Compensation of employees
Compensation of employees (CE) is a stat-
istical term used in national accounts, Bal-
ance of Payments statistics and sometimes in
corporate accounts as well. It refers basically
to the total gross (pre-tax) wages paid by em-
ployers to employees for work done in an ac-
counting period, such as a quarter or a year.
However,
in reality, the aggregate in-
cludes more than just gross wages, at least in
national accounts and balance of payments
statistics. The reason is that in these ac-
counts, CE is defined as "the total remunera-
tion, in cash or in kind, payable by an enter-
prise to an employee in return for work done
by the latter during the accounting period". It
represents effectively a total labour cost to
an employer, paid from the gross revenues or
the capital of an enterprise.
Compensation of employees is accounted
for on an accrual basis; i.e., it is measured by
the value of the remuneration in cash or in
kind which an employee becomes entitled to
receive from an employer in respect of work
done, during the relevant accounting period -
whether paid in advance, simultaneously, or
in arrears of the work itself. This contrasts
with other inputs to production, which are to
be valued at the point when they are actually
used.
For statistical purposes, the relationship
of employer to employee exists, when there is
an agreement, formal or informal, between
an enterprise and a person, normally entered
into voluntarily by both parties, whereby the
person works for the enterprise, in return for
remuneration in cash or in kind. The remu-
neration is normally based on either the time
spent at work, or some other objective indic-
ator of the amount of work done.
For social accounting purposes, CE is con-
sidered as a component of the value of net
output or value added (as factor income). The
aim is not to measure income actually re-
ceived by workers, but the value which la-
bour contributes to net output along with
other factors of production. The underlying
idea is that the value of net ou