Official pay data | Guide to the earnings figures

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XpertHR has pulled together a selection of the most up-to-date available official data on pay levels in Great Britain, collected by National Statistics, the government's statistics agency. We have organised the information into sections covering headline figures, occupations, sectors and regions. Here we present an HR practitioner's comparative guide to the two main official sources of pay information from National Statistics: the Annual Survey of Hours and Earnings (ASHE) and the Labour Force Survey (LFS)*.

The ASHE (like its predecessor, the New Earnings Survey (NES), which it replaces) is largely based on a 1% sample of employees covered by the income tax pay-as-you-earn (PAYE) system. The data variables remain broadly the same as the NES. However, the sample has been widened with the addition of supplementary information on parts of the workforce previously excluded from the survey.

By contrast, the LFS is based on a random sample of private households, and collects pay data on all household members in employment (excluding the self-employed), regardless of whether or not their earnings are above the tax threshold.

ASHE is employer-based . . .

The ASHE is an employer-based survey. Employers provide detailed information on the earnings, hours and occupations of selected employees.

The sample includes people whose national insurance numbers end with a specified pair of digits. The Inland Revenue provides National Statistics, which compiles the survey, with the names and addresses of the employers and the names of the employees to be included in the survey.

A key difference between the ASHE survey and the NES is the inclusion of data on VAT-only businesses and on people who changed or started new jobs between sample selection and the survey reference period. However, for the initial survey in 2004, National Statistics has also provided a second set of results which exclude the supplementary information, solely for comparison to previous years' data (which have in turn been revised by applying the ASHE methodology to the existing NES data sets for 1998 to 2003).

The weighting of the survey data has also been improved, with survey responses now weighted to the population of jobs measured by the LFS, to prevent the production of biased estimates of earnings.

Another important difference is National Statistics' decision to replace the mean with the median as the headline statistic. This is because the median is influenced less by extreme values, and because of the skewed distribution of earnings data.

Advantages: There are many benefits from this method of collecting wage data. Accurate figures are secured, from employers' payroll records, relating to a huge sample of employees.

Not only does this mean that reliable estimates of full-timers' average earnings across the whole economy can be provided, it also allows detailed information to be produced on the levels, distribution and composition of earnings for age groups, occupations, sexes, industries, regions and even local labour markets.

This ensures the position of the ASHE as the pre-eminent source of official earnings data.

Disadvantages: But the source of its strength is the cause of its weakness. The survey's sharp focus on earnings data excludes other employee characteristics - including ethnic origin, trade union membership, education, training and qualifications - to name but a few of the variables included in the LFS.

It is therefore of limited use in attempts to provide a more rounded picture of how individuals in different earnings brackets fit into the labour market.

. . . LFS is a household survey

Information used to compile the LFS is collected from members of around 65,000 private households. Individuals who take part are interviewed five times at three-month intervals. Questions about earnings are asked during the first and fifth interviews.

This means that, in any given quarter, two-fifths of the total sample will have provided pay data. LFS interviewers try to talk to each member of the household in person.

Where this is not possible, information is collected by proxy, from another adult household member present at the time (usually a relative); around 30% of LFS data are collected in this way.

Advantages: The survey is the main source of official statistics on many aspects of labour market behaviour; it is not limited to earnings and related information. For instance, the Government's preferred measure of unemployment (based on an internationally standard definition) uses LFS data - jobless respondents are asked whether they are available to start work and if they have looked for a job in the last four weeks.

The ability to match gross pay details with other relevant labour-market variables is a major strength of the LFS, as is the fact that there is no cut-off for employees at the bottom of the earnings distribution.

Disadvantages: There are several drawbacks to gleaning wage data from households rather than employers. Official statisticians are unsure, for example, about the extent to which respondents refer to payslips when answering questions about gross earnings.

People relying on memory may make mistakes. This is even more of a problem in the case of proxy respondents. Proxies exhibit a marked tendency to underestimate the earnings of their fellow household members, with the level of understatement depending on whether or not they are married to the individual concerned.

There is also uncertainty about the extent to which LFS estimates of gross earnings include variable pay elements, such as bonuses.