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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Costs per employee

Labour costs incurred in respect of employees, divided by the number of employees, for businesses operating at the end of 2002-03. The number of employees relates to the last pay period in 2002-03. Costs and employee numbers for businesses which ceased operating during 2002-03 are excluded.


Total employee remuneration during the reference year, regardless of the form of remuneration. This 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. Gross wages and salaries is net of amounts reimbursed for employees on government employment programs. Workers’ compensation payments paid through the payroll and fringe benefits tax paid by employers are excluded from earnings.


The number of wage and salary earners (as defined in paragraphs 7 and 8 of the Explanatory Notes) who received pay for any part of the last pay period ending on or before 30 June 2003.

Employer size

To derive estimates of employer size, each of the units selected in the survey is allocated a size classification based on the number of employees reported for that unit during the last pay period ended on or before 30 June 2003. The size classification reflects the size of a unit in each state or territory and not necessarily the size of the unit Australia wide.

Fringe benefits

Non-cash benefits, such as goods and services, provided to employees in respect of employment. Examples include use of a work car, a cheap loan, or health insurance costs. These benefits may be provided through salary sacrifice or other arrangements. Fringe benefits tax is payable (by the employer) in respect of most fringe benefits. Employer contributions to superannuation in respect of an employee (including through a salary sacrifice arrangement), when paid to a complying superannuation fund, are not considered to be fringe benefits.

Fringe benefits tax

Tax paid by employers in respect of fringe benefits provided for their employees. Fringe benefits tax is payable in respect of most fringe benefits provided by employers to employees. Generally, tax is payable on the value of the benefits in the fringe benefits tax year (1 April to 31 March).

Gross wages and salaries

Payments to employees before tax and other items (such as employee contributions to superannuation) are deducted, and comprise:

  • payments for time worked
  • payments for time not worked (such as annual, sick and other leave, and public holidays) and
  • leave loading payments.

Included are amounts paid from interstate or overseas; ordinary time and overtime earnings; overaward payments; penalty payments, shift and other remunerative allowances; retainers and commissions paid to employees who received a salary; bonuses and similar payments; payments under incentive, piecework or profit sharing schemes; advance and retrospective payments; and salaries and fees paid to company directors and members of boards who received a salary.

Excluded are reimbursements of expenses, e.g. travel, entertainment, meals etc. and drawings from profits by directors or office holders. Also excluded are salary sacrifice amounts, wages and salaries reimbursed under government employment programs, and workers’ compensation payments paid through the payroll.


Classified according to the Australian and New Zealand Standard Industrial Classification (ANZSIC) (see paragraph 11 of the Explanatory Notes).

Payroll tax

The amount of tax paid during the survey reference year in respect of employee earnings (as defined for payroll tax purposes), net of any rebates. Payroll tax assessed for payments to contractors and other persons not considered employees is excluded.

Salary sacrifice

Salary sacrifice is an arrangement between an employer and an employee, where the employee agrees to forgo part of their entitlement to salary or wages in return for the employer providing benefits of a similar cost (to the employer). Common types of benefits include employer contributions to superannuation funds and novated leases for motor vehicles.


Public sector comprises local government authorities and all government departments, agencies and authorities created by, or reporting to, the Commonwealth or State/territoy Parliaments. All remaining organisations are classified as private sector.

Severance, termination and redundancy payments

Lump sum payments made to employees on termination of employment, including severance and redundancy payments. Includes amounts paid into industry termination funds.


Employer contributions to superannuation funds on behalf of employees. Contributions by employees, or employer contributions under salary sacrifice arrangements, are excluded. See also paragraphs 22 and 30 of the Explanatory Notes.

Workers’ compensation

The cost to the employer in providing workers’ compensation cover for employees. There are three ways to meet these costs:

a The majority of employers pay a premium to an insurer. Workers’ compensation costs are considered to comprise:

  • premiums paid during the reference year including the component that covers the employee for common law damages, and
  • any workers’ compensation costs not reimbursed by the insurer, including ‘make-up’ and ‘excess’ pay.

b Some larger employers may become ‘self-insurers’ and cover most costs themselves. In this case, workers’ compensation costs are considered to comprise:
  • lump sum payments and payments made as part of employee earnings
  • premiums paid during the year to offset liability at common law for workers’ compensation, and
  • any other costs, including common law costs not reimbursed by the insurer, such as legal, accounting, medical and administrative costs.

c In the public sector, some workers’ compensation costs are paid from consolidated funds. In most cases these payments relate to liabilities incurred under prior legislation. The consolidated funded amounts are not included in the tables in this publication.