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Leave, Holidays Increase Non-Wage Labour Costs

Embargoed until 10:45am – 3 October 2006

Annual Leave and Statutory Holidays Drive Increase in Non-Wage Labour Costs

Labour costs rose 3.7 percent in the year to the June 2006 quarter, Statistics New Zealand said today. This is the largest annual increase since the series began in the December 1992 quarter. The salary and wage rates (including overtime) component of the Labour Cost Index (LCI) rose 3.2 percent from the June 2005 quarter to the June 2006 quarter, while the non-wage labour costs component rose 6.2 percent.

The increase in the non-wage labour costs component of the LCI was partly driven by a 7.1 percent increase in annual leave and statutory holiday costs. The main reason for the increase in this cost is employers increasing their leave entitlement in anticipation of changes to the Holiday Act taking effect in April 2007. Another contributor to the increase was a rise in the number of paid statutory holidays, from 10 to 11 days, due to Waitangi Day in 2005 falling on a weekday rather than a weekend.

Employer superannuation costs rose 6.6 percent in the year to the June 2006 quarter, which also had an upward influence on non-wage labour costs. Superannuation costs for the public sector rose 12.3 percent, partly due to the increase in the contribution rate of the State Sector Retirement Savings Scheme (SSRSS).

In the year to the June 2006 quarter, workplace accident insurance costs rose 4.8 percent, reflecting increases in pay rates and Accident Compensation Corporation (ACC) levy rates.

The index for other non-wage labour costs (medical insurance, motor vehicles available for private use, and employer-related low interest loans) rose 0.7 percent. The cost of providing medical insurance and employer-related low interest loans fell, while the cost of providing vehicles available for private use rose.

Brian Pink
Government Statistician


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