Informations Rapides · 9 July 2021 · n° 178

The all employees-revised index of hourly labour cost - (ICHTrev-TS); both a cost index and an index of employer contributions Hourly labour cost index - first quarter 2021

In the first quarter of 2021, the payroll and the number of hours paid by employers rose moderately, in a background of continued activity restrictions in some sectors. This followed unprecedented variations of those two variables during the year 2020, marked by the economic recession related to the health crisis. Indeed, in 2020, both hours and wages decreased sharply in the first half-year, especially during the lockdown period from March 17 to May 10, 2020, before rebounding sharply in the third quarter. During the fourth quarter, in relation to curfew measures and the second lockdown from October 30 to December 15, 2020, paid hours and payroll decreased again, but to a smaller extent than in the second quarter 2020.

These strong variations were mainly due to an extensive use of short-time working compensation during the first lockdown in spring 2020, which sharply shrunk during summer before rising again during the second lockdown in the autumn. Indeed, this system, which helps to contain job losses, leads to substitute compensation, not considered as wages, for part of the payroll.

The short-time working system existed before the health crisis but the government strengthened it when this crisis emerged: from March to May 2020, the government fully refunded the legal compensation (70% of gross wage within the limit of 4.5 times the minimal wage). From the 1st June 2020, the legal indemnity remained fixed at 70% of the gross wage, but, with a few exceptions, the government only covers 60%. The labour cost indices measuring only the cost supported by employers for the employment of their employees, the hours compensated for short-time working and the corresponding compensations paid to the employees are not taken into account. On the other hand, the portion of short-time working allowance not covered by the government as of June 2020 is included in the labour cost.

In addition, various labour cost reduction measures are taken into account in the labour cost indices and contribute to their variations until the first quarter of 2021.

First, the special bonus for purchasing power passed by French Parliament in late December 2018 has been renewed in 2020 and 2021: the original system planned that only firms having signed a profit-sharing deal could pay up to 1’000€ free of any tax, to employees whose wage was lower than 3 times the minimal wage. With the health crisis, the government has allowed all firms to pay this bonus in 2020 and has raised the threshold to 2,000€ for firms having signed a profit-sharing deal; the announcement of the renewal of the scheme for 2021 under similar conditions came on March 15.

Next, the plan to support the tourism sector decided on May 2020 provides for exemptions from employers’ social security contributions and assistance with the payment of contributions for the firms with fewer than 250 employees in some sectors, especially concentrated in trade, accommodation and food services and administrative and support service activities (list extended in October 2020). These measures are taken into account in the total labour cost index, amounting to 2.4 billion euros over the year 2020 and almost 350 million euros in Q1 2021.

Last, the “1 young person 1 solution” plan, launched at the end of July 2020, provides under certain conditions for a premium, up to 4’000€, to the employers hiring a young worker under 26 years of age. It also provides for an exceptional assistance when hiring a young worker with a sandwich course contract, up to 8’000€ if the worker is older than 18 years old and up to 5’000€ otherwise. These labour cost reduction measures are taken into account in the ICHTrevTS.

The ICHTrev-TS is primarily intended for users who need indicators of labour costs to upgrade their contracts. Therefore, this index is not usually subject to any revision once it has been published (however one exception was made in 2020, see Warning). It is a monthly index (base 100 in December 2008) that is published every quarter for all industries.

The index of employer contributions has been published since April 2010 (base 100 in December 2008). It differs from the ICHTrev-TS in two ways: the three monthly indices of a same quarter are identical and there is no forecast for the mechanical and electrical industries as far as the first month of the next quarter is concerned. This index of employer contributions measures the change in the variable “1 + rate of employer contributions” where the rate of employer contributions is the percentage of employer social contributions and taxes minus subsidies based on wages and employment, relative to gross salary (see methodological note).