TECHNICAL NOTES

The international comparisons of hourly compensation costs in 
manufacturing are prepared to assess differences in employer labor 
costs among countries. BLS compensation data permit more 
meaningful comparisons of employer labor costs than data based 
solely on average earnings. Definitions of average earnings vary 
considerably by country and do not include many items of labor 
cost that frequently make up a large portion of total cost. BLS 
compensation data include nearly all labor costs incurred by 
employers. 

Below is a summary of the concepts used in this release. For more 
detailed information, see www.bls.gov/ilc/ichcctn.pdf.

Definitions. Compensation costs include (1) direct pay (all 
payments made directly to the worker, before payroll deductions of 
any kind) and (2) social insurance expenditures (employer payments 
to secure entitlement to social benefits for employees) and labor-
related taxes (minus subsidies). 

The data relate to all employees in manufacturing, including part-
time and temporary workers. The self-employed, unpaid family 
workers, contract workers, and workers in private households are 
excluded.

Compensation Costs

Pay for Time Worked
* Basic wages
* Piece rate
* Overtime premiums
* Shift, holiday, or night work premiums
* Cost-of-living adjustments
* Bonuses and premiums paid each pay period

Directly-Paid Benefits
* 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

Employer Social Insurance Expenditures and Labor-related Taxes
* 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

Methodology. In general, total compensation for each economy is 
calculated by adjusting earnings series to include items of direct 
pay, social insurance, and labor-related taxes and subsidies not 
included in earnings. For economies for which earnings data are 
not available on a per hour worked basis, BLS makes adjustments in 
order to approximate compensation per hour worked. Compensation 
costs are converted to U.S. dollars using the average daily 
exchange rate for the reference year.

Earnings statistics are typically obtained from annual 
establishment surveys. Data on the other components of 
compensation are typically obtained from periodic labor cost 
surveys, employer confederations, and other sources.

For the United States, the methods and results differ somewhat 
from those of other BLS series on U.S. compensation costs. 

The statistics are adjusted, where possible, to account for major 
differences in worker and survey coverage. More information on 
exceptions to these methods, as well as data sources used, may be 
found in "Country Notes and Data Sources" located at 
www.bls.gov/ilc/ichccsources.pdf. 

The compensation measures in this news release are based on 
statistics available to BLS as of October 2012.