Definition

Labour costs represent the average cost of labour per unit produced. The figure aims to measure the average annual cost of an employee, and the cost per hour actually worked, and it enables different components of that cost to be identified.

It is similar to the notion of employee remuneration, though broader in its definition. Total labour costs include:

  • Remuneration in cash and payment in kind paid by employers to employees
  • Social services such as canteens and similar; cultural, sports or educational services; and, various other amounts such as transport costs paid by the employer.
  • Social charges and payroll taxes.

Director’s fees are the only component of compensation excluded from labour costs.

Directors’ fees are an amount attributed on an individual basis to the chairman and managing director, the CEO, administrators, members of the supervisory board of public limited companies or sociétés anonymes (SAs), and the fees are awarded in relation to their attendance of meetings and what they do within the company.

Directors’ fees are seen as compensation for a social mandate. If, however, a director is an employee, any payments are integrated into the contribution base.

The total amount paid in director’s fees is fixed by shareholders at an ordinary general meeting. The amount is then divided amongst the members of the executive committee or supervisory board.

Director’s fees should not be confused with dividends, which are paid out to shareholders if a company performs well.

However, labour costs also include:

  • The cost of recruitment to the employer
  • The cost of professional training to the employer
  • Certain goods and services for staff that belong to intermediate consumption rather than employee compensation

For some economists, labour costs also include intermediate consumption such as the use of equipment, supplies or premises, or even the sales team’s vehicles.

This indicator can be expressed as the ratio of total labour compensation per hour worked to output per hour worked (labour productivity). The costs are measured in percentage changes and indices.

Labour costs in France

According to Coe-Rexecode (the Centre d’observation économique et de Recherche pour l’Expansion de l’économie et le Développement des Entreprise, a French non-governmental macroeconomics research institute), labour costs in France are rising only moderately, yet remain amongst the highest in the Euro zone.

Rises in labour costs in France are comparable to Euro zone rises in tradable sectors, and more moderately in the manufacturing industry.

In the 3rd trimester of 2015, hourly labour costs across all tradable sectors stood at €36.70.

Labour costs in France are higher than the Euro zone average (€30.30), and in particular, surpass German (€34.70), Italian (€26.20) and Spanish costs (€21.00).

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In the manufacturing industry, French labour costs remain much higher (€38.00) than Italian (€27.6) and Spanish (€22.80) costs.

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In 2015, hourly labour costs for the whole economy were estimated to be an average of 25 Euros in the European Union.

It is important, however to take into consideration that the average hourly labour costs for a business are highly dependent on the make-up of its labour force in terms of socio-economic category, length of service and age. Furthermore, these costs rise with the size of a company.

In Lyon: competitive salary costs

Another convincing reason for businesses to invest in the Lyon area is that salary costs are lower than in Paris by an average of 8 to 12% and can be up to 20% lower for IT professionals.

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Do you need more information on salary costs for the profiles needed in your business? We can answer your questions thanks to our integrated Human Resources department!

Contact us.