In 2020

Labour Cost Index increased by 10.8% over the previous year

The Labour Cost Index (working days adjusted) increased by 7.1% in the 4^th quarter of 2020, compared with the same period of 2019.

The two main labour cost items are “wage costs” (per hour actually worked) and “other costs” (non-wage costs but per hour actually worked).

The first includes:

• Base wage
• Regular bonuses and allowances
• Irregular bonuses and allowances (holiday bonus, Christmas bonus, end-of-year bonuses/distribution of profits, other irregular bonuses and allowances)
• Payment of overtime
• Payment in kind

The other costs includes:

• Severance payment
• Employers’ legal costs (social security contributions, insurance against accidents and occupational disease)
• Collectively agreed, contractual and voluntary costs (supplementary pension/invalidity benefit, health insurance, life/personal accident insurance, and social benefits paid directly to employees in case of absence on account of sickness)

 “Wage costs” increased by 7.1% and the “other costs” by 7.3% from the year-ago quarter, respectively.

At the country level, the index increased by 6.6% year-on year. “Wage costs” went up by 6.5% and the “other costs” by 7.0%.

The annual data show that in 2020, the regional Labour Cost Index (LCI) increased by 10.8% when compared to 2019. This increase was determined by the positive rate of change in “wage costs” (+11.8%) and in “other costs” (+6.8%). In Portugal the LCI increased by 8.6% in 2020. Its components (“wage costs” and “other costs”) also grew by 9.2% and 6.1%, respectively.

This growth of the LCI in 2020 can be explained by the reduction of working hours, which is in itself a consequence of the restrictive measures taken to control the COVID-19 pandemic.

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