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 concerning the labour cost index (LCI)
Date: 2023-01-23
Institutions: European Commission, Eurostat
Subjects: EU statistics, application of EU law, data collection, disclosure of information, economic activity, economic indicator, labour force, pay, statistical method, wage cost

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 23.1.2023  COM(2023) 34 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 concerning the labour cost index (LCI)   
 
 
I. 

INTRODUCTION 

The labour cost index (LCI) measures quarterly changes in total hourly labour costs borne by 
employers, making it possible to monitor developments in the cost pressure arising from the 
production  factor  ‘labour’.  The  LCI  belongs  to  the  family  of  principal  European  economic 
indicators  /  euro-indicators1,  which  provide  information  on  economic  developments  in  the 
euro area.  

The  LCI  is  used  in  particular  by  the  European  System  of  Central  Banks  to  assess  possible 
inflationary  pressure  caused  by  developments  in  the  labour  market.  It  is  also  important  for 
social  partners  involved  in  wage  negotiations  and  for  the  European  Commission  itself  to 
monitor short-term developments in labour costs. Finally, LCI data are used for the indexation 
of prices in some large commercial contracts that span several years. 

On  its  website,  Eurostat  publishes  a  quarterly  news  release  on  the  LCI2,  which  contains  a 
large  set  of  data  broken  down  by  economic  activity  and  by  the  components  of  labour  costs 
(wage and non-wage  costs). The  website  also  includes  both  quarter-on-quarter and  year-on-
year growth rates. 

Regulation (EC) No 450/2003 of the European Parliament and of the Council of 27 February 
2003 concerning the labour cost index3 (the ‘LCI Regulation’) sets a common framework for 
Member States to produce comparable indices and provide them to the Commission.  

Article  13  of  Regulation  (EC)  No 450/2003  requires  the  Commission  to  report  to  the 
European Parliament and the Council every 2 years. The purpose of the report is to assess the 
quality of the statistics provided by Member States and of the EU aggregates, and to identify 
areas where improvements could be made.  

This is the ninth LCI report of the Commission to the European Parliament and the Council4. 
It  focuses  on  the  LCI  data  received  since  the  previous  edition,  for  the  reference  quarters 
ranging  from  the second quarter  of 2020 (2020Q2) to  the first  quarter of  2022 (2022Q1).  It 
reflects the observations made by Eurostat when collecting and validating LCI data for these 
reference  quarters  and  builds  on  the  documentation  provided  by  Member  States  in  their 
annual quality reports. 

This edition does not cover LCI data from the United Kingdom as this country left the EU on 
1 February 2020 and stopped transmitting LCI data from 2020Q1 onwards. 

1 

2 

3 
4  

Communication of the Commission to the European Parliament and the Council on eurozone statistics 
Towards improved methodologies for eurozone statistics and indicators (COM(2002) 661 final). 
The quarterly news release is published on the dates set in the release calendar; both can be found on 
the  Eurostat  website  (http://ec.europa.eu/eurostat/web/main  –  available  in  English,  French  and 
German). 
OJ L 69, 13.3.2003, p. 1. 
See previous report (COM(2020) 819 final of 22.12.2020). 

1 

 
                                                           
In  Annex  I  to  Regulation  (EC)  No 1216/20035,  the  quality  of  the  LCI  is  defined  using  the 
following  criteria:  relevance,  accuracy,  punctuality  of  delivery  of  data,  accessibility  and 
clarity,  comparability,  coherence  and  completeness.  As  accessibility  and  clarity  were 
considered  satisfactory  in  the  previous  LCI  report,  the  focus  in  this  report  is  on  relevance, 
completeness, punctuality, accuracy, comparability and coherence. 

In  this  edition,  we  also  report  on  the  main  impact  of  the  COVID-19  crisis  on  LCI  data 
collection.  

II. 

GENERAL PROGRESS SINCE THE LAST REPORT 

From a legislative point of view, no changes have been made since the previous report. The 
next paragraphs detail the improvements made in producing the report. 

2.1 Standards for data collection 

The latest version of the Statistical Data and Metadata eXchange (SDMX)6 data structures and 
internationally agreed code lists (available online through a dedicated registry7) continues to 
be  used  successfully  for  receiving  Member  State  data  and  producing  the  LCI  but  also  for 
transmitting LCI data to the European Central Bank. 

For  (flash  and  final)  data  from  2021Q3  onwards,  Member  States  have  started  using  an 
updated  version  (2.3)  of  the  SDMX  data  structure  definition,  which  incorporates  the  latest 
changes agreed at international level. 

2.2 Data validation 

The data have been systematically validated by means of a new tool, which checks whether 
the codes and data structures used meet the agreed standards for data transmissions (SDMX). 
This simplifies the production process and reduces the risk of errors arising from flaws in the 
coding.  When  the  file  transmitted  does  not  meet  the  SDMX  standards  in  force,  it  is 
automatically  rejected.  Member  States  receive  a  success  /  failure  notification  by  email  and 
they may access the validation report through a web service. 

Since  the  last  report,  Eurostat  has  adapted  the  production  process  to  make  it  possible  to 
process all types of SDMX formats, be they compact or generic. 

Moreover,  Eurostat  carries  out  credibility  checks  on  each  quarterly  transmission  by 
comparing data over time and across NACE Revision 2 (NACE Rev. 2) economic activities. 
If  there  are  significant  quarter-on-quarter  changes,  Eurostat  asks  Member  States  to  confirm 
the data or transmit a corrected data file. If large revisions or sudden changes are detected in 

5  

6  
7  

Commission  Regulation  (EC)  No  1216/2003  of  7  July  2003  implementing  Regulation  (EC)  No 
450/2003 of the European Parliament and of the Council concerning the labour cost index. 
http://sdmx.org/ (available only in English). 
https://webgate.ec.europa.eu/sdmxregistry/ (available only in English). 

2 

 
 
                                                           
 
any  particular  NACE  section,  they  are  systematically  followed  up  with  the  countries 
concerned.  

2.3 Hourly labour cost levels 

Eurostat has continued publishing with success the annual estimates of hourly labour costs by 
NACE Rev. 2 section since the first release issued in April 2016. These estimates are based 
on the levels obtained from the four-yearly labour cost survey, which  are extrapolated with 
the labour cost indices. They are produced 3 months after the end of the reference period and 
cover  all  NACE  sections  with  the  exception  of  NACE  Rev.  2  section  ‘L’  (real  estate 
activities). 

2.4 Quality reports 

The  quality  reports  submitted  by  Member  States  were  timely  processed  using  the  latest 
version of the European Statistical System Metadata Handler and made available to all users8. 

2.5 Seasonal and calendar adjustments 

Eurostat  analysed  the  seasonally  (SA)  and  calendar  (CA)  adjusted  series  transmitted  by 
Member  States,  and  presented  a  cross-country  comparison  to  its  expert  group  on  labour 
market statistics in October 2021. 

Eurostat also improved the seasonal adjustment annex attached to the national quality reports. 
This annex details in particular the seasonal adjustment models used, the outliers detected, the 
size of the adjustments, and the volatility of the results. 

Eurostat publishes SA data for EU aggregates in the database and in the Statistics Explained 
article on LCI, alongside not-seasonally adjusted (NSA) data. SA results for the totals are now 
derived from SA data for the wage and non-wage components, which ensures consistency.   

III. 

DATA QUALITY 

3.1 

Relevance and completeness 

Relevance 

User  demand  continued  not  only  for  information  on  quarterly  percentage  changes  in  labour 
costs,  as  measured  by  the  LCI,  but  also,  increasingly,  for  information  on  labour  costs  in 
absolute terms (euro per hour). Eurostat continued publishing, in April each year, estimates of 
hourly labour costs in euro and in national currencies (labour cost levels) with a NACE Rev. 2 
breakdown.  The  annual  growth  rate  of  hourly  labour  cost  levels  and  the  share  of  non-wage 

8 https://ec.europa.eu/eurostat/cache/metadata/EN/lci_esqrs.htm (available only in English). 

3 

 
 
                                                           
costs in total labour costs9 were included. The feedback received on the publication of these 
estimates is positive, and Eurostat will continue to produce the annual labour costs with the 
NACE Rev. 2 breakdown. 

Completeness 

This part reviews whether the LCI data and metadata transmitted meet the legal requirements 
in terms of completeness. Comments refer to indices, weights and quality reports.   

a) Indices 

In  general,  the  availability  and  completeness  of  the  LCI  was  satisfactory  over  the  whole 
reference  period.  Eurostat  received  CA  data  as  well  as  CA  and  SA  data  from  all  Member 
States  for  all  quarters  except  in  two  instances  (Greece  for  2020Q4  and  2021Q2).  Member 
States  also  delivered  NSA  data,  except  Denmark  and  Sweden,  which  have  been  granted 
derogations10.  

Regarding  other  European  Economic  Area  (EEA)  countries11,  both  Iceland  and  Norway 
transmitted LCI data for all quarters of the reference period. Iceland currently provides only 
CA as well as CA and SA series whereas Norway only transmits CA data. 

Despite the improved coverage of SA data, headline figures are still based on the year-on-year 
(Q/Q-4)  changes  in  CA  data,  which  show  lower  volatility.  However,  all  data,  including  SA 
estimates, are available on the relevant page12 of the Eurostat database. All countries covered 
all NACE sections, taking into account the above derogations.  

b) Weights 

Pursuant  to  the  LCI  Regulation,  Member  States  and  other  EEA  countries  are  expected  to 
transmit the annual labour costs for the wage / non-wage components of each NACE section 
(the ‘weights’) every year. Keeping these data up to date is important as they affect Eurostat’s 
calculation  of  NACE  aggregates  and  the  derivation  of  totals  from  the  wage  and  non-wage 
components.  

By 30 June 2022, all Member States and other EEA countries had transmitted the weights for 
the reference year 2020. The weights for the reference year 2021 were also available except 
for Czechia, Croatia, Ireland and the Netherlands. 

9  

10  

11  
12  

See the dataset lc_lci_lev in the dissemination database of Eurostat 
(https://ec.europa.eu/eurostat/data/database, available in English, French and German). 
Pursuant to Regulation (EC) No 1216/2003, Denmark, Germany, France and Sweden are not bound to 
deliver NSA data. Germany and France provide them anyway.  
Regulation (EC) No 450/2003 does not apply to Liechtenstein. 
https://ec.europa.eu/eurostat/data/database 

4 

 
 
  
                                                           
 
c) Quality reports 

All Member States except for Croatia provided national quality reports for the reference year 
2020.  These  reports  have  been  validated  and  published  on  Eurostat’s  corresponding 
webpage13. 

3.2 

Punctuality 

Pursuant to the LCI Regulation, Member States and other EEA countries must deliver labour 
cost indices within 70 days after the reference quarter.  

Since the previous report, 9 countries have missed deadlines for transmitting their data:  

- 

- 

the Netherlands (2021Q1 data received 1 calendar day after the deadline);  

Ireland (2021Q1 and 2022Q1 data received 4 calendar days after the deadline);  

-  Denmark (2021Q2 and 2022Q1 data received 1 calendar day after the deadline); 

-  Hungary (2021Q2 data received 1 calendar day after the deadline); 

-  France  (2021Q2  and  2021Q3  data  received  1  calendar  day  after  the  deadline  whereas 

2021Q4 data were received 3 calendar days after the deadline); 

-  Finland (2021Q3 data received 1 calendar day after the deadline); 

-  Latvia (2021Q2 data received 2 calendar days after the deadline); 

-  Croatia(2021Q2 data received 2 calendar days after the deadline); and 

-  Greece  (2021Q3  data  received  4  calendar  days  after  the  deadline  and  2021Q4  data 

received 3 calendar days after the deadline). 

Regarding other EEA countries, Norway transmitted LCI data on time, as did Iceland. 

3.3 

Accuracy 

The LCI is made up of a number of different variables (e.g. labour costs and hours worked), 
which may be taken from several sources. This means that revisions may occur at any time, 
affecting  the  last  quarter,  several  quarters  or  whole  years.  If  adjustments  relate  to  the 
reference year, the whole series has to be revised. Revisions of the EU headline figure (year-
on-year growth rate) never exceeded 0.2 percentage points (pp) (see Figure 1). The revisions 
were due to the COVID-19 crisis and governmental support measures mostly reported in the 
non-wage components of the LCI. 

13  

https://ec.europa.eu/eurostat/cache/metadata/EN/lci_esqrs.htm (available only in English). 

5 

 
 
 
                                                           
Figure 1: Changes to the annual growth rate between the first and final LCI releases  

(EU-27, NACE Rev. 2 Sections B to S aggregate, total labour costs, in pp, [2020Q1 to 2022Q1]) 

0,2

0

0

0

0

-0,1

-0,1

Q1

Q2

Q3

2020

-0,2

Q4

Q1

Q2

-0,2

Q3

2021

Q4

Q1

2022

Source:  
- 

For  final  data:  Eurostat  dataset  lc_lci_r2_q  [variable:  ‘Labour  cost  for  LCI  (compensation  of  employees 
plus taxes minus subsidies)’]. 
For first estimates: production database of Eurostat. 

- 

Data were extracted on 24.6.2022. 

3.4  

Coherence and comparability 

Coherence with national accounts figures 

One  of  the  areas  that  continues  to  receive  attention  is  the  coherence  of  the  LCI  with  other 
statistics on labour costs, in particular with the quarterly national accounts data. 

For the annual quality report, Member States are asked to compare the growth rate of the LCI 
with  that  of  employees’  hourly  compensation  found  in  the  national  accounts  (ESA 2010 
definition14).  The  datasets  are  not  expected  to  perfectly  match:  even  if  almost  identical 
definitions of labour cost are used, statistical sources and treatments may differ. Furthermore, 
collecting  data  on  hours  worked  is  particularly  difficult  for  both  the  LCI  and  the  national 
accounts. Despite these differences in  methodology, it is  informative to  analyse the level  of 
discrepancies between both sources. When the levels are above a given relative threshold, this 
may indicate quality issues in either dataset.  

14 

Regulation (EU) No 549/2013  of the European Parliament and of the Council of 21 May 2013 on the 
European system of national and regional accounts in the European Union (OJ L 174, 26.6.2013, p. 1). 

6 

 
 
 
                                                           
For  quality  assessment,  Eurostat  continued  to  monitor  the  NACE  Rev.  2  Sections  B  to  S 
aggregates of each Member State. For this comparison, NSA LCI data were used, except for 
Denmark and Sweden for which CA data were available. The median annual growth rate of 
the  LCI was  compared  with  that of the hourly  compensation of employees, over 8 quarters, 
and variations of more than 2 pp were considered to warrant further analysis (see Figure 2). 

Figure 2: Median annual growth rates of the LCI versus hourly compensation of employees  

 (NACE Rev. 2 Sections B to S aggregate, total labour costs, reference period: 2020Q2-2022Q1*) 

* For Denmark and Sweden, the NSA data were not available at the time of drafting; CA data were used instead. 

Source:  
- 

- 

For  the  national  accounts:  Eurostat  datasets  namq_10_a10  [variable:  ‘Compensation  of  employees’]  and 
namq_10_a10_e [variable: ‘Employees domestic concept, in thousands hours worked’]. 
For the LCI: Eurostat dataset lc_lci_r2_q [variable: ‘Labour cost for LCI (compensation of employees plus 
taxes minus subsidies)’]. 
Data were extracted on 24.6.2022. 

Countries with a gap of more than 2 pp were: Malta (5 pp), Czechia (4.4 pp), Croatia (3.1 pp), 
Ireland (2.8 pp), Poland (2.7 pp) as well as Latvia and Denmark (both 2.4 pp) (see Figure 2, 
with countries ranked by increasing order of the gap in absolute value).  

The  results  of  the  above  analysis  are  followed  up  with  Member  States,  in  particular  with 
respect to data on hours worked. 

7 

 
 
 
 
In  addition  to  the  medians,  Eurostat  compared  the  standard  deviation  of  the  annual  growth 
rates of both the LCI and the national accounts series, as an indicator of volatility. Compared 
with  the  last  report,  the  volatility  of  both  series  has  increased  substantially  because  of  high 
variations  in  the  number  of  hours  worked.  This  was  particularly  the  case  for  the  economic 
activities  most  impacted  by  the  COVID-19  crisis,  namely  NACE  Rev.  2  Sections  I 
(‘Accommodation and food service activities’) and R (‘Arts, entertainment and recreation’). 

Comparability 

Comparability between countries is ensured through the detailed definitions and methodology 
included  in  the  LCI  legislation.  Member  States  fulfil  the  EU  requirements  with  the  data 
sources  available  at  national  level.  Most  of  them  use  either  surveys  or  a  combination  of 
surveys and administrative data, whereas 2 Member States exclusively rely on administrative 
sources. 

In order to publish comparable LCI data over time, it is important to correct for calendar and 
seasonal  effects.  The  headline  figures  are  adjusted  for  calendar  effects  while  offsetting 
seasonality by comparing the same quarters over 2 consecutive years. 

Pursuant  to  Article  1  of  Regulation  (EC)  No 1216/2003,  LCI  figures  must  be  provided  in 
NSA, CA as well as CA and SA form. 

Regulation  (EC)  No 450/2003  does  not  explicitly  state  whether  calendar  and  seasonal 
adjustments have to be made using the direct or the indirect approach. An indirect adjustment 
means  that  the  basic  series  are  adjusted  and  then  used  to  construct  higher-level  aggregates, 
whereas a direct adjustment means that every single series, including higher-level aggregates, 
is adjusted individually. 

For  the  LCI,  Eurostat  recommends  using  the  indirect  approach  to  avoid  inconsistencies 
between total labour costs and components.  

Eurostat systematically checks for inconsistencies between the annual  growth rates of totals 
and  components,  and  reports  all  inconsistencies  that  exceed  0.1  pp  (after  rounding)  to  the 
countries concerned. The total LCI is then recalculated on the basis of the wage and non-wage 
improved 
components  (indirect  approach).  This  harmonised  approach  also  ensures 
comparability across countries. 

8 

 
 
 
IV. 

IMPACT OF THE COVID-19 CRISIS 

4.1 Survey of Member States 

In March 2020, Eurostat launched a survey enabling countries to report the main issues they 
had  faced  in  collecting  LCI  data  since  the  start  of  the  pandemic.  The  most  frequent  issue 
reported  in  the  EU  survey,  as  well  as  in  the  metadata  files  for  2020Q1  and  2020Q2,  was  a 
lower  response  rate  from  businesses  surveyed  due  to  temporary  business  closures  and  new 
working arrangements (short time work, teleworking, etc.).  

4.2 Methodological guidance and reporting 

To  ensure  a  harmonised  recording  of  COVID-19  measures  in  labour  cost  statistics,  in 
particular  in  the  quarterly  LCI,  Eurostat  posted  a  guidance  note  on  recording  government 
schemes related to the COVID-19 crisis in labour cost statistics15 in April 2020.  

The  support  measures  introduced  by  EU  governments  varied  in  scope,  intensity  and  time 
span, depending on how the COVID-19 pandemic affected  each national  economy. To help 
users  analyse  developments  in  the  LCI  during  the  pandemic,  Eurostat  collected  information 
on  the  main  schemes  with  an  impact  on  labour  cost  statistics.  This  was  done  in  full 
cooperation with the national statistical institutes, and the results have been added to the LCI 
metadata in the dissemination database of Eurostat16. 

4.3 Impact on LCI data 

Despite the hindrances caused by the COVID-19 outbreak, Member States managed to deliver 
2020Q1 data on time. In 2020Q2, most countries recorded large year-on-year increases in the 
wage component of the LCI. This was caused by reductions in the number of hours worked 
while  wages  were  generally  preserved.  Conversely,  the  non-wage  component  decreased 
reflecting  higher  subsidies  (recorded  with  a  negative  sign)  paid  by  governments  to 
compensate firms for limiting wage cuts. However, this was not always the case, as some EU 
governments  opted  for  paying  subsidies  directly  to  employees,  in  which  case they were not 
recorded in wage statistics. 

15  
16  

https://ec.europa.eu/eurostat/documents/10186/10693286/Labour-costs_Guidance_note.pdf 
Labour cost index (lci) (europa.eu), item 15.2. 

9 

 
 
 
                                                           
V. 

CONCLUSIONS 

Overall, the quality of the labour cost indices of the Member States and of the EU aggregates 
has remained good, despite the impact of the COVID-19 crisis. In particular, EU aggregates 
recorded  low  revisions,  as  was  the  case  before  the  crisis.  Eurostat  also  issued  a  detailed 
guidance note to preserve cross-country comparability throughout the reference period.   

The quality reports submitted by Member States were processed using the latest version of the 
European Statistical System Metadata Handler and made available to all users. Eurostat added 
a  comprehensive  annex  on  seasonal  adjustment  practices  and  results  across  Member  States. 
Moreover, Member States reported on the main schemes introduced by their governments to 
subsidise  labour  costs  during  the  COVID-19  crisis.  This  information  has  been  added  to  the 
reference metadata on quality. 

Since 2017, Eurostat has been publishing annual estimates of the hourly labour cost levels by 
NACE Rev. 2 sections, based on both labour cost survey levels and  LCI trends. The related 
Statistics Explained articles recorded a high number of hits, confirming users’ interest. 

The  Commission  will  continue  to  monitor  compliance  and  data  quality  on  a  regular  basis, 
using the data delivered and other national documentation, including quality reports. 

In  close  cooperation  with  the  national  statistical  institutes,  Eurostat  has  also  carried  out  a 
general review of EU legislation on labour market statistics on businesses. This review aims 
to  evaluate  and  modernise  all  EU  legislation  in  the  field  of  labour  market  statistics  on 
businesses. 

As regards the LCI, Eurostat envisages to propose the following improvements: 

-  collecting a flash LCI estimate at t+45 days, from the larger EU countries, with a view 

to publishing euro area and EU totals at around t+50 days; 

-  collecting final LCI data at t+65 days instead of t+70 days, with a view to publishing 

the results at t+72 days, against t+77 days currently; and 

- 

introducing precision targets for the wage component of the LCI. 

10