Labour costs increased 3.7 percent in the year to the June 2008 quarter, following a 3.9 percent rise in the year to the June 2007 quarter. The salary and wage rates (including overtime) component of the Labour Cost Index (LCI) rose 3.5 percent, while the non-wage labour costs rose 4.1 percent.
Non-wage labour costs rose 4.1 percent between the June 2007 and the June 2008 quarter. This is down from the record increase of 8.1 percent in the year to the June 2007 quarter. The latest annual rise in non-wage labour costs was due to rises in the costs of annual leave and statutory holidays, superannuation, workplace accident insurance and other non-wage labour costs (such as motor vehicles available for private use, medical insurance and employer-related low interest loans).
From the June 2007 quarter to the June 2008 quarter, the cost of annual leave and statutory holidays to employers increased 4.7 percent, following the record increase of 9.3 percent in the year to the June 2007 quarter. The remaining direct effect of the 1 April 2007 increase in minimum leave entitlements (from three weeks per year to four weeks per year) is included in the latest rise.
In the year to the June 2008 quarter, employer superannuation costs increased 2.7 percent, following a 4.2 percent rise in the year to the June 2007 quarter. The latest increase was influenced by a 3.5 percent rise in salary and ordinary time wage rates and by the introduction of employer contributions to KiwiSaver schemes, after tax credits of up to $20 a week per employee were taken into account. While there was an increase in the number of employers contributing to superannuation, the tax credit partly offset the additional cost. In the four months from April 2008 to July 2008, employers reclaimed, on average, about 70 percent of their contributions to KiwiSaver schemes. In some industries, the proportion of contributions reclaimed averaged about 90 percent, and in other industries, only about half was covered by tax credits. There were also some instances where employers previously contributing to other superannuation schemes have transferred their contributions to KiwiSaver, so are now able to offset some of their superannuation costs through the tax credit. The methods that were developed to introduce KiwiSaver into the LCI will be reviewed and may be refined for next year's release.
Employers' workplace accident insurance costs increased 4.7 percent in the year to the June 2008 quarter. This follows an increase of 9.3 percent in the year to the June 2007 quarter. A 3.5 percent rise in pay rates and, to a lesser extent, changes in Accident Compensation Corporation (ACC) levy rates have combined to cause the latest increase.
Other non-wage labour costs rose 0.3 percent in the year to the June 2008 quarter, following a 1.8 percent increase in the year to the June 2007 quarter. From the June 2007 quarter to the June 2008 quarter, the cost of providing motor vehicles for private use and medical insurance rose, while the cost of providing employer-related low interest loans fell. The prescribed interest rate that is used to calculate the fringe benefit value of low interest loans increased to 10.57 percent, up from 9.55 percent in the June 2007 quarter.
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Next release ...
Labour Cost Index (Salary and Wage Rates): December 2008 quarter will be released on 2 February 2009.