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Background

Official quarterly statistics produced from the Linked Employer-Employee Data (LEED) measure labour market dynamics, providing an insight into the operation of New Zealand's labour market. Statistics New Zealand releases other official labour market statistics which show changes in employment at an aggregate level. New statistics from LEED, such as job and worker flows, help explain what causes these aggregate movements and are therefore useful for explaining changes in the labour market.

LEED uses existing administrative data drawn from the taxation system, together with business data from Statistics NZ's Business Frame (BF). The LEED dataset is created by linking a longitudinal employer series from the BF to a longitudinal series of Employer Monthly Schedule (EMS) payroll data from Inland Revenue. The LEED initiative follows the successful development of similar datasets by a number of European and North American countries such as the USA, France, Sweden and Germany.

The LEED project was started as part of a Cross-Departmental Research Pool initiative and received further funding under the Department of Labour Skills Action Plan. Further funding was received through the Growth and Innovation budget allocation. The project was primarily driven by the need to add to the range of official statistics on the labour market and provide better data to address a range of policy issues. LEED has the potential to improve the knowledge base for policy development in employment, business performance, productivity, firm creation and growth, employee turnover and many other areas.

Statistics NZ and the Department of Labour, in collaboration with Inland Revenue, completed the first stage of the initiative in September 2003, when the results of a feasibility study on the creation of a linked employer-employee dataset in New Zealand were released. This report concluded that the development of such a dataset was feasible, and formed the basis of a successful bid to government for funding to implement the required data and methodological infrastructure.

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Initial release

The LEED series is available from the June 1999 quarter. The release of statistics in February 2006 provides a back series of data from the June 1999 quarter to the December 2004 quarter. Some caution should be taken in interpreting this back series, as it was produced using historical data with reduced ability to correct for inaccuracies in the source data.

The Linked Employer-Employee Data: To December 2004 quarter Hot Off The Press release contains quarterly data on jobs, earnings, and job and worker turnovers. Future releases will include information on person-level statistics.

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Population

LEED covers all individuals (‘employees’) who receive income from which tax is deducted at source. These payments are made by organisations that are registered with Inland Revenue. Note that the LEED data includes social assistance payments such as paid parental leave, student allowances, benefits, pensions and ACC payments, although these are excluded from the quarterly measures. For confidentiality purposes, some individuals are withheld from the data provided to Statistics NZ by Inland Revenue.

In LEED, the employer is the geographical unit or physical location of the business rather than the administrative reporting unit. For example, a nationwide retail chain may have one Inland Revenue reporting unit covering all of its retail branches. In LEED, each branch is considered to be a distinct employer. This approach has been taken to allow regional statistics to be produced. It also ensures that LEED is comparable with similar international statistics.

The fundamental basis of the LEED quarterly measures is ‘jobs’. A job is defined as a unique employer-employee pair present on an EMS in the reference quarter.

For inclusion in the LEED quarterly statistics the job must:

  • relate to a person 15 years of age and over
  • have PAYE tax deducted at source
  • be in relation to ‘paid employment’ rather than a social assistance payment
  • have a valid IRD identifier.

An exception is the total earnings measure which includes all jobs with PAYE tax deducted at source (irrespective of age and IRD identifier) except for those relating to social assistance payments.

It should be noted that a small number of working proprietors, partners, or other self-employed, choose to pay their income tax at source and have not been separated from the 'true' jobs.

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Privacy, security and confidentiality

Statistics NZ and Inland Revenue have an agreement that governs the transfer of tax data for statistical purposes. This process is done under section 81(4) (d) of the Tax Administration Act 1994. Inland Revenue data is encrypted prior to transmission and decrypted upon arrival into Statistics NZ.

Principle 12 of the Privacy Act 1993 prohibits the use of a unique identifier for an individual which has been assigned by another agency. IRD numbers are therefore individually encrypted and names and addresses removed from the Statistics NZ analytical environment.

Statistics NZ’s standard physical and data security practices are augmented in LEED by:

  • the use of the highest level of physical security of data cartridges, servers and back-ups
  • the use of a separate server environment with different servers for raw and analytical data
  • restriction of access to the data to staff working on LEED who have understood and signed Statistics NZ and Inland Revenue declarations of secrecy.

Statistics NZ has protected privacy by:

  • undertaking a privacy impact assessment that determined that the benefits of the data exceeded the possible confidentiality and privacy risks
  • consulting with the Privacy Commissioner and data suppliers, both in the initial stages and the ongoing development of the project
  • complying with the Statistics Act 1975 requirements and Statistics NZ protocols on data integration and micro-data access
  • openness with respect to the project objectives and processes
  • designing systems and processes that minimise the exposure of identified personal data during processing
  • placing restrictions on data use and project outputs, proposed data retention and destruction practices.

LEED consists of unit record data that is used to produce official statistics and support statistical research. Any information released is in the form of summary statistics or statistical research. No information is released from the data that would allow for the identification of any individual or business. The categories for data release are established so that each cell in a table complies with Statistics NZ confidentiality rules. All outputs are rigorously checked by staff to ensure confidentiality is preserved.

To reiterate, LEED is used only for statistical purposes. The data is not available for operational or administrative purposes. In keeping with this policy, Inland Revenue provides data to Statistics NZ but Statistics NZ does not provide data back to Inland Revenue. Any amendments made by Statistics NZ to the Inland Revenue data during processing are for statistical purposes and are not fed back to Inland Revenue.

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