic statistics units model, refer to Information Paper: Improvements in ABS Economic Statistics [Arising from The New Tax System], (cat. no. 1372.0).


20 Earnings of employees in the Major Labour Costs Survey are defined more broadly than in other ABS surveys, such as the Survey of Average Weekly Earnings. Earnings in the Major Labour Costs Survey comprises:

  • gross wages and salaries,
  • the value of salary sacrificed (excluding fringe benefits tax),
  • the ungrossed value of fringe benefits provided by employers through arrangements other than salary sacrifice, and
  • severance, termination and redundancy payments.

21 Earnings of employees in the survey is net of amounts reimbursed for wages and salaries of employees on government employment programs, and excludes workers’ compensation paid through the payroll.


22 For the Major Labour Costs Survey superannuation costs are the total employer superannuation contributions paid during the year on behalf of employees. It excludes the value of salary sacrificed by employees in exchange for superannuation contributions. During 2002-03, legislation underlying the Superannuation Guarantee Charge (SGC) required that employers provide superannuation contributions of at least 9% of gross wages and salaries for all eligible employees. Although employers may treat the value of salary sacrificed by employees to superannuation as employer contributions under SGC obligations, in this survey such contributions are treated as earnings, and not as superannuation costs. Occasionally, surplus funds of some defined benefit superannuation schemes are used to offset the superannuation cost incurred by contributing employers in a particular time period.


23 Historically, public sector superannuation has been handled differently to that of the private sector. Public sector superannuation schemes could be either ‘fully funded’, i.e. where funds were set aside in advance to meet future liabilities, similar to most private sector schemes, or they were ‘unfunded’, i.e. met on an ‘emerging cost’ basis where costs are met only as the liability becomes due. These latter schemes were by far the most common. In 1999, changes to superannuation legislation allowed public sector employees to contribute to their choice of any registered superannuation scheme. This change was accompanied by the closure of unfunded schemes to new public sector employees. The cost for existing members of unfunded schemes is gradually diminishing.

24 In addition, Commonwealth Government and State Governments traditionally met the cost of superannuation for general government agencies directly from consolidated funds. However, since the mid 1990s these agencies are increasingly recording employer contributions in their budgets. While Commonwealth and State Governments are still required to meet their accrued liabilities from consolidated funds, the extent to which that is not offset within agency budgets is decreasing. Costs paid out of consolidated funds are not collected in the Major Labour Costs Survey.

25 By 2002-03, the budgets of virtually all public sector organisations included contributions to superannuation schemes. While predominantly on a fully funded basis, unfunded costs are still a significant component of this cost for some agencies. The differences that remain mean that estimates of public sector superannuation in this publication are not directly comparable with those of the private sector.


26 Employers whose wage and salary payments reach a specified level, as defined in each state’s or territory’s payroll tax legislation, are liable to pay this tax. Employers may claim exemptions for some categories of employees. Religious, not-for-profit and general government organisations are generally exempt from payroll tax.


27 Workers’ compensation costs comprise, in general, the costs of insurance premiums paid plus any other costs not reimbursed by insurers. Premium rates are usually determined by considering the industry of the employer and the employer’s previous claims history. Non-reimbursed costs may vary depending on the legislation which applies in each state, but can include wages and salaries, other costs such as medical and legal costs, and lump sum settlement payments. In addition, most states and territories allow very large employers to self-insure, where, except in extreme circumstances, workers’ compensation costs are borne by the employers. The direct costs of self-insurance are included in the estimates of workers' compensation costs in this publication.


28 Fringe benefits are remuneration provided to employees in the form of benefits such as goods or services - for example, use of a work car, a cheap loan, or health insurance costs. These may be provided through salary sacrifice arrangements, as part of salary packages, or through other arrangements. Fringe benefits tax (FBT) is payable on the value of benefits provided, although exemptions apply to some categories of employers (e.g.certain not-for-profit organisations) and certain benefits (e.g. laptop computers). Estimates of the ungrossed value of fringe benefits (a component of earnings) and fringe benefits tax both relate to the year ended 31 March 2003.


29 Estimates are subject to sampling and non-sampling errors. For more information refer to the Technical Note.


30 Care should be taken when comparing estimates from this survey with estimates from previous Major Labour Costs surveys because of changes in definitions and changes in treatment of certain data items.

  • Superannuation
    The 2002-03 estimates for employer superannuation costs exclude the value of contributions to superannuation funds made under an employee's salary sacrifice arrangement. These costs were included in the superannuation cost estimates for previous Major Labour Costs Surveys. For the 2002-03 Major Labour Costs Survey, employee contribution to superannuation under a salary sacrifice arrangement, along with other salary sacrifice amounts (excluding any FBT incurred), are treated as earnings.

  • Earnings
    The earnings estimates in the 2002-03 survey include, for the first time, the value of salary sacrificed.

    In the current and earlier surveys, employers reported the aggregate taxable value of fringe benefits provided to employees during the FBT year (1 April to 31 March). These amounts were obtained from an employer's FBT return for the relevant year. Where an employer had FBT exemptions (see paragraph 28 above), their FBT return would not have included the full value of fringe benefits that might have been provided. Until recently, there was no other source of information about FBT exempt fringe benefits paid to employees, which resulted in an understatement of the value of fringe benefits provided to employees in previous Major Labour Costs surveys. From 1 April 1999, all employers have been required to record the grossed-up (taxable) value of fringe benefits on payment summaries (previously known as group certificates) of employees who received relevant benefits with a total taxable value exceeding $1000. This is known as the reportable fringe benefits amount (RFBA) and must be reported regardless of an employer's exemption status with regard to FBT liabilities. The 2002-03 Major Labour Costs Survey collected the aggregate value of RFBA for each selected employer and this was used to provide more complete estimates of the value of fringe benefits paid to employees.

    In the 2002-03 survey outputs the
    ungrossed value of fringe benefits is used in the derivation of earnings, whereas the grossed up value of fringe benefits was used for this derivation in the 1996-97 survey outputs. The use of the ungrossed value of fringe benefits in the derivation of earnings provides a better conceptual measure of employee earnings. The use of the grossed up value of fringe benefits in the 1996-97 survey had the effect of overstating employee earnings for Australia by $2,779.0m or 1.3%.


31 Users may also wish to refer to the following publications which are available on request:
      Australian Labour Market Statistics (cat. no. 6354.0) - issued quarterly
      Average Weekly Earnings, States and Australia (cat. no. 6302.0) - issued quarterly
      Employee Earnings and Hours, Australia (cat. no. 6306.0) - biennial, last issued May 2002
      Employer Training Expenditure and Practices, Australia (cat. no. 6362.0) - issued for 2001-02
      Job Vacancies, Australia (cat. no. 6354.0) - issued quarterly
      Labour Force, Australia (cat. no. 6202.0) - issued monthly
      Labour Statistics: Concepts, Sources and Methods (cat. no. 6102.0) - also available free of charge from the ABS website
      Wage Cost Index, Australia (cat. no. 6345.0) - issued quarterly
      Wage and Salary Earners, Public Sector, Australia (cat. no. 6248.0.55.001) - issued quarterly

32 Current publications produced by the ABS are listed in the Catalogue of Publications and Products (cat. no. 1101.0). The Catologue is available from any ABS office or the ABS web site. The ABS also issues a daily Release Advice on the web site (Information on Releases) which details products to be released in the week ahead.


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


ABNAustralian Business Number
ABSAustralian Bureau of Statistics
ANZSICAustralian and New Zealand Standard Industrial Classification
ATOAustralian Taxation Office
cat. no.Catalogue number
FBTFringe Benefits Tax
PAYGWpay-as-you-go withholding
RFBAreportable fringe benefits amounts
TAUtype of activity unit