Labour Costs of an Enterprise

This study introduces a model for adaptive control of the labour costs of an enterprise. Labour costs are divided into two components – net wage costs and other labour costs. The latter is named as labour force tax. The labour intensity of a firm is measured as the ratio of the sum of net wages to the value added of a firm. The tax rate of labour force is set to be dependent on the labour intensity and the amount of individual net wages of workers. In this way, a dynamic labour force taxation system is achieved. This system adapts to the varying business conditions and provides enterprises with more ability to compensate for the varying economic conditions. This is needed since the labour costs (in Finland) do not follow cyclical trends as do, for example, raw material costs, and the income of enterprises. Introducing the proposed system would result in business life being more resistant to disturbances. Adaptive control of labour costs would act as an automatic stabiliser in the economy.