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: 2024-12-18
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, 18.12.2024  COM(2024) 578 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  cost  pressures  arising  from  the 
production factor ‘labour’. The LCI belongs to  the principal European economic indicators/ 
euro-indicators1, which provide information on economic developments in the euro area.  

The  LCI  is  used  by  the  European  System  of  Central  Banks  to  assess  possible  inflationary 
pressures  caused  by  labour  market  developments.  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  to  index  prices  in  some  large 
commercial contracts that span several years. 

On  its  website,  Eurostat  publishes  a  quarterly  news  release  on  the  LCI2,  with  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 transmit 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 10th 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  from 
the  second  quarter  of  2022  (Q2-2022)  to  the  first  quarter  of  2024  (Q1-2024).  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. 

In Annex I to Regulation (EC) No 1216/20035, the quality of the LCI data is defined using the 
following  criteria:  relevance,  accuracy,  punctuality  of  the  delivery  of  data,  accessibility  and 
clarity, comparability, coherence and completeness.  

1 

2 

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. ELI: http://data.europa.eu/eli/reg/2003/450/oj 
See previous report  COM (2023) 34 final of 23.1.2023. 
Commission Regulation (EC) No 1216/2003 of 7 July 2003 implementing Regulation (EC) No 

3 
4  
5  
              450/2003 of the European Parliament and of the Council concerning the labour cost index. 

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The accessibility and clarity of LCI data is now well established, through the publication of 
detailed  metadata  and  national  quality  reports  on  Eurostat’s  website.  This  LCI  report  will 
therefore focus on the other criteria. 

II. 

GENERAL PROGRESS SINCE THE LAST REPORT 

No legislative  changes have been made since the  last report. The next paragraphs set out in 
detail the improvements made in producing the report. 

2.1 Data collection standards 

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  and  for 
transmitting LCI data to the European Central Bank. 

2.2 Data validation 

The data have been systematically validated using a new tool to check if the codes and data 
structures  used  meet  the  agreed  data  transmission  standards.  This  simplifies  the  production 
process and reduces the risk of errors arising from  coding flaws. If 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  using  the 
EDAMIS portal. 

Eurostat  also  carries  out  plausibility  checks  on  each  quarterly  transmission  by  comparing 
series  over  time  and  across  economic  activities  according  to  the  statistical  classification  of 
economic activities in the European Community (NACE)8. If there are significant quarter-on-
quarter changes, Eurostat asks Member States to confirm the data or transmit a corrected data 
file. If major revisions or sudden changes are detected in any particular NACE section, they 
are systematically followed up with the countries concerned.  

2.3 Hourly labour cost levels 

Eurostat  has  continued  publishing  the  annual  estimates  of  hourly  labour  costs  by  NACE 
section since the first release in April 2016. These estimates are based on the levels obtained 
from the four-yearly labour cost survey, extrapolated with the LCIs. Produced 3 months after 
the  end  of  the  reference  period,  they  cover  all  NACE  sections  excluding  sections  ‘A  – 
Agriculture, forestry and fishing’; ‘O – Public administration and defence; compulsory social 
security’;  ‘T  –  Activities  of  households  as  employers;  undifferentiated  goods-  and  services-
producing  activities  of  households  for  own  use’  and  ‘U  –  Activities  of  extraterritorial 
organisations and bodies’.   

6  
7  
8  

http://sdmx.org/ (available only in English). 
https://webgate.ec.europa.eu/sdmxregistry/ (available only in English). 
OJ L 393, 30.12.2006, p. 1; ELI: http://data.europa.eu/eli/reg/2006/1893/oj.   

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2.4 Quality reports 

The  annual  quality  reports  submitted  by  Member  States  were  processed  on  time  using  the 
latest version of the European Statistical System Metadata Handler and made available to all 
users9. 

2.5 Seasonal and calendar adjustments 

Eurostat  analysed  the  calendar  adjusted  (CA)  and  calendar  and  seasonally  adjusted  (CSA) 
series  transmitted  by  the  Member  States.  According  to  Commission  Regulation  (EC)  No. 
1216/200310,  all  EU  Member  States  and  other  European  Economic  Area  (EEA)11  countries 
are expected to transmit CA and CSA series for each individual NACE section. 

Eurostat also monitors 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  CSA  data  for  EU  aggregates  in  the  database  and  in  the  ‘Statistics 
Explained’12  article  on  LCI,  alongside  not  seasonally  adjusted  (NSA)  data.  CSA  results  for 
the total LCI are derived from CSA data for the wage and non-wage components, to ensure 
consistency. 

2.6 Rebasing 

In  2023,  all  countries  were  invited  to  transmit  data  expressed  in  the  new  base  year  2020  = 
100, meaning that the index equals 100 for the reference year 2020. Eurostat had launched a 
test transmission before the actual transmission took place in May 2023 (for flash LCI data) 
and  June  2023  (for  final  LCI  data).  There  was  no  difference  recorded  between  the  rebased 
data  transmitted  and  the  data  Eurostat  recalculated,  except  for  three  countries  which 
subsequently corrected the data and retransmitted them. 

The  LCI  data  expressed  in  the  new  base  year  were  subsequently  published,  for  reference 
quarter Q1-2023 and the full historical time series before that quarter. 

9             https://ec.europa.eu/eurostat/cache/metadata/en/lci_esms.htm (available only in English). 
10          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 

11           Except Lichtenstein, as Regulation (EC) No 450/2003 of the European Parliament and of the Council                  
              of 27 February 2003 does not apply to this country. Throughout the document, Norway                   
              and Iceland are referred to as ‘other EEA countries’. 
12           Labour cost index - recent trends - Statistics Explained 

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III. 

DATA QUALITY 

3.1 

Relevance and completeness 

Relevance 

User demand continued not only for information on the quarterly variations in hourly labour 
costs, as measured by the LCI, but also, increasingly, on labour cost levels. Eurostat went on 
publishing at the end of March/beginning of April each year, annual estimates for the hourly 
labour costs in euro and in national currencies, broken down by NACE section. The shares of 
non-wage costs in total labour costs13 were also disseminated. The feedback received on the 
publication  of  these  estimates  is  positive,  and  Eurostat  will  continue  to  produce  the  annual 
labour costs by NACE section. 

Completeness 

This part reviews whether the LCI data and metadata transmitted fulfil the legal requirements 
for 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 and CSA data for all quarters concerned and from 
all  Member  States  except  Greece  (Q1-2023  data).  All  Member  States  also  delivered  NSA 
data, except for Denmark and Sweden which have been granted derogations14.  

Regarding  other  EEA  countries15,  both  Iceland  and  Norway  transmitted  LCI  data  for  all 
quarters of the reference period. Norway provides CA, CSA and NSA series. Iceland provides 
CA and CSA series only. 

All  data,  including  CSA  estimates,  are  available  in  the  relevant  table16  of  the  Eurostat 
database. Headline figures are based on CA data, expressed as year-on-year (Q/Q-4) changes 
that  are  more  stable  than  quarterly  movements.  All  countries  covered  all  NACE  sections, 
taking the above derogations into account. 

b) Weights 

According  to  the  LCI  Regulation,  Member  States  and  other  EEA  countries  are  expected  to 
transmit, at least once a year, the annual labour costs for the wage/non-wage components (the 
weights) of each individual NACE Rev. 2 section. 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.  

See the dataset lc_lci_lev in the dissemination database of Eurostat   

13  
              (https://ec.europa.eu/eurostat/data/database, available in English, French and German). 
14  
              provide NSA data. However, Germany and France provide them anyway.  
15  
Regulation (EC) No 450/2003 does not apply to Liechtenstein. 
16  
https://ec.europa.eu/eurostat/data/database 

According to Regulation (EC) No 1216/2003, Denmark, Germany, France and Sweden are not bound to    

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By 30 June 2024, all Member States and other EEA countries had transmitted the weights for 
the reference year 2023. 

c) Quality reports 

By  the  beginning  of  September  2024,  all  Member  States  had  drafted  their  national  quality 
reports for the reference year 2023.  

The  LCI  2023  quality  reports  are  meant  to  be  published  on  Eurostat’s  corresponding 
webpage17 together with a report on seasonal adjustment. 

3.2 

Punctuality 

According  to  the  LCI  Regulation,  Member  States  and  other  EEA  countries  must  deliver 
labour  cost  indices  within  70  days  of  the  reference  quarter.  The  countries  that  have  missed 
some deadlines since the last report are Sweden (Q4-2023 data received 2 calendar days after 
the deadline) and Finland (Q4-2023 data received 3 calendar days after the deadline). 

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

3.3 

Accuracy 

The LCI is made up of a number of different variables (e.g. labour costs and hours worked) 
that  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,  namely  the  year-on-year  growth  rate  of  the  total  LCI, 
have  never  exceeded  0.3  percentage  points  (pp)  except  in  one  special  case  (Q2-2022,  see 
Figure 1). 

The  major  revision  (+1.1  pp)  recorded  in  that  quarter  was  due  to  the  one-off  changes 
Germany  made  to  their  sources  and  methods.  From  Q3-2022  onwards,  the  LCI  data  of  this 
country have been benchmarked on labour cost survey data for 2020 while the data source for 
wages was changed. 

This revision had a one-off impact on the annual growth of the LCI, with no consequence on 
the reliability of the LCI estimates. 

17  

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

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Figure 1: Changes in the annual growth rate between the first and final LCI releases  
(EU-27, NACE Sections B to S aggregate, total labour costs, in pp, [Q2-2022-Q1-2024]) 

1,1

0,3

0,1

0,1

Q2

Q3

2022

Q4

Q1

0,0

Q4

-0,1

Q1

2024

-0,2

Q2

-0,3

Q3

2023

Sources:  
- 

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 20 August 2024 

3.4  

Coherence and comparability 

Coherence with national accounts figures 

One area that continues to receive attention is the coherence of the LCI with other statistics on 
labour costs, in particular 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 
definition18).  The  datasets  are  not  expected  to  match  perfectly  -  even  if  the  definitions  of 
labour  cost  are  almost  the  same,  statistical  sources  and  treatments  may  differ.  Moreover, 
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.  

18  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). 

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For quality assessment, Eurostat continued to monitor the NACE Sections B to S aggregates 
of  each  Member  State.  For  this  comparison,  NSA  data  were  used,  except  in  the  case  of 
Denmark and Sweden for which only CA data are available. The median annual growth rate 
of the LCI was compared with that of the hourly compensation of employees based on data 
from  national  accounts  over  8  quarters.  Variations  of  more  than  3  pp  were  considered  to 
warrant further analysis (see Figure 2, with countries ranked by increasing order of the gap in 
absolute value). Only Lithuania and Latvia recorded a gap above 3 pp (both 3.5 pp).  

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

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. Among all 
countries,  the  highest  gaps  between  standard  deviations  were  recorded  in  Sweden  (2.1  pp), 
followed by Latvia (1.5 pp), the Netherlands and Czechia (1.3 pp for both) then Slovakia (1.2 
pp). 

Figure 2: Median annual growth rates of the labour costs index (LCI) versus 
national accounts (NA) series for the hourly compensation of employees 
(NACE Sections B to S aggregate, total labour costs, reference period: Q2-2022-Q1-2024*) 

Sources: 
- 

For  the  national  accounts:  Eurostat  datasets  namq_10_a10  [variable:  ‘Compensation  of  employees’  in 
national  currency]  and  namq_10_a10_e  [variable:  ‘Employees  domestic  concept,  in  thousands  of  hours 
worked’]. 
For the LCI: Eurostat dataset lc_lci_r2_q [variable: ‘Labour cost for LCI (compensation of employees plus 
taxes minus subsidies)’]. 
For  Denmark  and  Sweden,  the  NSA  data  were  not  available  at  the  time  of  drafting;  CA  data  were  used 
instead. Data were extracted on 4 September 2024. 

- 

- 

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Figure 3: Standard deviation of annual growth rates of the labour costs index (LCI) versus 
national accounts (NA) series for the hourly compensation of employees 
(NACE Sections B to S aggregate, total labour costs, reference period: Q2-2022-Q1-2024*) 

Sources: 
- 

For  the  national  accounts:  Eurostat  datasets  namq_10_a10  [variable:  ‘Compensation  of  employees’  in 
national  currency]  and  namq_10_a10_e  [variable:  ‘Employees  domestic  concept,  in  thousands  of  hours 
worked’]. 
For the LCI: Eurostat dataset lc_lci_r2_q [variable: ‘Labour cost for LCI (compensation of employees plus 
taxes minus subsidies)’]. 
For  Denmark  and  Sweden,  the  NSA  data  were  not  available  at  the  time  of  drafting;  CA  data  were  used 
instead. Data were extracted on 4 September 2024. 

- 

- 

Comparability 

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

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. 

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

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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  consistency  between  the  annual  growth  rates  of  the  total 
LCI versus its wage and non-wage components and reports all inconsistencies exceeding 0.1 
pp (after rounding) to the countries concerned. The total LCI is then recalculated based on the 
wage and non-wage components (indirect approach). This harmonised approach also ensures 
better comparability across countries. 

IV. 

CONCLUSIONS 

Overall, the quality of the labour cost indices of the Member States and of the EU aggregates 
has remained good. Except for a substantial revision in one quarter (Q2-2022), explained by 
methodological  changes  in  one  country,  EU  aggregates  underwent  small  revisions  only,  as 
was the case before the COVID-19 crisis.  

The quality reports submitted by Member States were processed using the latest version of the 
European  Statistical  System  Metadata  Handler.  They  were  made  available  to  all  users, 
including the annex on seasonal adjustment practices and results across Member States19.  

Since 2017, Eurostat has been publishing annual estimates of the hourly labour cost levels by 
NACE section, based on both labour cost survey data and LCI trends20. The related ‘Statistics 
Explained’21  article  had  a  significant  number  of  views,  confirming  users’  interest  in  this 
subject  matter.  The  Commission  will  continue  to  regularly  monitor  compliance  and  data 
quality,  based  on  the  data  delivered  and  other  national  documentation,  including  quality 
reports. 

Since May 2024, Eurostat has been releasing early estimates for the labour cost index (LCI) 
for both the EU as  a whole and the euro area. These estimates are released around 1 month 
before  the  final  release  (50  days  instead  of  77  days  after  the  reference  period).  These  early 
estimates are released in the same dataset as the final data22. 

Finally, Eurostat has carried out a general review of EU legislation on labour market statistics 
on businesses, which has led to a legislative proposal that was adopted by the Commission on 
28 July 202323. This review aims to evaluate and modernise all EU legislation in the field of 
labour market statistics on businesses, including the LCI. 

19 https://ec.europa.eu/eurostat/cache/metadata/en/lci_esms.htm (available only in English). 
20 https://ec.europa.eu/eurostat/databrowser/view/lc_lci_lev/default/table?lang=en&category=labour.lc.lcan 
21 Hourly labour costs - Statistics Explained 
22 https://ec.europa.eu/eurostat/databrowser/view/lc_lci_r2_q/default/table?lang=en&category=labour.lc.lci 
23 EUR-Lex - 52023PC0459 - EN - EUR-Lex (europa.eu)  

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