This file contains the technical notes for data products associated with “International Comparisons 

of Hourly Compensation Costs in Manufacturing” at www.bls.gov/ilc. This document discusses the 

general sources, methods, and definitions used in constructing hourly compensation costs estimates. 

Exceptions to these methods, as well as specific data sources used, can be found in “Country Notes and 

Data Sources” at www.bls.gov/ilc/ichccsources.pdf. 

 The international comparisons of hourly compensation costs in manufacturing are prepared to 

assess differences in employer labor costs across countries. BLS compensation data permit more 

meaningful comparisons of employer labor costs than data based solely on average earnings. 

Definitions of average earnings differ considerably by country and do not include many items of labor 

cost that frequently make up a large portion of total cost. 

Definitions

 Compensation costs relate to all employees in manufacturing and include (1) direct pay and (2) 

employer social insurance expenditures and labor-related taxes (see table 1). Direct pay includes all 

payments made directly to the worker before payroll deductions and consists of two parts: Pay for time 

worked and directly-paid benefits. Social insurance expenditures refer to the value of social 

contributions (legally required as well as private and contractual) incurred by employers in order to 

secure entitlement to social benefits for their employees; these contributions often provide delayed, 

future income and benefits to employees. Labor-related taxes refer to taxes on payrolls or employment 

(or reductions to reflect subsidies), even if they do not finance programs that directly benefit workers. 

Table 1. Components of Compensation Costs 

Compensation Costs 

Direct Pay Employer Social Insurance

Pay for Time Worked Directly-Paid Benefits Expenditures and Labor-related Taxes

• Basic wages

• Piece rate

• Overtime premiums

• Shift, holiday, or night 

work premiums 

• Cost-of-living 

adjustments

• Bonuses and premiums 

paid each pay period

• Pay for time not worked 

(vacations, holidays, and 

other leave, except sick 

leave)

• Seasonal and irregular 

bonuses 

• Payments in kind 

• Allowances for family 

events, commuting, etc. 

• Payments to employees’ 

savings funds 

• Retirement and disability pensions 

• Health insurance 

• Income guarantee insurance 

• Pay for sick leave

• Life and accident insurance

• Occupational injury and illness 

compensation 

• Unemployment insurance 

• Severance pay

• Other social insurance expenditures

• Taxes (minus subsidies) on payrolls 

or employment

Technical Notes 

International Comparisons of Hourly Compensation Costs 

in Manufacturing

International Labor Comparisons August 2013

1 
 BLS compensation data include nearly all labor costs incurred by employers, but some costs 

included in the International Labor Office (ILO) definition of total labor costs—such as recruitment, 

vocational training, and maintenance of company-provided facilities—are not included in the BLS 

data. The excluded costs amount to no more than two percent of total costs in countries for which data 

are available.

Employees include all persons employed full or part time in an establishment during a specified 

payroll period. Temporary employees are included. Persons are considered employed if they receive 

pay for any part of the specified pay period. The self-employed, unpaid family workers, contract 

workers, and workers in private households are excluded.

Methods

 In general, total compensation for each country is calculated by adjusting earnings series for items 

of direct pay, social insurance, and labor-related taxes and subsidies not included in earnings. For 

countries for which earnings data are not available on a per hour worked basis, BLS makes 

adjustments in order to approximate compensation per hour worked. The statistics are also adjusted, 

where possible, to account for major differences in worker coverage and changes over time in survey 

coverage.

Earnings statistics are typically obtained from establishment surveys or from administrative data 

sources. The surveys typically cover firms with a minimum of ten employees. 

 Average earnings are generally adjusted to total compensation using data from periodic labor cost 

surveys. Other sources include censuses of manufacturers, tabulations of employer social security 

contribution rates provided by the International Social Security Association, information on contractual 

and legislated changes in social insurance benefits, and statistical series on indirect labor costs from 

employer confederations. 

The compensation measures relate to manufacturing as defined by the International Standard 

Industrial Classification of All Economic Activities (ISIC) Revision 4. Some countries, including the 

United States, use classification systems which do not correspond directly to ISIC Revision 4; in these 

countries, there are some differences in the definition of manufacturing and sub-manufacturing 

industries. The classification differences, however, are typically minor and do not materially affect the 

international comparisons presented in the BLS data products. More information about classification 

differences by country is available in “Country Notes and Data Sources” at

www.bls.gov/ilc/ichccsources.pdf. 

The hourly compensation data in this report differ from those in “International Comparisons of 

Manufacturing Productivity and Unit Labor Cost Trends.” The data in the two reports are not 

comparable: data in this report relate to all employees in manufacturing, are derived primarily from 

establishment-based survey data, and are adjusted with a primary focus on the levels of compensation; 

data in “International Comparisons of Manufacturing Productivity and Unit Labor Cost Trends” relate 

to all employed persons (including the self-employed), are derived primarily from national accounts 

data, and are presented only on a trend basis. 

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Exchange Rates and Currencies

 Hourly compensation costs are converted to U.S. dollars using the average exchange rate for the 

reference year. The exchange rates used are prevailing commercial market exchange rates as published 

by either the U.S. Federal Reserve Board or the International Monetary Fund.

 For Euro Area countries in this report, data are converted to U.S. dollars using the euro to dollar 

exchange rate only for years in which the euro was the official currency in the country. For years prior 

to adoption of the euro, the data in the old national currency for all years are converted to U.S. dollars 

using historical U.S. dollar to national currency exchange rates or fixed national currency to euro 

exchange rates established at the time of the country’s conversion to the euro. 

Trade-weighted measures

Trade-weighted averages for selected economic groups are calculated based on each country’s 

relative importance to U.S. trade. The weights are calculated using the dollar value of U.S. trade 

(exports plus imports) in manufactured commodities with each country for the year 2010. The trade 

data are compiled by the U.S. Census Bureau. See table 2 for a list of economic groups and trade 

weights for each country. 

Labor costs versus labor income 

 The comparative hourly compensation data are measures of the cost of labor to an employer, not 

worker income, because workers only receive a part of hourly compensation directly. Other parts of 

employer compensation costs, such as unemployment insurance, health insurance, or payments to 

retirement funds, may only provide deferred or indirect benefits to workers. In these cases, the 

relationship between current employer payments and potential future worker benefits is too indirect to 

be considered income. 

 This report also provides measures of direct pay, which is pay for time worked plus directly-paid 

benefits. However, direct pay understates the total value of income derived from work because 

employer payments to funds may substitute for worker savings or self-insurance to cover retirement, 

medical costs, etc. Thus, direct pay is also not appropriate as a measure of worker income. 

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Table 2. Trade Weight Shares and Economic Groups

Country or 

Economic Group

2010 Trade 

Weight Share OECD Europe Euro Area Eastern Europe

East Asia 

ex. Japan

Argentina 0.4%

Australia 1.0 ●

Austria 0.3 ● ● ●

Belgium 1.4 ● ● ●

Brazil 1.8

Canada 15.5 ●

Czech Republic 0.1 ● ● ●

Denmark 0.3 ● ●

Estonia 0.03 ● ● ● ●

Finland 0.2 ● ● ●

France 2.2 ● ● ●

Germany 4.6 ● ● ●

Greece 0.1 ● ● ●

Hungary 0.1 ● ● ●

Ireland 1.5 ● ● ●

Israel 1.2 ●

Italy 1.5 ● ● ●

Japan 6.3 ●

Korea 3.0 ● ●

Mexico 12.5 ●

Netherlands 1.7 ● ● ●

New Zealand 0.2 ●

Norway 0.3 ● ●

Philippines 0.5 ●

Poland 0.2 ● ● ●

Portugal 0.1 ● ● ●

Singapore 1.6 ●

Slovakia 0.05 ● ● ● ●

Spain 0.6 ● ● ●

Sweden 0.5 ● ●

Switzerland 1.2 ● ●

Taiwan 2.1 ●

United Kingdom 3.2 ● ●

Economic Groups

Foreign Countries 66.6%

OECD 60.1 ●

Europe 20.3 ●

Euro Area 14.4 ●

Eastern Europe 0.6 ●

East Asia ex. Japan 7.3 ●

Source: U.S. Bureau of Labor Statistics, International Labor Comparisons, August 2013 

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