Compensation of Employees is mostly the wages received by workers. It includes gross wages before deductions for income tax, Pay Related Social Insurance (PRSI), employee pension contributions, union dues, saving schemes or anything else. It includes any bonuses, overtime payments, cost of living allowances, clothing allowances, and sales commissions. So Compensation of Employees includes wages in the very widest sense, but it is not called the more familiar term ‘wages’ because it includes many things besides:
Compensation of Employees is essentially the cost to the employer of having employees, rather than what the employee receives.
For some National Accounts, Compensation of Employees is presented broken down into two parts:
These two add up to the total Compensation of Employees.
Compensation of Employees is the total paid in the whole country, and so it usually increases because the number of people working increases or because those who are working are paid more on average. It is usually a combination of these two factors that drive changes in Compensation of Employees. Statistics on numbers in work are found in the Labour Force Survey, and the Earnings, Hours and Employment Costs Survey looks at pay rates.
The Compensation of Employees that is included in GDP calculated by the Income Method is the total paid in Ireland. So, for example, if someone works for a company in Louth but lives in Northern Ireland and commutes, their wages are included in the total GDP because they are paid by a company here. If someone lives in Dublin but works remotely for a company in London, their wages are excluded from the national total. In practice, these cross-border figures are almost equal and opposite, but cross-border workers can have a bigger impact in other countries. The net Compensation of Employees across borders is a small part of the Net Factor Income.