TECHNICAL NOTE
Employer Costs for Employee Compensation (ECEC) measures the average cost to employers for wages and salaries and
benefits per employee hour worked.
Wages and salaries are defined as the hourly straight-time wage rate or, for workers not paid on an hourly basis,
straight-time earnings divided by the corresponding hours. Straight-time wage and salary rates are total earnings
before payroll deductions and include production bonuses, incentive earnings, commission payments, and cost-of-living
adjustments. Not included in straight-time earnings are nonproduction bonuses such as end-of-year payments, shift
differentials, and premium pay for overtime and for work on weekends and holidays; these payments are included in the
benefits component.
Benefits include: Paid leave--vacations, holidays, sick leave, and personal leave; supplemental pay--premium pay
for work in addition to the regular work schedule (such as overtime, weekends and holidays), shift differentials, and
nonproduction bonuses (such as referral bonuses and attendance bonuses); insurance benefits--life, health, short-term
disability, and long-term disability; retirement and savings benefits--defined benefit and defined contribution plans;
and legally required benefits--Social Security, Medicare, federal and state unemployment insurance, and workers’
compensation.
In June 2008, the “other leave” benefit was changed to include only paid personal leave. Paid
personal leave accounts for the majority of the cost of the prior other leave benefit category.
Employer Costs for Employee Compensation includes data for the civilian economy, which includes data from both
private industry and state and local government. Excluded from private industry are the self-employed and farm and
private household workers. Federal government workers are excluded from the public sector. The private industry
series and the state and local government series provide data for the two sectors separately.
The cost levels for this quarter were collected from a probability sample of approximately 63,200 occupations
selected from a sample of about 13,300 establishments in private industry and approximately 11,700 occupations from
a sample of about 1,900 establishments in state and local governments. The state and local government sample, which
is replaced less frequently than the private industry sample, was replaced in its entirety in September 2007. The
private industry sample is rotated over approximately 5 years, which makes the sample more representative of the
economy and reduces respondent burden. Data are collected for the pay period including the 12th day of the survey
months of March, June, September, and December. The sample is replaced on a cross-area, cross-industry basis.
When respondents do not provide all the data needed, a procedure for assigning missing values is used. This
imputation procedure is comparable to that used for the Employment Cost Index (ECI). For a description, see
“Accounting for missing data in the Employment Cost Index,” in the April 2006 issue of the Monthly
Labor Review at http://www.bls.gov/opub/mlr/2006/04/art4abs.htm.
The ECEC percent of total compensation estimates are calculated from cost aggregates and then rounded to the
published level of precision. This method provides the most precise estimates of the percent of total compensation;
however, estimates of the percentage of total compensation calculated from the published cost estimates may differ
slightly from those calculated from the unpublished cost aggregates.
Sample establishments are classified by the industry categories based on the 2007 North American Industry
Classification System (NAICS). Prior to December 2007, the 2002 NAICS classification system was used. Differences
between the two NAICS systems did not affect any of the published series. Within a sample establishment, specific
job categories are selected and classified into about 800 occupational classifications according to the 2000 Standard
Occupational Classification (SOC) system. Individual occupations are combined to represent one of ten intermediate
aggregations, such as professional and related occupations, or one of five higher-level aggregations such as
management, professional, and related occupations. Both the NAICS and the SOC classification systems are defined
by the U.S. Office of Management and Budget (OMB). For more detailed information on NAICS and SOC, including
background definitions, see the BLS Web sites: www.bls.gov/bls/naics.htm and www.bls.gov/soc/home.htm.
To be included in the ECEC, employees in occupations must receive cash payments from the establishment for services
performed and the establishment must pay the employer’s portion of Medicare taxes on that individual’s wages. Major
exclusions from the survey are the self-employed, individuals who set their own pay (for example, proprietors, owners,
major stockholders, and partners in unincorporated firms), volunteers, unpaid workers, family members being paid token
wages, individuals receiving long-term disability compensation, and U.S. citizens working overseas.
The state and local government sample consists of 152 areas that represent the Nation’s 361 metropolitan statistical
areas and 573 micropolitan statistical areas as defined by OMB in December 2003 and the remaining portions of the 50 states.
The private industry estimates started the conversion to December 2003 OMB area definitions in the December 2008 reference
period with replacement of one-fifth of the sample under the new area definitions.
Current employment weights are used to calculate cost levels. These weights are derived from two BLS programs:
the Quarterly Census of Employment and Wages (QCEW) and the Current Employment Statistics (CES). Combined, these programs
provide the appropriate industry coverage and currency of data needed to match the ECEC. For more information on these
changes, see “Changes in Calculations for the BLS Employer Costs for Employee Compensation Data, March 2007,”
at http://www.bls.gov/ncs/ect/sp/ececcalc.pdf. In most instances, private industry employment weights used in the ECEC
were total employment estimates for 2-digit industry groups, such as utilities (NAICS 22) or wholesale trade (NAICS 42).
In a few cases, more detailed private industry employment weights were used. These include 4-digit educational
establishments--elementary and secondary schools (6111), junior colleges (6112), and colleges and universities (6113)--as
well as the 6-digit aircraft manufacturing industry (336411). For state and local governments, a more aggregated level
was used reflecting the level of detail published by the CES program. For both private and government establishments,
the employment data were apportioned based on the sampling weights assigned to the Employment Cost Index (ECI) sample.
The ECI, which measures the change in employer costs for employee compensation, is calculated with fixed 2002
employment counts to prevent employment shifts among occupations and industries from influencing the changes. Therefore,
changes over time in the Employer Costs for Employee Compensation survey will differ from those in the ECI.
Historical ECEC data are available in three listings, all available at: http://www.bls.gov/ect/#tables. The first
historical listing covers data for the March references periods from 1986 to 2001. These data use the Standard Industrial
Classification (SIC) and Census of Population classification systems. The second listing contains data for the March,
June, September, and December reference periods from March 2002 to December 2003. These data also are based on the SIC
and Census of Population classification systems. The final listing includes data for March 2004 to the current reference
period. These are based on the NAICS and SOC classification systems. Also, data and related articles are included
in the bulletin, Employer Costs for Employee Compensation, 1986-99 (Bulletin 2526), available upon request by calling
(202) 691-6199 or by email to: NCSinfo@bls.gov.
Beginning with the March 2004 quarter, historical data are available based on the North American Industry
Classification System and the 2000 Standard Occupational Classification. The new historical tables are available
on the Internet site http://www.bls.gov/ncs/ect/home.htm or upon request. Information on how costs are calculated
appears in “Measuring Trends in the Structure and Levels of Employer Costs for Employee Compensation,”
Compensation and Working Conditions, Summer 1997, at http://www.bls.gov/opub/cwc/archive/summer1997art1.pdf. An article
on changes in employer compensation costs, “Tracking Changes in Benefit Costs,” appears in Compensation
and Working Conditions, Spring 1999, at http://www.bls.gov/opub/cwc/archive/spring1999brief3.pdf.
Relative Standard Errors
Because the ECEC is a sample survey, it is subject to sampling errors. Sampling errors are differences that occur
between the results computed from a sample of observations and those computed from all observations in the population.
The estimates derived from different samples selected using the same sample design may differ from one another. A
measure of the variation among these differing estimates is the standard error. It can be used to measure the precision
with which an estimate from a particular sample approximates the expected result of all possible samples. For more
information on the calculation procedure, see "Changes in Variance Estimation Calculations for the BLS Employer Costs
for Employee Compensation Data, March 2007," at http://www.bls.gov/ncs/ect/sp/ececvmet.pdf. The chances are about 68
out of 100 that an estimate from the survey differs from a complete population figure by less than the standard error.
The chances are about 90 out of 100 that this difference would be less than 1.6 times the standard error. All the
statements of comparisons appearing in this publication are significant at a 1.6 standard error level or better, unless
otherwise indicated. This means that for differences cited, the estimated difference is greater than 1.6 times the
standard error of the difference. The relative standard errors (RSE) for all estimates are available shortly after the
release is issued at http://www.bls.gov/ncs/ect/#tables.
For a more detailed explanation of relative standard errors, see “Measuring Trends in the Structure and Levels
of Employer Costs for Employee Compensation,” Compensation and Working Conditions, Summer 1997, at
http://www.bls.gov/opub/cwc/archive/summer1997art1.pdf. For a detailed explanation of how to use standard error data to
analyze differences in changes over time, see “Analyzing Year-to-Year Changes in Employer Costs for Employee
Compensation,” Compensation and Working Conditions, Spring 1998, at http://www.bls.gov/opub/cwc/archive/spring1998art3.pdf.
This article supplements an article from the Summer 1997 issue of Compensation and Working Conditions, “Explaining
the Differential Growth Rates of the ECI and ECEC,” available at http://www.bls.gov/opub/cwc/archive/summer1997art2.pdf,
which examined how differences in the construction of these measures contribute to differing trends.
Standard errors relate to differences that occur from sampling errors, but not from nonsampling errors. Nonsampling
errors are not measured and include survey nonresponse and data collection and processing errors. Survey nonresponse
occurs when sample members are unwilling or unable to participate in the survey. Data collection errors include
inaccurate data by respondents and definitional difficulties. Processing errors include errors in recording, coding,
and entering data. Although nonsampling errors are not measured, BLS quality assurance programs include procedures for
reducing such errors. These procedures include data collection reinterviews, observed interviews, computer data edits,
and systematic review of reports on which data are recorded. Extensive field economist training also is conducted to
maintain high data collection standards.
Comparing private and public sector data
Aggregate compensation cost levels in state and local government should not be directly compared with those in
private industry. Differences between these sectors stem from factors such as variation in work activities and
occupational structures. Manufacturing and sales, for example, make up a large part of private industry work
activities but are rare in state and local government. Professional and administrative support occupations (including
teachers) account for two-thirds of the state and local government workforce, compared with one-half of private industry.
A detailed examination of differences in compensation levels and trends between private industry and state and
local government may be found in “Cost of Employee Compensation in Public and Private Sectors,” Monthly Labor
Review, May 1993, on the BLS Internet site http://www.bls.gov/opub/mlr/1993/05/contents.htm and “Compensation Cost
Trends in Private Industry and State and Local Governments,” Compensation and Working Conditions, Fall 1999, at
http://www.bls.gov/opub/cwc/archive/fall1999art2.pdf.
Obtaining information
Articles, bulletins, and other information may be obtained by calling (202) 691-6199, sending e-mail to
NCSinfo@bls.gov, or visiting the Internet site http://www.bls.gov/ect. Information in this release will be made
available to sensory impaired individuals upon request. Voice phone: (202) 691-5200; Federal Relay Service Number:
1-800-877-8339.
