1. Item 10: Compensation of Employees and Operating Surplus
ESTP course on National Accounts
ESA 2010
Luxembourg, 15 May May Eurostat

2. Components of income side GDP
GDP income side
Compensation of employees (+)
Gross operating surplus/mixed income (incl CFC) (+)
Taxes/subsidies on production (+)
= GDP

3. Compensation of employees
Defined in ESA 2010 (para 4.02) as:
“total remuneration, in cash or in kind, payable by an employer to an employee in return for work done by the latter during the accounting period”

4. “employer to an employee”
Only includes employees
Definition of ‘employees’
Self-employed workers receive “mixed income”

5. “total remuneration” Gross of taxes on income
Includes holiday/sick pay, bonuses, tips and redundancy payments
CoE includes:
D.11 wages & salaries
D.12 social contributions by employers

6. Wages “in cash or in kind”
Wages and Salaries in cash
Definition of “in kind”; examples (stock options, meals&drinks, company housing, company car, etc.)
Valuing in-kind benefits

7. Re-routing social contributions
D.11 salary
D. 12 social contrib
D. 61 social contrib
To uncover hidden relations…
D.62 social benefits for other citizens
…but in conflict with cash flows

8. Types of social contributions
1. Actual contributions
for social security or funded schemes
2. Imputed contributions
for unfunded schemes
Calculations:
Payments-based vs. actuarial calculations

9. Summary CoE Recording: Sources: Receivable by households
Payable by corporations, Govt, NPISH, rest-of-the-world
Sources:
Income tax registers, business stats
Calculation imputed social contributions

10. Operating surplus Calculated as balancing item (=residual)
No proper ESA definition, e.g. like CoE
ESA 2010 (para 8.18) indicates:
“… the surplus (or deficit) on production activities before account has been taken of the interest, rents or charges …”
OS aimed to corporations, but households and Government may have OS too.

11. OS as balancing item: GDP from income side
GDP production side
GDP income side
Output (+)
Compensation employees (+)
Intermediate consumption (-)
Gross operating surplus (+)
Taxes/subsidies on products (+)
Taxes/subsidies on production (+)
= GDP
GOS = GDP – CoE – taxes/subsidies on production

12. OS in practice OS is conceptually a residual…
…in practice it must be calculated, if we want an income GDP independent from production/expenditure approaches
Most countries calculate (parts of) OS
Use of business accounts
Business accounting rules are national-based  cherry picking from accounts

13. OS includes Flows paid out of OS (i.e. ‘included’ in OS) OS includes:
any income tax, society tax, etc.
Dividends paid
investment & depreciation of capital stock
OS includes:
mixed income of self-employed too!
Mixed income – income from self-employment (wages and profit of the entrepreneur)
Operating surplus – balancing item of generation of income account for owner-occupied dwellings

14. OS excludes revenues different from operational income
e.g. capital gains, investment own assets (financial or not), dividends received,…
Employers’ social contributions on behalf of employees (= part of CoE)

15. OS place in the System, graphically
“sales” (output)
– “current costs” (intermediate consumption)
– “salaries” (compensation employees)
= “profits” or “entrepreneurial income” (GOS)
“profits” (GOS) + “other revenue” (property income)
“interest/dividends” (property income)
“taxes” (D.5)
“investment” (P.5)
“surplus available for acquiring financial assets” (B.9)

16. GDP income side revisited
GDP output side
GDP income side
Output (+)
Compensation employees (+)
Intermediate consumption (-)
Gross operating surplus (+)
Taxes/subsidies on products (+)
Taxes/subsidies on production (+)
= GDP
Why taxes/subsidies too?
Need for valuation adjustment

17. EU27 GDP by income approach