3.2 Annual estimation methods and data sources

3.10 The annual and monthly estimates of labour income are closely intertwined. The annual estimates set the level of wages and salaries and supplementary labour income by industry and by province and territory, while the monthly estimates project the last annual estimate of labour income up to the most recent month.

3.11 Labour income estimates follow the Canadian System of National Accounts four year revision cycle. The first two years of the revision cycle, known as benchmark years (t-4 and t-3), are reconciled with the Input-Output Tables. The third revision year (t-2) levels are built with the latest taxation statistics and survey information. Monthly patterns, already established from the monthly projection process, are then adjusted to annual levels using a statistical technique called quadratic minimization. Both benchmark and third year estimates are built from a top-down approach, where the province and territory totals are established first and industry detail is allocated within these totals. For the last revision year (t-1) and most current period (t), monthly estimates of labour income are derived using a bottom-up approach, where estimates are derived first by industry within each province and territory, and then aggregated to obtain totals by provinces and territories.

3.12 Similar data sources are used for wages and salaries and supplementary labour income in both the benchmark and third year annual revision estimates. However, data sources are more varied for industry estimates in the benchmark years as the Industry Accounts Division builds industry estimates of wages and salaries and supplementary labour income using a wide range of published and unpublished survey data at very detailed North American Industry Classification System (NAICS) levels.

3.13 The third non-benchmarked revision year, built solely by the Income and Expenditure Accounts Division, is based on a smaller group of data sources and industry groups with heavy reliance on tax data as described below.

Wages and salaries

3.14 Wages and salaries are available for all provinces and territories as well as for outside Canada. In addition, wages and salaries estimates are produced for most industries at the two-digit NAICS level. Estimates are broken down into three groups, wages and salaries paid by businesses, governments, and persons.

3.15 The principal data source for wages and salaries at the national level is the T4 Statement of Remuneration Paid, commonly known as the T4 slip. In Quebec, employers use the Relevé 1 to state employees' wages and salaries. These slips are submitted by employers to the Canada Revenue Agency at the end of each calendar year. All T4 slips for a given tax year are contained in a file known as the T4 Supplementary file which is provided to Statistics Canada.¹ The aggregation of the employment income field (Box 14) on all T4 slips issued to employees working in Canada provides the level for wages and salaries for the benchmark and third-year estimates. Specific conceptual adjustments are made to this aggregate, such as the exclusion of allowable expenses, which are paid to employees through the T4, but subsequently deducted from the employees' net taxable income.² In addition, the employers' share of premiums to Alberta and British Columbia provincial health plans, considered taxable income for the employee, are excluded as these are part of supplementary labour income. Further adjustments include the addition of wages paid to workers in private households³, tips received by workers⁴, and wages paid to First Nations people living on reserves⁵.

Supplementary labour income

3.16 Supplementary labour income is divided into six distinct categories which include employers' contributions to registered private and public sector pension plans, the Canada and Quebec pension plans, the Employment Insurance Fund, workers' compensation funds, health and life insurance plans (referred to as welfare in the table below), and retirement allowances. These components are all available by province and territory, by industry, and by sector.

Registered pension plans

3.17 Employers' contributions to registered private and public sector pension plans are based on negotiated agreements between employers and employees to provide pension benefits to employees upon retirement. These agreements are registered with the Canada Revenue Agency and provincial and federal pension regulatory authorities. Regardless of the funding mechanism of pension plans through either government consolidated revenue funds or trust agreements, all employers' contributions to registered pension plans are included.⁶ The Pension Plans in Canada Survey⁷, is an annual census of registered pension plans in Canada, and provides the Canada estimate.

Canada and Quebec pension plans

3.18 By law, employers must contribute to either the Canada Pension Plan or the Quebec Pension Plan on behalf of their employees.⁸ Employees and their families are then eligible for benefits upon retirement, sickness, disability or death. Employers' contributions are captured on the T4 Summary filed with the Canada Revenue Agency along with T4 slips at the end of each calendar year. The Canada estimate is an aggregate of employers' contributions on the T4 Summary Statement.

Employment insurance

3.19 By law, employers must contribute to the Employment Insurance Fund on behalf of their employees.⁹ Employers' contributions are captured on the T4 Summary Statement filed with the Canada Revenue Agency along with T4 slips at the end of each calendar year. The Canada estimate is an aggregate of employers' contributions on the T4 Summary Statement.

Workers' compensation

3.20 By law, employers must contribute to employee work injury insurance plans operated and administered by provincial and territorial workers' compensation boards. Employers must contribute to workers' compensation funds based on their industry's injury rate applied to their payrolls. In the event of an accident or injury, the employer is not held liable and the employee or their family is eligible for a range of services and benefits. Self-insurers, who pay administration fees for the application of the insurance program to their employees, and who pay the full amount of the benefits administered by the provincial and territorial boards, are also included.

Welfare

3.21 Employers' contributions to a variety of public¹⁰ and non-profit health, dental, accident, sickness and life insurance benefit plans fall under this group. Five sub-groups are represented in the welfare component of supplementary labour income, which are:

• employers' contributions to accident and sickness insurance plans;
• group term life insurance plans;
• administrative service contracts;¹¹
• premiums to provincial health plans in Alberta and British Columbia; and
• non-profit health plans.

3.22 These plans offer a wide variety of life and health insurance coverage—from basic physician, hospital and drug expenses to specialized health care services, such as eye and dental care, mental health services, and specialized physical treatment services, such as podiatric and chiropractic services. Employers' contributions to these plans may depend on formal or informal agreements between employers and their employees.

Retirement allowances

3.23 Upon retirement, layoff or termination, employees may be eligible for retirement allowances depending on the contractual obligations of employers, and jurisdictional labour legislation. Retirement allowances or severance pay is an amount paid by employers to an employee in recognition of long service or loss of employment.¹² The data source for retiring allowances is the T4A Supplementary file, which includes all statements of pension, retirement, annuity, and other income filed with the Canada Revenue Agency at the end of each calendar year. The aggregation of all T4A slips¹³ issued by employers provides the annual estimate of retiring allowances.

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• 3.3 The quarterly and monthly estimates of labour income

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• 3.1 Concepts and definitions
• 3 Wages, salaries and supplementary labour income

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Notes

1. Under a memorandum of understanding between Statistics Canada and the Canada Revenue Agency, a preliminary file is provided in September and a final file is provided in January.

2. Allowable expenses include employment expenses that an employee has disbursed in the course of employment, such as lodging and travel expenses.

3. Wages paid to workers providing domestic services and child care within the home are estimated using data on expenditures from the Survey of Household Spending, survey no. 3508. Incomes from child care provided outside the home is not included here unless employees are receiving T4 slips. Incomes from child care provided outside the home by unincorporated businesses are not included here.

4. Tips received by workers are estimated from industry sales of alcoholic beverages, full service restaurant meals, and accommodation. Further imputations are made for tips received in barber and beauty salons and railway stations. Tips received by taxi-drivers are not included.

5. Wages paid to First Nations people living on reserves are often reported as zero on T4 slips because of exemptions for personal income taxes. To estimate for under-coverage, a proxy of wages is taken from the insurable earnings (Box 24) reported on T4 slips.

6. These include special payments made by employers into pension plans as a result of actuarial assessments, which evaluate the unfunded liability of the pension fund. If the future financial obligations of the pension fund cannot be met by the regular employer and employee pension contributions, the employer must make special payments into the pension fund to eliminate the unfunded liability. If the actuarial assessment evaluates a plan surplus, the employer can take a contribution holiday, that is, stop making regular contributions for a specified period of time.

7. Survey no. 2609. More information on this survey is also available in Pension Plans in Canada, catalogue no. 13F0026 and in Pension Plans in Canada: Key Tables, catalogue no. 74-508.

8. Employers match employee contributions. Employee contributions are based on a contribution rate applied to earnings up to a maximum contribution.

9. The employers' contribution is equivalent to 1.4 of the employees' contribution. Employees' contributions are based on a contribution rate applied to earnings up to a maximum contribution.

10. Only employers' contributions to both Alberta and British Columbia provincial health insurance plans are included in supplementary labour income. Employer payroll taxes are not included in supplementary labour income but are included as indirect taxes on production.

11. Administrative service contracts are arrangements between employers and insurance companies where employers pay for the health benefits of employees on a pay-as-required basis. Claims are approved and administered by an insurance company or third party for an administrative fee. Insurance companies administer these contracts under which employers pay for benefits to employees outside of group insurance plans. Short-term and long-term disability income protection, extended health care coverage, and dental care expenses can all be provided in this way.

12. This does not include unused sick leave credits or vacation leave credits which are part of wages and salaries. However, it does include golden handshakes, cash-outs, or wrongful dismissal payments.

13. Box 26 includes the amount eligible for transfer to Registered Retirement Savings Plans (RRSP), and Box 27 includes the amount not eligible for transfer.