Informations Rapides · 8 January 2021 · n° 005

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 - third quarter 2020

In a context of economic recession, related to the health crisis, the first three quarters were impacted by unprecedented variations of payroll and hours paid by employers. These variables 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.

These strong variations were mainly due to an extensive use of short-time working compensation during the first lockdown, which sharply shrunk during summer. Indeed, this system, which helps to contain job losses, leads to substitute compensation for part of the payroll, regarding non-working periods that are partially or totally supported by the state and UNEDIC. Short-time working compensation requests can be done with some months of delay. Since the health crisis emergence, estimations are more likely than usual to be revised, especially in sectors with an extensive use of short-time working. These late adjustments, combined to the identification of inconsistencies and their corrections in the declarations of paid hours of some firms, lead to an exceptional revision of the ICHTrev-TS data for the months of April to June 2020.

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, 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 is included in the labour cost.

The series of hours worked per job produced by Dares (Statistical service of the Ministry of Labour) and usually used for the calculation of labour cost indices has been suspended in the first semester 2020, due to the replacement of the Acemo quarterly survey by a flash survey on activity and employment conditions of the workforce specific to the health crisis (Acemo-Covid). Thus, since the publication of Q1 2020, the hours used have come from a new source used for this goal: the nominative social declaration (DSN), covering paid hours (excluding short-time working).

The special bonus for purchasing power passed by French Parliament in late December 2018 has been renewed in 2020: 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 and has raised the threshold to 2,000€ for firms having signed a profit-sharing deal.

Announced by the government on 14th May 2020, the plan to support the tourism sector 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). These measures are taken into account in the total labour cost index, amounting to 1.7 billion euros over the first three quarters of 2020 evaluated from firms’ declarations. For the previous release, as these data were not available, these measures were taken into account based on the figure provided for in the third draft amending finance bill (2.2 billion euros). This gap between forecast and observed data contributes to the exceptional revision of the ICHTrev-TS in the second quarter of 2020.

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 ICHTrev-TS.

As of 1st October 2019, the employers’ contribution general exemption, consisting in lowering the employers’ social contributions for wages lower than 1.6 times the minimal wage, has been extended to the unemployment insurance contribution (with a rate of 4.05%). As the ICHTrev-TS is a smoothed index over a four-quarter period, the effect of this measure is spread from the fourth quarter of 2019 to the third quarter of 2020 inclusive.

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. Due to the magnitude of revisions to the data used in its calculation, the ICHTrev-TS was exceptionally revised for the months of April to June 2020 on the occasion of this publication (see Warnings). 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). Due to the magnitude of revisions to the data used in its calculation, this index was also exceptionally revised for the months of April to June 2020 on the occasion of this publication.