Concepts and definitions

Base index

In the base index the price of the calculation period is always compared with the base period. In the base index weights are usually changed less often than yearly, for example, at intervals of five years.

Bonuses and allowances not paid in each pay period

Bonuses and allowances not paid in each pay period are such as performance-based bonuses, holiday bonus and holiday supplement and seniority increments paid in some hourly paid fields. Payment of one-off pay components can also be based on collectively bargained agreements.

Structural statistics on wages and salaries:

Holiday supplement paid for days off not taken is not included in these bonuscomponents in the structural statistics on wages and salaries.

Index of wage and salary earnings:

The index of wage and salary earnings measures the development of earnings from regular working hours regardless of the mode of payment. Components paid on the basis of performance are included in the earnings concept so that they are divided evenly over the whole calendar year. Similarly, bonuses and allowances not paid in each pay period based on collective agreements are evenly divided for the whole year. All these components belonging to the concept of index of wage and salary earnings, such as holiday bonuses are not included in data on wages and salaries used in the calculation of the index, but they are taken into consideration in index calculation only in case changes in their relative share are agreed in collective bargaining. In the index of wage and salary earnings contractual pay increases paid retrospectively are also taken to the quarter when they were earned.

Labour cost survey:

In the concepts of the labour cost survey compensations for termination of an employment relationship belonging to bonuses and allowances not paid in each pay period are included in social costs.

Labour cost index:

In the labour cost index bonuses and allowances not paid in each pay period also include contractual pay increases paid retrospectively from previous pay periods. The labour cost index also contains incentive stock options according to their exercise value.

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Bonuses and allowances not paid in each pay period are not published in the statistics on private sector and local government wages and salaries. These components are not included in the index of regular earnings.

Chain index

In the chain index the comparison takes place always between successive calculation periods. In the chain index the change in two calculation periods is used to take forward the index point figure of the desired base period. In the chain index the weights are changed in principle in each calculation period.

At times the chain index is also mentioned in such cases where the comparison period is retained fixed in comparisons within the year, but the comparison period and the weight structure of the index is changed whenever the year changes.

Employer sector

Employer sector describes the structure of the labour market and is determined by the decision-making unit. The classification of employer sectors used in statistics on wages and salaries and in statistics on labour costs is a national adaptation of the Classification of Sectors that is used in economic and social statistics (Classification of Sectors 2000).

The classification used in statistics on wages and salaries has the following structure:

Local government sector

Operating units of municipalities and joint municipal boards, and municipal enterprises

Central government sector

Agencies and institution financed from the State budget

Private sector

Private enterprises, enterprises with central or local government majority holding and state enterprises

Non-profit corporations, parishes, and organisations and foundations are also included in the private sector in statistics on wages and salaries.

The structure of the classification of sectors used in statistics on labour costs and in the labour cost index is similar to that of the classification used in statistics on wages and salaries.

In the index of wage and salary earnings, non-profit corporations, parishes and organisations form a separate employer sector of their own (Others).

Hours paid

Hours paid refer to those hours of total working time for which wage and salary earners are paid. Hours paid can be hours worked or not worked, or absences (annual leaves, sick leaves, public holidays, other time off).

Index formula

Index formula is a mathematical function by means of which an individual key figure describing change is calculated from observation values (e.g. Fischer, Laspeyres and Paasche index formulas).

Index of wage costs

The index of wage costs,

The wage and salary index, which is part of the labour cost index, measures the change in wage and salary costs calculated per hour worked. Wage and salary costs include all pay and bonuses according to Section 13 of the pre-liminary tax withholding act, thus also costs incurred by payments in kind and incentive stock options.

Labour costs

Labour costs describe all costs incurred by an employer from the employment of labour. Labour costs are usually presented as costs for an hour worked. Costs arising from work premises, commuting or untaxed daily allowances are not included in labour costs.

Total labour costs are obtained by deducting employer's subsidies from the sum of labour cost items. Employer's subsidies are intended for full or partial financing of costs arising from direct compensations paid by the employer. Such subsidies comprise employment subsidies and training compensations paid to employers.

In the labour cost index, labour cost items are grouped as follows:

  • remuneration exclusive of one-off pay components
  • one-off pay components
  • social security costs

In the labour cost survey, labour cost items are divided into the following main groups:

  • direct earnings
  • one-off pay components
  • remuneration for days off
  • contributions to personnel funds
  • costs of fringe benefits and company products
  • social security costs
  • training costs
  • other labour force costs

Direct earnings refer to wages and salaries paid for hours worked in each pay period. Direct earnings comprise

  • direct compensations paid on the basis of hours worked, output produced or amount of work performed
  • compensations for overtime, shift work and the like
  • additional bonuses and compensations paid regularly in each pay period.

One-off pay components refer to items that are not paid regularly in each pay period. Such bonuses that are often paid only once a year include performance-based bonuses and holiday pay, and seniority increments paid in some hourly paid fields. Payment of one-off pay components can also be based on collectively bargained agreements.

Pay for days off refers to compensations paid for statutory, agreement-based or voluntarily granted leaves, national holidays or other paid days of leave. Typical items of this group are pay during annual holiday entitlement, monthly paid employees' pay during national holidays, hourly paid employees' compensation during national holidays and days of leave in compensation of shortened working hours.

Payments to personnel funds refer to the sums enterprises may annually contribute to their employees' saving systems, such as personnel funds.

Costs of fringe benefits and company products include all costs incurred by an employer from the goods and services it provides for to its employees. Such goods and services include e.g. company car and subsidised meals, incentive stock options and personnel's recreational and social activities. Own personnel's pay is not included.

Social security costs refer to the sum employers pay for the social security benefits of its employees. Such statutory, agreement-based or voluntary payments include employment pension, social security and unemployment insurance contributions. Additionally, this group comprises as imputed social security funding items pay during illness and parental leave (net, i.e. less compensations paid to the employee by the Social Insurance Institution) and occupational health care costs (likewise, net), as well as compensations arising from the termination of an employment relationship.

Training costs include e.g. costs of professional training services, costs of course participations, fees of instructors hired from outside the enterprise and payments to organisations arranging training. By contrast, pay for the participants during training is not counted as training costs but as pay for hours worked.

Other labour costs include e.g. costs arising from protective and working clothes and from the procurement of labour.

Employer's taxes paid on the basis of the sum of wages and salaries or the employed labour force that the labour cost concept of the European Union contains do not exist in Finland.

The concept of labour costs partly equals the national accounts concept of compensation of employees but exclusive of e.g. occupational health care, training and recruitment costs.

Point figure

Point figure is a change quantity used in price indices, which expresses the price, average price or index of the comparison period relative to the price, average price or index of the base period. The point figure of the base period is usually denoted by the number hundred. For example, if the point figure for a commodity at a certain point in time is 105.3, it means that the price of that commodity has risen by 5.3 per cent from the base period.

Quarterly change

Quarterly change refers to the relative change in the index of the quarter compared with the index of the previous quarter. The change is usually expressed in percentages.

Sosial cost index

The social cost index, which is part of the labour cost index, measures the development of employers' statutory and voluntary social insurance contri-butions calculated per hour worked.

See more about social security costs under the concept of labour costs.

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Weight structure

Describes what meaning each sub-index (commodity, employee group, etc.) belonging to the index has for total index.

Referencing instructions:

Official Statistics of Finland (OSF): Labour cost index [e-publication].
ISSN=1798-3746. Helsinki: Statistics Finland [referred: 24.7.2014].
Access method: http://tilastokeskus.fi/til/tvki/kas_en.html.

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