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:

1. Benefit in kind. For instance: shares or share options, subsidised crèche or canteen, subsistence claims paid to employees to cover meals if they are away for work, a company car, staff discounts on the company’s products
2. Tips received directly from the customer, for example by staff in restaurants or hairdressers
3. Holiday pay for annual leave
4. Employers’ PRSI and any other payments employers make to cover employees for when they are sick or otherwise cannot work
5. Pension contributions paid by employers. This includes the real contributions made by employers and extra Imputed Contributions for defined benefit pension schemes.

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:

• Wages and salaries (which includes items 1 to 3 above)
• Employers’ social contributions (items 4 and 5 above)

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.

Read next: Gross Operating Surplus

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