The Labour Cost Index (LCI)

0. Registration entry for subjects

0.1 Name

The Labour Cost Index (LCI)

0.2 Subject area

Wages, salaries and income

0.3 Responsible authority; office, division, person etc.

Statistics Iceland
Wage statistics
Telephone: (+354) 528 1250

0.4 Purpose and history

The purpose of the labour cost index is to allow possible users to understand developments of the inflation and the labour market, monitor the changes in labour costs and to have comparable measurement on labour costs between different countries within the European Union.

0.5 Users and application

The data is used to compare wages and labour costs to our neighbouring countries. It has not yet been tested who the main domestic users are. The likeliest users are institutions, analysts and the public.

0.6 Sources

The source of the data is the survey on wages, earnings and labour costs (ISWEL). ISWEL is based on a sample of companies and is collected directly from their software. The data covers the economic activities; Manufacturing (D), Construction (F), Wholesale and retail trade; Repair (G) and Transport, Storage and communications (I).

0.7 Legal basis for official statistics

Data is collected according to Act No 163/2007 regarding Statistics Iceland and Council regulation no 530/1999 concerning structural statistics on earnings and labour cost. According to Act regarding Statistics Iceland No 163/2007, one of the main subjects of Statistics Iceland is obligated to examine is the economy, this includes the populations labour costs.

0.8 Response burden

When collecting data from the companies, there is some burden for the companies in the inclusion process but it is remote after that.

0.9 EEA and EU obligations

The regulation regarding wage and labour cost is the council regulation No 530/1999 concerning structural statistics on earnings and labour costs. Definitions and implementation of the survey can be found in other regulations. Those regulations are 450/2003 and 1216/2003.

1. Contents

1.1 Description of content

This survey is intended to publish concepts to measure changes in wages and labour costs in a way that we can compare them with our neighbouring countries.

1.2 Statistical concepts

  • Annual earnings are defined in the survey as the sum of Basic wages and salaries, Additional allowances, Bonus payments, Overtime pay, Shift premium, Sickness pay, Lump sum payments, Other payments and Remuneration paid for leave.
  • Total hourly wage is defined in the survey as the sum of Basic wages and salaries, Additional allowances, Bonus payments, Overtime pay, Shift premium and Sickness pay divided by total number of paid hours.
  • The total number of paid hours is defined in the survey as paid hours for daytime, overtime and sickness.
  • Daytime hours are defined as total number of paid hours without paid hours for overtime.
  • Wages are defined as the sum of basic wages, additional allowances, bonus payments, Piecework payments and output work, shift premium, overtime pay, lump sums, Committee or management payments, Fringe benefits, Other payments, Remuneration paid for leave and Science fund / continued education.
  • Labour cost other than wages and salaries are defined as the sum of Pension fund contribution, Social security tax, Sickness fund payment, Vacation (union) housing fund fee, Other labour costs and Sickness pay.
  • Total labour costs are defined as the sum of Wages and Labour cost other than wages and salaries.
  • Total labour cost excluding bonuses is defined as the sum of Wages and Labour cost other than wages and salaries excluding payments that are paid irregularly and labour costs derived thereof. Irregular payments are defined as payments that are not paid at each pay period.
  • Total number of paid hours is defined as the sum of Normal hours, Overtime hours and Hours with shift premium.

2. Time

2.1 Reference periods

The index is published every quarter and is dated from the first quarter 1998.

2.2 Process time

Transmission of data to Eurostat is 70 days after the reference period ends. At that time the figures are also published domestically. The most recent figures are provisional.

2.3 Punctuality

Statistics Iceland has always kept to the dates Eurostat has given. Statistics Iceland has also kept to the dates regarding the publication domestically.

2.4 Frequency of releases

General results are published quarterly, 70 days after the reference period ends.

3. Reliability and security

3.1 Accuracy and reliability

The Icelandic survey on wages, earnings and labour costs is a sample survey. The sample is a stratified cluster sample, where the sample unit is the local activity unit and the observation unit is the employee. The target population contains all local activity units with no fewer than 10 employees. The population frame is based on monthly PAYE (Pay As You Earn) data. PAYE data reflects the sum of wages reported to the tax authorities.
The population is stratified in sections and subsections according to NACE Rev. 1. Activity units with more than A/m employees are selected with a probability of 1 (where A is the number of employees in the stratum and m is the number of activity units to be selected from the stratum). For the rest of the population, a simple random sample (srs) is selected from each stratum.
During visits to participating companies, technical aspects concerning the software for wage calculations are addressed, along with details on entering records, such as classification of occupations according to ÍSTARF95 standard. The company's wage structure is examined, assigning payroll items to the wage items of the survey to ensure coordination with other companies. Population frame is updated yearly and new companies are simultaneously included into the survey as other quit participation and efforts are continuously made to improve the data quality through feedback to the enterprises and through updating and improvement of the quality checking system.

3.2 Sources of errors

A variety of errors are possible during the salary analysis, performed every four years, and also the monthly wage survey (ISWEL). Sample errors in ISWEL: Sample errors is caused by the uncertainty that the sample replicas the population. Sample errors are subjected to the sample frame, the size of the sample and its variance. The survey sample changes but also does the population. It is attempted that the sample reflects the population as well as possible. Errors due to imperfect sample frame: In the construction of the sample and the sample frame is attempted to minimize the sample errors and errors due to imperfect sample frame. That kind of errors is expected to decrease as the sample grows and sample frame is updated. Measurement errors and errors due to non-response and missing values: It happens e.g. that those employees are wrongly categorized, especially in enterprises with great turnover. By keeping good relations with the enterprises in the survey and using specific work methods in the data collection and the quality checking it is attempted to reduce those errors.

3.3 Measures on confidence limits/accuracy

There are no measures on confidence limits/accuracy used in the publications.

4. Comparison

4.1 Comparison between periods

The methodology is the same between periods although Eurostat can change variables and methods slightly as more experience is gained using the data. The sample can change considerably between periods and even though a set distribution is kept in every economic activity it can affect the comparison of the data.

4.2 Comparison with other statistics

Comparison has been made with the wage index. The results were that the labour cost indices had risen little more than the wage index for the private sector. Considerable difference is between those two indices as the wage index is based on a paired sample and measures only regular wages.

4.3 Coherence between preliminary and final statistics

The most recent figures are provisional until next publication.

5. Access to information

5.1 Forms of dissemination

  • News, released on Statistics Iceland's website
  • Statistics, categorised statistical web tables
  • Statistical Series, Hagtíðindi
  • Eurostat publishes the results on its website,

5.2 Basic data; storage and usability

The basic data is kept as confidence information in Statistic Iceland. Access to the basic data is only granted to those employees that work with the data. The primary characteristics of the enterprises and the individuals are scrambled to obscure the origin of the data.

5.3 Reports

The primary results are published in Statistical Series of Statistics Iceland.

5.4 Other information

Further information is provided by the department of Wages, income and education.

© Hagstofa �slands, �ann 24-6-2014