REPORT FROM THE COMMISSION TO THE COUNCIL assessing the application of extending coverage of statistical units in Council Regulation (EC) No 530/1999 to units with less than ten employees

1. Introduction

Council Regulation (EC) No 530/1999 [1] requires from Member States the four-yearly collection of statistics on the structure of earnings and on the structure of labour costs, for all enterprises with 10 or more employees. When this Regulation was drafted, there was a concern that including statistical units with less than 10 employees would be an unjustifiable burden for Member States. However, Article 4 of the Regulation contained a provision requiring the Commission (Eurostat) to study the possible future inclusion of these smaller units in the structural surveys on earnings and labour costs and to submit a report to the Council within four years, i.e. before 1 April 2003.

[1] OJ L 63, 9.03.1999, p. 6

To compile this report, the Commission (Eurostat) has consulted Member States and members of the Eurostat Working Group on Wages and Labour Costs. The report examines the requirement for extending the coverage to enterprises with less than 10 employees and proposes a possible solution, taking into account the relevant data collection systems in each Member State. The report has been approved by the Statistical Programmme Committee

2. Requirement for extending coverage to smaller statistical units

Data from all enterprises are required in order to provide a representative picture of Member State and European Union economies. This is particularly important because the structure of enterprises varies considerably across the EU (Table 1).

Table 1

// Enterprise size structure estimates 2000:

Private enterprises excluding forestry/fishing

Average enterprise size (employees)

Austria // 10

Ireland // 10

Luxembourg // 10

Netherlands // 10

Denmark // 9

Germany // 8

Sweden // 8

France // 7

Finland // 6

Belgium // 6

United Kingdom // 6

Portugal // 5

Spain // 5

Italy // 3

Greece // 2

EU-Average // 6

Source: Observatory of European SMEs 2002/02

Micro enterprises [2] (i.e. those with less than ten employees) are more prevalent in certain EU economies and they tend to have distinctive characteristics - e.g. they have a shorter life-span and are less export-oriented. Specific policy initiatives that are aimed at supporting and encouraging small businesses need to be complemented by good statistical information. However, the collection of data from micro enterprises often entails a relatively high cost for an employer with limited staff and computing resources. Governments are understandably reluctant to increase the administrative burden on small businesses at the same time that competitiveness and entrepreneurship are being encouraged. Therefore a realistic balance has to be struck between the needs of data users and those of small businesses.

[2] In this paper the term "micro enterprise" means "statistical unit with less than 10 employees"

3. Experience of collecting data from small enterprises

A number of Member States have undertaken studies related to the collection of earnings or labour cost statistics from micro enterprises, and a summary is presented in Table 2. The experience highlights that this segment of the economy has characteristics which clearly distinguish it from larger enterprises. Micro enterprises start and cease with a greater degree of volatility; the survey response rates are often lower and they require longer to complete the information, often because they lack computerised business accounting systems and rely on manual records.

Table 2

//

Summary of previous work undertaken in Member States

Portugal //

Analyses of the 2000 structural business survey and the 2001 quarterly earnings survey (Quarter 4) indicate that for smaller statistical units the survey response rate is typically lower than for larger statistical units.

France // France attempted to extend the 1992 Labour Cost and Structure of Earnings Surveys to statistical units with less than 10 employees. This proved too difficult to achieve and was not supported by employers. Resource shortages and organisational changes have prevented any subsequent extensions.

Italy // Analyses of the 2000 structural business survey indicate that statistical units with less than 10 employees have specific characteristics compared to larger units, e.g lower labour costs, slightly more hours worked, lower survey response rates and more occurences of missing data items.

Greece // In parallel with the annual industry survey, a sample survey has been carried out over the last three years covering units with less than 10 employees. Information is available on the types of employees, earnings and labour costs.

Spain // The Quarterly Labour Cost Survey in Spain provides details on the characteristics of units with less than 10 employees compared to larger businesses: large number of business births and deaths each year, limited accounting and administrative resources, lower survey response rates and more statistical variation in the data.

United Kingdom // A study on compliance costs was undertaken in 2000, covering 700 contributors to the annual survey on the structure of earnings. The study indicated that, compared to larger businesses, units with less than 10 employees required more time to complete data requests and had lower survey response rates.

Netherlands // The techniques used to compile the 2000 Labour Cost Survey from existing sources could also be used to provide results for units with less than 10 employees, avoiding any additional burden on business.

At the moment, only three Member States (Portugal, United Kingdom and the Netherlands) currently include micro enterprises as part of the data collection for the four-yearly structural statistics required by Regulation 530/1999.

4. Feasibility of extending coverage to enterprises with less than 10 employees

The extension of the structural surveys to micro enterprises must take into account the practical constraints that exist across the different national statistical systems. One significant issue is that in many Member States any increase in the statistical burden placed on employers runs contrary to national statistical policy. For such countries three possible solutions could be:

- to make use of other national data sources;

- to develop estimation procedures; or

- to collect less detailed structural data from smaller enterprises.

The use of other national data sources can be an effective way of obtaining the required data. However, the level of detail may not be sufficient, the definitions used may not exactly match the statistical requirements or the results may not be available in time. Furthermore, the ability to improve the statistical quality of data, e.g. in terms of definitions used or timeliness may be limited if the the National Statistical Office is not directly responsible for the data collection.

A more feasible option for several Member States may be to apply estimation procedures to existing statistical or administrative sources, in order to generate adequate results for micro enterprises. Such procedures would need to be developed on a national basis and the quality of the estimates would have to be carefully evaluated, particularly in respect of the level of detail and accuracy which can be obtained.

Finally, it may be possible to collect from micro enterprises structural data which are less detailed than the data collected from larger enterprises. This would help to reduce the survey burden for micro enterprises, but it would restrict the statistical results that could be produced whenever micro enterprises are included in an analysis.

5. The next structural surveys in 2004 and 2006 - trial periods

A small number of Member States have indicated to Eurostat that they could provide data for micro enterprises for the next two structural surveys in 2004 (Labour Cost Survey) and in 2006 (Structure of Earnings Survey). Other Member States will have to modify their existing structural surveys or investigate the use of other sources and estimation techniques.

The next two structural surveys could therefore act as a trial for the eventual inclusion of these small statistical units. All Member States would be invited to supply data, on a voluntary basis, for units with less than 10 employees. In this way, results from surveys, other sources and estimation techniques could be evaluated and compared. The results could also be compared with relevant statistics from the national accounts, which already include the effect of micro enterprises. For meaningful conclusions, it is important that as many Member States as possible are encouraged to take part in the trial. The outcome would then influence the final decision on the inclusion of these units in subsequent structural surveys, from 2008.

6. Recommendations

In principle, the inclusion of micro enterprises is not contentious and is in line with the objectives of EU comparability and coherence with other EU business statistics and national accounts. The difficulty lies in how inclusion can be achieved without undue cost and burden. The recommendations below take into account the positions reported by Member States and represent a pragmatic longer-term solution to be tested and evaluated by Eurostat and Member States:

- Member States that are already able to provide structural statistics on earnings and labour costs for micro enterprises will be asked to provide Eurostat with these data, on a voluntary basis, for the Labour Cost Survey in 2004 and for the Structure of Earnings Survey in 2006.

- Member States that are currently not able to produce any structural statistics on earnings and labour costs for micro enterprises will be asked to propose cost-effective approaches that can be developed to provide the necessary detail. This may involve the application of statistical estimation techniques to existing data sources. The approaches should be developed for testing in the Labour Cost Survey in 2004 and in the Structure of Earnings Survey in 2006.

- Eurostat will study the actual results and the test results relating to micro enterprises from the Labour Cost Survey of 2004 and the Structure of Earnings Survey of 2006 and will evaluate the quality of the results.

- Subject to a satisfactory quality evaluation of the results for micro enterprises based on the Labour Cost Survey 2004, Eurostat will start work with Member States to establish a legal basis for the inclusion of statistical units of all sizes in the Labour Cost Survey in 2008.

-

- Following a satisfactory quality evaluation of the results for micro enterprises based on the Structure of Earnings Survey 2006, Eurostat will work with Member States to establish a legal basis for the inclusion of statistical units of all sizes in the Structure of Earnings Survey in 2010.

Eurostat

February 2003

Attachments

Annex 1: Eurostat questionnaire

Annex 2: Summary of questionnaire responses

Annex 1: Eurostat questionnaire

COUNCIL REGULATION (EC) NO. 530/1999 CONCERNING STRUCTURAL STATISTICS ON EARNINGS AND LABOUR COSTS

Questionnaire to assess the implications of extending coverage to statistical units with less than 10 employees

INTRODUCTION

Current EU legislation concerning structural statistics on earnings and labour costs does not require data for statistical units with less than 10 employees. Yet increasingly, information from small enterprises is required in order to provide a complete and coherent picture of the EU economy. However, when the Council Regulation on earnings and labour costs was being drafted, there was a concern that including these small units would be an unjustifiable burden for Member States. Eurostat undertook to study the implications of covering this segment of the economy and agreed to submit a report to the Council within four years.

Much of the groundwork for the report has already taken place. Structural business statistics and national accounts now require the coverage of small enterprises, and this has generated important lessons to be considered. However, additional information, more specific to the collection of data on earnings and labour costs from businesses, is still required to complete the overall picture; that is the purpose of this questionnaire.

The questionnaire is in two parts:

Part 1 - Structural statistics on labour costs

Part 2 - Structural statistics on earnings

Please complete the questionnaire by inserting your text into the document.

Part 1 - Structural statistics on labour costs

Questions 1.1 - 1.7

1.1 Please describe any studies that you have undertaken to assess the burden and data quality issues in relation to the collection of labour cost data from statistical units with less than 10 employees.

1.2 Do the sources you use for the four-yearly structural labour cost statistics already include statistical units with less than 10 employees?

1.3 Could structural labour cost statistics be provided to Eurostat for statistical units with less than 10 employees, in accordance with the definitions and transmission requirements specified in Commission Regulation (EC) 1726/1999, starting from the reference year 2004?

If the answer is NO, please indicate the reasons why and then continue with Question 1.4.

If the answer is YES, please turn to Part 2.

1.4 What would be required in order for you to meet the requirements of Commission Regulation (EC) 1726/1999 in respect of statistical units with less than 10 employees?

In responding to this question, please consider the following:

The extent to which your existing data collections can be adapted to include these units?

How small enterprises are represented for structural business statistics under Regulation (EC, Euratom) 58/1997?

How small enterprises are represented for the estimates of employee compensation in the national accounts (ESA 95)?

The possibility of exploiting suitable administrative data sources?

The use of statistical estimation techniques?

1.5 Would there be any additional technical, organisational or resource issues for your national statistical office, in order to provide structural labour cost statistics for statistical units with less than 10 employees?

1.6 How soon could the necessary labour cost data from statistical units with less than 10 employees be collected/estimated?

1.7 What would be the additional burden placed on businesses in order to provide this information to Eurostat?

Part 2 - Structural statistics on earnings

Questions 2.1 - 2.7

2.1 Please describe any studies that you have undertaken to assess the burden and data quality issues in relation to the collection of earnings data for individual employees in statistical units with less than 10 employees.

2.2 Do the sources you use for the four-yearly structural statistics on earnings already include statistical units with less than 10 employees?

2.3 Could structural statistics on earnings be provided to Eurostat for statistical units with less than 10 employees, in accordance with the definitions and transmission requirements specified in Commission Regulation (EC) 1916/2000, starting from the reference year 2006?

If the answer is NO, please indicate the reasons why and then continue with Question 2.4.

If the answer is YES, please stop and return the questionnaire to Eurostat.

2.4 What would be required in order for you to meet the requirements of Commission Regulation (EC) 1916/2000 in respect of statistical units with less than 10 employees?

In responding to this question, please consider the following:

The extent to which your existing data collections can be adapted to include these units?

How small enterprises are represented for structural business statistics under Regulation (EC, Euratom) 58/1997?

How small enterprises are represented for the estimates of employee compensation in the national accounts (ESA 95)?

The possibility of exploiting suitable administrative data sources?

The use of statistical estimation techniques?

2.5 Would there be any additional technical, organisational and resource issues for your national statistical office, in order to provide structural statistics on earnings for statistical units with less than 10 employees?

2.6 How soon could the necessary structural statistics on earnings from statistical units with less than 10 employees be collected/estimated?

2.7 What would be the additional burden placed on businesses in order to provide this information to Eurostat?

Annex 2: Summary of questionnaire responses

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