Report from the Commission to the European Parliament and the Council on the implementation of Regulation (EC) No 450/2003 of the European Parliament and of the Council
Date: 2004-12-27
Institutions: European Commission
Subjects: EU statistics, application of EU law, data transmission, labour force, national implementing measure, statistics, wage cost, wage indexing

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 27.12.2004 
COM(2004)833 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT 
AND THE COUNCIL 

on the implementation of Regulation (EC) No 450/2003 of the European Parliament 
and of the Council 

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1. 

Introduction 

In the Euro-zone, labour costs are generally considered as one of the main potential sources of 
inflation. A timely labour cost index is thus considered by the Commission to be of the utmost 
importance  for  the  European  Central  Bank  to  monitor  inflation  and  for  social  partners  to 
negotiate wage agreements. 

Regulation (EC) No 450/2003 of the European Parliament and of the Council of 27 February 
2003 concerning the labour cost index establishes a common framework for the production, 
transmission and  evaluation of comparable labour  cost indices in the  Community (OJ  L  69, 
13.3.2003, p. 1). After the endorsement of the Regulation, the Member States have begun to 
implement  its  requirements.  Most  Member  States  continued  to  develop  provisional  index 
series  (which  had  already  been  disseminated  for  several  years  by  Eurostat)  to  become  final 
indices, whereas other countries began to consider possible alternative approaches. For some 
countries it was the first time they had had to develop a labour cost index. 

Article  13  of  the  Regulation  stipulates  biennial  reports  on  the  implementation  of  the 
Regulation. This first report, as laid down in the last sentence of Article 13 of the Regulation, 
refers  only  to  the  actions  executed  by  Member  States  to  prepare  the  application  of  the 
Regulation. 

2.  Transition periods 

The  following  table  shows  the  Member  States  with  transition  periods  until  June  2005  to 
provide Labour Cost  Index  series  from 1996 to  today.  The  transition  periods  concern  either 
only some characteristics or the full application of the index. 

Member State 

Transition period covers 

Belgium 

-  70-day transmission period 

-  Labour costs per hour worked 

Germany 

NACE sections H, I and K 

Greece 

Spain 

France 

Ireland 

Italy 

All provisions 

70-day transmission period 

All provisions 

All provisions 

-  Employers' social contributions plus taxes paid by the employer 

less subsidies received 

-  Exclusion of taxes and subsidies (D4 and D5)  

Luxembourg 

All provisions 

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Netherlands 

-  Back data 1996 – 2002 

-  Employers' social contributions plus taxes paid by the employer 

less subsidies received 

-  Exclusion of taxes and subsidies (D4 and D5) 

NACE sections G, H, I, J and K 

All provisions 

All provisions 

Austria 

Finland 

Sweden 

United Kingdom 

- 

- 

Inclusion of Northern Ireland 

Inclusion of units with less than 20 employees 

-  Working day adjustment 

3.  Measures implemented by the Member States up to October 2004 

The  following  countries  have  undertaken  all  necessary  measures  to  fully  comply  with  the 
Regulation: Czech Republic, Denmark, Lithuania, Hungary, Portugal and Slovak Republic. 

Another group of Member States are fully implementing the Regulation apart from the items 
that are subject to the transition period. This group includes Germany, Spain, the Netherlands 
and Austria. 

For the other countries, the situation is as follows: 

Belgium  

A provisional index with partial coverage has been prepared using the existing data sources. 
These series are available for 1996-2002. 

Estonia 

The  Labour  Cost  Index  has  been  implemented  partially.  Definitions,  concepts  and  the  item 
coverage comply with the Regulation. Back data from 1996 to 2002 are missing, as well as 
working day and seasonally adjusted series. 

Greece  

Transition period until 2005 June for the full application of the index. 

A  provisional  index  is  under  construction.  The  compilation  based  on  the  quarterly  Labour 
Force Survey and the multi-annual Labour Cost Survey has led to a provisional index which is 
under validation as regards its methods and plausibility. 

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France 

Transition period until 2005 June for the full application of the index. 

A provisional index partially following the concepts of the Regulation is available from 1996 
onwards.  A  series  of  methodological  studies  and  simulations  have  been  conducted  during 
2003 and 2004 for testing the compilation of the final index. 

Ireland  

Transition period until 2005 June for the full application of the index. 

A provisional index with partial coverage has been prepared using the existing data sources. 
These series are available for 1996-2002. 

Italy 

The  Labour  Cost  Index  has  been  implemented  in  part.  The  denominator  of  the  index,  i.e. 
hours  worked,  is  for  the  time  being  the  total  number  of  employees  expressed  as  full-time 
equivalent employees. The 70-day period is not yet observed, and working day and seasonally 
adjusted series are not available. 

Cyprus 

A  provisional  index  is  under  construction.  A  pilot  survey  was  carried  out  in  2002-2003  to 
collect quarterly information directly from businesses. As the results were not satisfactory in 
all aspects, series of studies examining existing data sources are currently being conducted. 

Latvia 

The  Labour  Cost  Index  has  been  implemented  partially.  Definitions,  concepts  and  the  item 
coverage are in line with the Regulation. Only the back data for 1996 are missing. 

Luxembourg  

Transition period until 2005 June for the full application of the index. 

A provisional index following the concepts of the Regulation in part is available from 1996 
onwards. Series of methodological studies and simulations have been carried out during 2003 
and 2004 for testing the compilation of the final index. 

Malta 

A  provisional  index  is  under  construction.  A  series  of  studies  examining  the  existing  data 
sources are being carried out. 

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Poland 

A provisional index which partially follows the concepts of the Regulation is available from 
1996 onwards. Index series are not broken down, as requested, by economic activities nor by 
working day, and seasonally adjusted index series are not available. 

Slovenia 

The  Labour  Cost  Index  has  been  implemented  partially.  Definitions,  concepts  and  the  item 
coverage comply with the Regulation. The working day and seasonally adjusted index series 
are not available. 

Finland 

Transition period until 2005 June for the full application of the index. 

A provisional index which partially follows the concepts of the Regulation is available from 
1996  onwards.  A  series  of  methodological  studies  and  simulations  were  conducted  during 
2003 and 2004 to test the compilation of the final index. 

Sweden 

Transition period until 2005 June for the full application of the index. 

A provisional index which partially follows the concepts of the Regulation is available from 
1996  onwards.  A  series  of  methodological  studies  and  simulations  were  conducted  in  2003 
and 2004 for testing the compilation of the final index. 

United Kingdom 

A provisional index which partially follows the concepts of the Regulation is available from 
1996 onwards. Index series are not broken down either by the requested economic activities 
or by working day and seasonally adjusted index series are not available either. 

All Member States have been invited to give a more detailed report on their implementation 
activities. Available information is annexed to this report. 

4.  Accompanying actions by the European Commission (Eurostat) 

Since  Regulation  (EC)  450/2003  came  into  force  Eurostat  has  been  giving  the  countries 
further  instruction  in  the  basic  methodology  and  transmission  of  data.  An  implementing 
Regulation was adopted by the Commission in July 2003 (EC 1216/2003, OJ L 169, 8.7.2003, 
p.  37),  stipulating  in  more  detail  the  procedures  for  transmitting  the  index,  the  specific 
(seasonal) adjustments to be made and the content of the quality reports.  

Eurostat has been preparing the database and data transmission facilities in order to receive, 
verify,  manipulate,  store  and  disseminate  the  Labour  Cost  Index  data  in  a  timely  manner. 
These  processes  will  be  completed  and  fully  operational  by  spring  2005  when  the  last 
transition  periods  will  have  expired  and  all  countries  are  delivering  the  Regulation-based 

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index  series.  In  the  meantime,  Eurostat  continues  to  receive  and  disseminate  index  series 
based  on  the  Regulation,  or  provisional  index  series,  depending  on  the  Member  States’ 
implementation status. 

5.  Conclusions 

Ten Member States are in full compliance with the Regulation; four of these still have agreed 
transition arrangements for some aspects of the implementation. 

Fifteen  Member  States  are  still  in  a  preparatory  phase  of  the  implementation  of  the 
Regulation. Six of those have agreed transitional arrangements for the full implementation of 
the Regulation.  

The remaining items to implement the Regulation mainly concern the full breakdown of the 
data by economic activities, back data and the (seasonal) adjustments of the series. Producing 
an index in a timely manner in 70 days also requires adjustments to the production process. 
For some countries the search for, and testing of, the most suitable data sources is still going 
on. 

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Details on National Implementation Activities 

ANNEX  

Belgium 

The currently available data from the first quarter of 1996 to the fourth quarter of 2002 are not 
yet  fully  based  on  the  harmonised  methodology.  The  major  problem  is  estimating  the 
denominator of the basic variable, i.e. hours worked. Available information in administrative 
data files is expressed in "Full Time Equivalents", rather than in number of hours. The aim of 
current activities is to be able to estimate quarterly working hours more accurately, so as to 
adopt practices that are more consistent with those used by other Member States. Provisional 
quarterly indices for the years 2003 and 2004 are currently being compiled. 

Czech Republic 

The  indices  have  been  prepared  strictly  according  to  the  legal  acts.  To  achieve  full 
compliance,  however,  it  is  still  necessary  to  calculate  the  index  excluding  bonuses.  Initial 
activities have already been  launched  successfully. A new variable on bonuses was inserted 
into  the  Enterprise  Report  list  of  variables  in  the  first  quarter  of  2003.  The  results  will  be 
checked  against  the  corresponding  annual  figures  from  the  yearly  Labour  Cost  Survey. 
Calculation of back data before the first quarter of 2003 will not be possible. 

Greece 

Data collection on hours worked and labour costs will be based on a quarterly sample survey, 
starting in 2005, for the reference years 2000 to 2004. Data for the years 1996-1999 might be 
based  on  administrative  sources  (Social  Insurance  Funds)  depending  on  the  outcome  of  a 
currently ongoing study. 

Spain 

Previous activities can been summarised as follows: 

Time 

Action 

1998-1999 

Development of the Quarterly Labour Cost Survey (QLCS) 

January 2000 

First data collection of the QLCS 

March 2002 

Estimation  of  back  series  on  wages  and  salaries  by  linking  the  QLCS
with the data from the previous Wage and Salary Survey 

June 2002 

Estimation of back data for other labour cost data 

December 2002 

Implementation of the Laspeyres formula 

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2003 

Study  and  implementation  of  the  working  day  and  seasonal  adjusted 
series; study on the introduction of provisional data within the requested 
70-day deadline; study of revisions 

March 2004 

First  sending  of  data  according  to  the  requirements  of  the  Regulation, 
except for non-observance of the 70-day transmission deadline 

Since 2002 

Feasibility study on the inclusion of the NACE section L 

France 

Despite  its  derogation,  France  is  already  sending  provisional  figures  going  back  to  the  year 
1996. Since 2003, France has been taking appropriate measures to conceptually improve the 
indices; these measures include methodological studies, the development of specific computer 
tools  and  research  on  the  most  appropriate  data  sources.  In  October  2004,  the  informatics 
tools were more or less finalised. 

Ireland 

The indices will be compiled as part of a new economy-wide survey called Earnings, Hours & 
Employment Costs Survey (EHECS). The project to implement this new EHECS has begun. 
Initially,  data  will  be  collected  for  the  fourth  quarter  of  2004  in  the  NACE  sections  on 
Construction,  Wholesale  &  Retail  and  Financial  Intermediation,  with  survey  forms  to  be 
issued in January 2005. The other NACE sections from C to O will be incorporated step-by-
step. The EHECS will be a postal survey, with the submission of returns in electronic form 
being  strongly  encouraged.  Scanning  technology  will  be  used  for  data  capture  of  the  forms 
returned.  Until  this  survey  is  established,  Ireland  will  transmit  the  old  indices.  The 
methodology for integrating the two series will be forwarded at a later stage. 

Cyprus 

A  quarterly  sample  survey  for  the  collection  of  hours  worked  and  labour  costs  has  been 
established,  based  on  personal  interviews  in  enterprises  with  five  and  more  employees.  The 
experience from the survey was fairly positive in terms of data quality. However, it created a 
high response burden for the enterprises and proved to be costly and time-consuming, leading 
to a considerable delay in collecting, processing and preparing the data. For these reasons the 
use  of  administrative  sources  seems  to  offer  a  more  timely  option  and  also  to  reduce  the 
response burden. Exploring various possibilities, it was found that the best available source is 
the  Register  of  the  Social  Insurance  Department.  As  it  is  still  encountering  problems, 
particularly  with  the  classification  of  economic  activities  and  the  timely  attribution  of 
irregular  bonuses,  the  Statistical  Service  of  Cyprus  has  already  started  to  remedy  these  two 
weaknesses  as  far  as  possible.  The  first  results  for  the  years  2000-2003  are  expected  to  be 
delivered  before  the  end  of  2004.  Studies  are  currently  ongoing  to  find  the  best  way  to 
compute back data. 

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Latvia 

The data for Latvia are in line with the Regulation. The only exception is that back data up to 
1996  as  part  of  the  main  source  data,  i.e.  the  hours  worked  in  the  private  sector  and  some 
other information, are not available. 

Hungary 

The situation in Hungary is largely in line with the legal requirements. Exceptions include the 
index excluding bonuses, as information on bonuses is missing for the years before 2002. The 
indices are based on monthly short-term surveys covering all corporations with more than 49 
employees,  and  corporations  with  between  5  and  49  employees  on  a  representative  basis 
(public institutions have been observed on a full-scope basis since 1998), and the Labour Cost 
Surveys 2000 and 1996. In addition, some ratios for estimating components other than wages 
and salaries are used to supplement data from the primary sources. The first quality report was 
sent in September 2004. 

Poland 

The Polish data for the first, second and third quarters are transmitted according to the legal 
requirements up to 70 days; the data for the fourth quarter, however, are sent up to 120 days 
after the reference period. The metadata have been established according to the SDDS format 
of  the  International  Monetary  Fund  (IMF).  The  related  quality  report  has  also  been  made 
available. 

Portugal 

The Portuguese indices are based on several sources, the main one being the survey ‘Índice de 
Custo do Trabalho’ (ICT). Originally established for the development and implementation of 
the  Labour  Price  Index  (LPI),  the  survey  had  to  be  adjusted  for  the  needs  of  the  indices. 
Complementary  data  sources  were  studied  and 
that 
implementation is in accordance with Regulation 450/2003. 

tested.  These  studies  showed 

Slovenia 

The data for Slovenia are in line with the Regulation. The only exception concerns seasonal 
and working day adjustments, which will be made fully available in 2005. 

Finland 

During the transition period Finland has transmitted to Eurostat within the 70-days deadline 
index series that did not fully comply with the Regulation. The methods of production have 
now been upgraded to provide the detail and quality required by the Regulation, which will be 
implemented from the beginning of 2005. The index will also cover public sector activities. 

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United Kingdom 

The  UK  is  currently  providing  an  interim  series  that  does  not  fully  comply  with  the 
Regulation.  The  new  series  based  on  the  Regulation  has  been  developed,  and  is  to  be 
published  and  regularly  transmitted  to  Eurostat  from  2005.  By  the  end  of  2004,  the  UK 
expects to make available a consistent back series to the first quarter of 2000, based on the 
Regulation. This will be linked to the current interim series to provide a back series to the first 
quarter of 1996. 

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