Informations Rapides · 17 March 2023 · n° 66

In Q4 2022, labour cost index – wages and salaries increased by 2.0%, total labour cost index by 1.4% Labor cost index in industry, construction and services - fourth quarter 2022

In the fourth quarter of 2022, the payroll increased significantly more than the number of hours paid by employers. The increase of wages is the result of the context of high inflation, which encouraged the wage negotiations but also and above all the massive payments of the Value Sharing Premium (PPV) at the end of the year. This scheme, which replaced the special bonus for purchasing power, allows firms to pay, between July 2022 and December 2023, up to 3,000 euros of bonuses per calendar year and per employee (and even 6,000 euros in the case of a profit-sharing agreement), free of social security contributions and income tax.

In addition, various labour cost reduction measures are taken into account in the labour cost index and contribute to its variations until the fourth quarter of 2022.

On the one hand, the “1 young person, 1 solution” plan, launched at the end of July 2020, provides under certain conditions for a premium, up to €4,000, to employers hiring a young worker under 26 years of age. It also provides for an exceptional aid for hiring a young worker with a sandwich course contract, up to €8,000 if the worker is older than 18 years old and up to €5,000 otherwise.

On the other hand, the plan to support the tourism sector decided on May 2020 provides for exemptions from employers’ social security contributions and assistance with the payment of contributions for the firms with fewer than 250 employees in some sectors, especially concentrated in trade, accommodation and food services and administrative and support service activities. These measures have been gradually reduced as the health crisis came to an end; however, some employers still have the opportunity of charging to 2022 the remainder of the aid for the payment of contributions to which they were entitled in 2021 and from which they have not yet benefited fully.

In the fourth quarter of 2022, the labour cost index (LCI) - wages and salaries in the non-farm business sector accelerated: +2.0% over the quarter, after +1.6% in the previous quarter (seasonally and trading days adjusted data). This acceleration was mainly explained by the Value Sharing Premium (PPV) payments: 3.3 billion euros were paid to employees in the non-agricultural market sector (excluding services to household) in the fourth quarter, compared to 0.7 billion in the previous quarter, thus contributing 1.6 percentage points to the quarterly change in hourly wages.

Year-on-year, the LCI – wages and salaries increased significantly: +5.2% compared to the fourth quarter of 2021 (after +3.8% in the previous quarter), in a context of high inflation which led to three revaluations of the minimum wage over the year. PPV payments contributed 1.5 percentage points to the year-on-year increase in the fourth quarter (after +0.1 points in the third quarter). By sector, hourly wages rose by 5.4% over a year in industry and by 5.3% in construction, sectors where PPV payments were relatively high. In services, hourly wages rose by an average of 5.1% over the year, but this dynamism covered heterogeneous situations in terms of use of the PPV scheme in particular: employees in finance and insurance activities, for example, benefited more from the PPV than those in accommodation and food service activities. On the other hand, as low-paid workers are over-represented in the accommodation and food service activities, they have benefited more from the automatic revaluation of the minimum wage in 2022.

Compared to the previous estimation of 16 December 2022, the Q3 2022 quarter-on-quarter variation in labour cost index – wages and salaries has been revised downwards by 0.1 percentage points; the year-on-year variation has been unchanged.

In the fourth quarter of 2022, the total labour cost index (LCI) in the non-farm business sector increased by 1.4%, as in the third quarter of 2022. The difference in dynamism with the LCI – wages and salaries in the fourth quarter was mainly explained by the extensive use of PPV, free of social security contributions.

Over a year, the total labour cost increased by 4.7% in the fourth quarter of 2022, after +3.5% in the previous quarter.

In accommodation and food service activities, the increase in hourly labour costs (+8.2%) was more pronounced than that of hourly wages (+5.9%). Indeed, during the health crisis in 2020 and 2021, the exemptions from employers’ social contributions and the aid for the payment of contributions contained the increase in the labour cost in this sector; as the use of these schemes tended to be significantly reduced, the total LCI increased much more strongly than the LCI – wages and salaries as a result.

Compared to the previous estimation of 16 December 2022, the Q3 2022 quarter-on-quarter and year-on-year variations in labour cost index in the non-farm business sector have been revised downwards by 0.1 percentage points.