15 September 2020

2020- n° 233

In Q2 2020, labour cost index - wages and salaries rose by 2.8% and total labour cost index by 2.9% Labor cost index in industry, construction and services - second quarter 2020

In a context of economic recession, related to the health crisis and the implementation of the lockdown from March 17 to May 10, 2020, wage bill and total hours worked decreased sharply in the first semester 2020.

- The unprecedented drops of payroll and total hours paid, due to the massive use of short-time working compensation, led to strong evolutions of hourly wages, especially in some activities (accommodation and food service activities, transportation and storage). Furthermore, short time working compensations can be requested with some months of delay. Estimations are thus more likely than usual to be revised, especially in sectors with a lot of use of short-time working.

- The period was marked by the strong increase in the use of short-time working, for which the system has been strengthened by the government: from March to May 2020, the government fully refunded the legal compensation (70% of gross wage within the limit of 4.5 times the minimal wage). From the 1st June, the legal indemnity remained fixed at 70% of the gross wage, but, with a few exceptions, the government only covers 60%. The labour cost indices measuring only the cost of one worked hour supported by employers, the hours compensated for short-time working and the corresponding compensations paid to the employees are not taken into account. On the other hand, the portion of short-time working allowance not covered by the government as of June was included in the labour cost, amounting to 0.4 billion euros in non-farm business sector.

- The series of hours worked per job produced by Dares (Statistical service of the Ministry of Labour) and usually used for the calculation of labour cost indices has been suspended in the first semester 2020, due to the replacement of the Acemo quarterly survey by a flash survey on activity and employment conditions of the workforce specific to the health crisis (Acemo-Covid). Thus, since the publication of Q1 2020, the hours used come from a new source used for this goal: the nominative social declaration (DSN), covering paid hours (excluding short-time working). The revision of this source and a correction in its implementation lead to a revision of +1.5 points in the labour cost index - wages and salaries and +1.1 points in the total labour cost index in the first quarter of 2020.

- The special bonus for purchasing power passed by French Parliament in late December 2018 has been renewed in 2020: the original system planned that only firms having signed a profit-sharing deal could pay up to 1’000€ free of any tax, to employees whose wage was lower than 3 times the minimal wage. With the health crisis, the government has allowed all firms to pay this bonus and has raised the threshold to 2’000€ for firms having signed a profit-sharing deal. In Q2 2020, this bonus contributed +0.9 points to the year-on-year change in the labour cost index - wages and salaries (after -1.1 points in the previous quarter) and +0.6 points to the year-on-year change in the total labour cost index.

- As of 1st October 2019, the employers’ contribution general exemption, consisting in lowering the employers’ social contributions for wages lower than 1.6 times the minimal wage has been extended to the unemployment insurance contribution (with a rate of 4.05%). Thus, the amount of exemptions under this measure increased by 900 million euros in Q4 2019, lowering by 0.5 points the total labour cost index. This effect no longer affects the quarter-on-quarter variations but still impacts the year-on-year variations.