ANNUAL LABOR COST IN ESTABLISHMENTS

• In 2019, a total of PhP1,661.44 billion comprised the annual labor cost incurred by all establishments employing 20 or more workers in the Philippines for their employees. This was higher by more than half (55.9%) of the cost amounting to PhP1,065.68 billion recorded in 2013. (Figure 1)

• Industry-wise, establishments in administrative and support service activities recorded the highest share in the total labor cost at 21.4 percent (PhP356.37 billion) followed by manufacturing at 18.5 percent (PhP306.94 billion); financial and insurance activities at 15.7 percent (PhP260.85 billion); and wholesale and retail trade; repair of motor vehicles, motorcycles at 11.6 percent (PhP192.06 billion). Other industries had shares of less than 10 percent each or with a total labor cost of PhP82.80 billion and below. (Table 2)

LABOR COST COMPONENTS

Direct Wages and Salaries

• Payments by employers to their employees before any deductions are considered as direct wages and salaries which contributed PhP1,289.09 billion of the total cost of labor in 2019. Expectedly, it is the biggest portion of the labor cost components which accounted for 77.6 percent of the total labor cost. (Figure 2 and Table 1)

Remuneration for time not worked

• This labor cost component includes payments for paid leaves (e.g., vacation, sick, maternity, paternity, service incentive, union/emergency/bereavement/burial leaves, etc.) which totalled to PhP10.32 billion or (0.6%) in 2019.

Bonuses and Gratuities

• Companies spent around PhP157.90 billion for bonuses and gratuities or 9.5 percent of the total cost during the period. The expenses in this sub-cost component included payments for year-end, seasonal and other one-time bonuses, profit sharing bonuses and additional payments in respect of vacation, supplementary to normal vacation pay.

Payments in Kind

• These are goods and services given to workers as part of their remuneration (e.g., ordinary clothing  and footwear). During the survey period covered, a total of PhP2.20 billion or (0.1%) was the total amount spent by of the establishments for this cost component.

Cost of Workers’ Housing Shouldered by Employers

• The cost of workers’ housing provided by the establishments includes the cost for establishment-owned dwellings (maintenance expenditures, fees, property taxes, insurance and other costs) and the cost for dwellings not owned by establishment and other housing costs (e.g., housing allowances, rents, subsidies, etc.).  During the period, a total of PhP7.18 billion or 0.4 percent of the total annual labor cost was spent for the provision of housing as shouldered by the employers.

Employers’ social security expenditures (excluding employees’ share)

• In 2019, a total of PhP176.27 billion or 10.6 percent of the total annual cost was spent for social security of employees. This cost component includes payments of compulsory social security contributions (GSIS, SSS, PhilHealth, PAG-IBIG, ECC); retirement and termination/separation pay; of medical care and health services; collectively agreed, contractual and non-obligatory contributions to private social security schemes and insurance; and direct payments to employees regarded as social security benefits. 

Cost of Training

• Training expenses covering net cost of fees, salaries, and other payments/expenses during training was estimated at PhP5.12 billion or 0.3 percent of the total labor cost.

Cost of Welfare Services

• The cost of welfare services which composed of grants to credit unions, cost of canteens, educational, cultural, recreational and other related facilities and services was amounted to PhP4.38 billion or 0.3 percent of the total labor cost.

Other Labor Costs

• Other expenses considered as labor costs were the cost of work clothes/protective gears, transport of workers to and from work and recruitment cost provided by the employers. This was amounted to PhP8.97 billion or 0.5 percent of the total labor cost.

ANNUAL LABOR COST PER EMPLOYEE

• The survey revealed that the annual labor cost per employee is estimated at PhP304,691 in 2019.  (Table 1)

• Direct wages and salaries posted the highest annual labor cost at PhP236,405 per employee. This was followed by the expenses incurred by employers for social security, and bonuses and gratuities at PhP32,327 and PhP28,598, respectively.

• For the other labor cost components, employers have minimal spending from Php404 to Php1,893 per employee for the period covered.

• Across industries, financial and insurance activities recorded the highest labor cost per employee with PhP763,591. This was followed by electricity, gas, steam and air conditioning supply at PhP526,401. (Table 2)

• Comparatively high annual labor costs per employee were also found in water supply; sewerage waste management and remediation activities at PhP435,457; information and communication at PhP410,285; and repair of computers and personal and household goods; other personal service activities at PhP407,027.

• Remarkably, the lowest annual labor costs per employee was posted in transportation and storage at PhP197,588.

HOURLY LABOR COST

• Considering the total hours actually worked of all employees including overtime work and during holidays and rest days in all establishments covered in 2019, the labor cost was estimated at PhP125.17 per hour. (Figure 3)

• By industry, those establishments engaged in financial and insurance activities posted the highest hourly labor cost at PhP347.49. This was followed by electricity, gas, steam and air conditioning supply at PhP225.93 and water supply; sewerage waste management and remediation activities at PhP192.20 per hour.

SHARE OF LABOR COST TO TOTAL COST

• The average labor cost as a proportion of the total cost of establishments in operating their businesses was estimated at 26.9 percent. Establishments engaged in professional, scientific and technical activities had the highest percent share of labor cost relative to their total cost at 31.8 percent.  Transportation and storage likewise recorded a high percent share of 30.8 percent.  On the other hand, the lowest share of labor cost to total cost was recorded in mining and quarrying at 16.6 percent. (Figure 4 and Table 3)

DENNIS S. MAPA, Ph.D.
Undersecretary
National Statistician and Civil Registrar General

See more at the Integrated Survey on Labor and Employment Landing Page.

Survey Information:

Labor cost statistics (LCS) is one of the basic labor and employment statistics generated and compiled by the Philippine Statistics System in the country following the major provisions of Labour Statistics Convention 160 (C160) for the International Labor Organization (ILO), to which the Philippines is a member state. The LCS intends to provide data that would address the gap in wage statistics, specifically on the evolution of labor cost and its various components.

This module on the 2019 Labor Cost of Employees (LCE) mainly inquires on the different labor costs incurred by employers in engaging the services of workers in carrying out their business operations. Consistent with the ILO definition of labor cost, the LCE generates statistics on the current structure of labor costs in the country. Specifically, the module focuses on the direct costs and indirect costs paid to employees by major industry group. Direct cost components include direct wages and salaries; bonuses and gratuities; remuneration for time not worked by employees; payments in kind; and housing shouldered by employers. Indirect costs, on the other hand, cover social security expenditures; cost of trainings; cost of welfare services; and other labor costs.

The LCE is a regular section in the ISLE but only conducted on a less frequent manner covering a period of five (5) to six (6) years. This is in consideration of the fact that based on findings the change in the structure and composition of labor cost components do not drastically change over a shorter period of time.

DEFINITION OF TERMS:

Labor cost - cost incurred by the employer in the employment of labor in a specified reference period. The statistical concept of labor cost as comprising of remuneration for work performed, payments in respect of time paid but not worked, bonuses and gratuities, the cost of food, drinks and other payments in kind, cost of workers’ housing borne by employers, employers’ social security expenditures, cost to the employer for vocational training, welfare services and miscellaneous items, such as transport of workers, work clothes and recruitment, together with taxes regarded as labor cost.

Direct wages and salaries - payments by employer to employees before any deductions is made in respect of taxes, contributions of employees to social security and pension schemes, life insurance premiums, union dues and other obligations of employees. These exclude payments/overhead costs which are reimbursements to employees for travel, entertainment, meals and other expenses incurred in conducting the business of the employer.

Remuneration for time not worked - payments for vacation leave, sick leave, maternity leave, paternity leave, service incentive leave, union/emergency leave, bereavement/burial leaves and other paid leaves.

Payments in kind - goods and services valued at producer’s or wholesale prices given to workers as part of their remuneration. These exclude general amenities provided by the employer such as imputed rental value of free/subsidized housing, medical services and canteen and other welfare services and facilities.

Cost for establishment-owned dwellings - net cost, i.e., maintenance expenditures, fees, property taxes, insurance, interest, depreciation and other costs - less grants-in aid, tax rebates, subsidies, etc., received from government and other institutions in respect of employee housing. Excluded are capital investment on building, equipment or land made during the year and labor cost of personnel employed by the establishment for maintenance and other works that are related to establishment-owned houses.

Cost of medical care and health services - medical care and health expenses (except insurance), e.g., medicines, incurred by the employer on behalf of the employees. It excludes cost of establishment-owned medical care and health facility and equipment for employees.

Cost of training - net cost of fees, salaries, and other payments for services of outside instructors, payments made to outside training institutions on behalf of the workers in the establishment and the reimbursement of school fees to workers. It excludes cost of establishment-owned training facility and equipment for employees.

Cost of welfare services - grants to credit unions and related services for employees, cost of services such as canteens and other food services, educational, cultural, recreational, and related facilities and services (See definition of cost for establishment-owned dwellings).

Total cost - all expenses incurred by the establishment whether paid or payable, valued at market price. Aside from labor cost, these are costs of:

• purchased materials, supplies, fuel and electricity
• industrial and non-industrial services done by others
• costs of good for resale
• interest expenses; and
• indirect taxes

Donations and contributions, bad debts, income taxes, losses, depreciation are excluded under total cost.