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New Zealand Business Demography Statistics: At February 2006
Embargoed until 10:45am  –  26 October 2006
Technical notes

Business demography statistics

Business demography statistics provide an annual snapshot (as at February) of the structure and characteristics of New Zealand businesses. Statistics are available on a range of variables, including industry, region, institutional sector, business type, degree of overseas ownership and employment levels.

Business demography statistics are derived from the Statistics New Zealand Business Frame. The Business Frame is a list of individual, private and public-sector businesses and organisations that are engaged in the production of goods and services in New Zealand. It provides an accurate and timely population source for economic and financial surveys so that they produce robust economic and financial statistics. The Business Frame is maintained using information from Inland Revenue, such as goods and services tax (GST) registrations and Employee Monthly Schedule (EMS) returns, as well as Statistics New Zealand survey information.

Businesses covered

In order to understand what business demography statistics measure, it is important to take into account the coverage of businesses and the characteristics of the Business Frame.

The initial source of information about enterprises is the Inland Revenue's client registration file. Currently, there are more than 575,000 taxpayers registered for GST on the client registration file.

The analysis of business demography is limited to economically significant enterprises – those that meet at least one of the following criteria:

  • annual GST expenses or sales of more than $30,000
  • rolling mean employee count of greater than three
  • in a GST-exempt industry (except residential property leasing and rental)
  • part of a group of enterprises
  • a new GST registration that is compulsory, special or forced
  • registered for GST and involved in agriculture or forestry.

At February 2006, there were 346,091 non-farming enterprises on the Business Frame. Although they represent just over half of the enterprises on Inland Revenue's client registration file, they are estimated to represent more than 99 percent of non-farming GST sales. All non-trading and dormant companies are excluded from business demography statistics.

All GST-registered enterprises recorded on Inland Revenue's client registration file are continually monitored to determine whether they meet the 'economic significance' requirements for 'birth' onto the Business Frame. A buffer zone of $25,000 to $35,000 has been established to prevent enterprises switching excessively from 'being maintained on the Business Frame' to 'not being maintained on the Business Frame'. The enterprises maintained on the Business Frame represent the target population from which Statistics New Zealand's economic surveys are selected.

Change in Business Frame maintenance strategy

In 2003, there was a significant change in the strategy used to maintain the Business Frame (BF), from which business demography statistics are sourced. This strategy involves greater use of administrative data to maintain the BF. A summary of the changes that have resulted from the change in strategy include:

  • changed employment measure on the BF from a full-time equivalent persons engaged (FTE) measure to employee count (EC)
  • increased coverage of the BF to include all employing businesses – with the exception of individuals that are employers but are not registered for GST – and reactivation of previously ceased businesses that are showing GST activity
  • reduced compliance costs by decreasing the reliance on survey-sourced information to maintain the BF
  • improved coverage of GST-exempt industries by making greater use of tax data (sourced from the EMS and IR10 tax returns)
  • faster processing of the births and deaths of enterprises to more accurately reflect real-world changes
  • inclusion of farming businesses in the maintenance strategy (previously excluded)
  • definition of boundaries for maintenance of enterprises on the BF on the basis of business size – larger enterprises continue to be primarily updated using annual maintenance survey data and tax data, while smaller enterprises are principally maintained using tax data.

The effect of these changes on business demography statistics has been examined. The outcomes of this work can be summarised as follows:

  • Births and reactivations of enterprises identified solely as a result of changes in the maintenance strategy have been excluded to ensure comparability of statistics with previous years.
  • The faster processing of births and deaths had a minimal impact on business demography statistics, so no adjustments were made.
  • The farming industry has been excluded in the release of business demography statistics to ensure comparability of results with recent years. Statistics on the farming industry are available to users on request.

The outcome of changing the business size measure in business demography statistics from FTE to EC is discussed below.

Changes in employment data

An important change from the 2004 release onwards has been that the indicator of business size (employment levels) now used is EC. This replaces the previously available FTE measures (including full-time and part-time employees and working proprietors). To enable trends to be studied, the EC measure has been back-cast to the year 2000.

The EC is sourced primarily from Inland Revenue's IR348 form – the EMS. This form is required to be completed on a monthly basis by employers, and allows for the number of salary and wage earners to be derived. The EC used for the business demography statistics is for the February month. There are a small number of enterprises whose employee count is collected by Statistics New Zealand surveys.

The change to the EC measure has the following benefits:

  • reduced compliance load for small and medium-sized businesses
  • improved coverage – information on businesses involved in farming is now maintained on the BF after being excluded in recent years. Business demography statistics on the farming industry are available to users on request
  • improved accuracy – the attributes of businesses on the BF will now be updated more regularly, improving accuracy as a result.

The following table summarises the main differences between EC and FTE:

Employee Count (EC) Full-time Equivalent (FTE)
Source Mainly sourced from the IRD Employer Monthly Schedule (there are a small number of enterprises whose employee count is collected by Statistics New Zealand surveys) Was updated on the Business Frame using survey feedback from respondents
Business Frame maintenance Updated monthly on the Business Frame Was updated annually, as at February, on the Business Frame
Measure Head count of all salary and wage earners for the reference month. This is mostly employees, but can include working proprietors who pay themselves a salary or wage The total number of employees and working proprietors working full time, plus half the number of employees and working proprietors working part time
Full-time/part-time split Not available Available
Sex breakdown Not available Available
Availability From 2000 to date Discontinued in 2003

Limitations of business demography data

There are a number of limitations associated with business demography data. These limitations include:

  • non-coverage of 'small' enterprises that fall below the economic significance criteria
  • exclusion of enterprises involved in farming (Australian and New Zealand Standard Industrial Classification (ANZSIC) subdivision A01 Agriculture). However, data for the farming industry is available from 2004 on request; it was excluded from this release to allow for comparison of data produced for recent business demography releases (which excluded farming)
  • lags in recording businesses that have ceased trading or whose activity has dropped below the economic significance threshold
  • difficulties in maintaining industrial and business classifications for smaller firms (this is primarily maintained using administrative data)
  • data produced on the entry and exit of firms includes administrative changes (such as company restructuring and changes of ownership) as well as genuine business start-ups and closures. When businesses register for GST and are added (or 'birthed') onto the Business Frame, they are given a new reference number. Company restructuring and changes of ownership can result in a new GST registration being filed, even though it relates to an existing business. Births and deaths of businesses can be identified in business demography statistics by matching the GST registration reference numbers for one year with those of the previous year. These counts of births and deaths therefore include administrative as well as genuine business start-ups and closures.

Industry coverage

Below is a summary of the industry coverage available in the business demography statistics, dating back to 1994.

The coverage of the business demography statistics has changed in recent years, as more industries have been included in the population. Historically, most of these industries were excluded because they contained a large proportion of enterprises that were not registered for GST, or a large proportion of enterprises that fell below the threshold of economic significance.

Since 1997, the selection criteria and standard published industry categories for the business demography statistics have been based on the Australian and New Zealand Standard Industrial Classification (ANZSIC). In 1996, the statistics were published using ANZSIC, but the selection criteria were based on the New Zealand Standard Industrial Classification (NZSIC).

The statistics in this release exclude agriculture production (ANZSIC subdivision A01) to ensure industrial coverage consistent with recent releases of business demography data. Business demography data for the agriculture production industry is available on request.

2004 to date

All industrial activity covered.

1999–2003

Excludes agriculture production (ANZSIC subdivision A01).

1998

All industrial activity covered.

1997

Excludes agriculture production (ANZSIC subdivision A01).

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1996

Excludes:
agriculture production (NZSIC major group 111)
residential property leasing and rental (NZSIC subgroup 83121)
religious organisations (NZSIC subgroup 93910)
social and related community services (NZSIC 93990)
sporting and recreational clubs (NZSIC subgroup 94402).

1994–1995

Excludes:
agriculture production (NZSIC major group 111)
residential property leasing and rental (NZSIC subgroup 83121)
commercial property leasing and rental (NZSIC subgroup 83123)
daycare centres and crèches (NZSIC subgroup 93402)
other welfare institutions (NZSIC subgroup 93403)
business, professional and labour associations (NZSIC subgroup 93500)
religious organisations (NZSIC subgroup 93910)
social and related community services (NZSIC 93990)
sporting and recreational clubs (NZSIC subgroup 94402).  

Terms and definitions

ANZSIC

Australian and New Zealand Standard Industrial Classification. A geographic unit is assigned to an ANZSIC category according to the predominant activity in which it is engaged. The enterprise ANZSIC is derived from the ANZSIC and employment levels of the geographic unit(s) belonging to that enterprise.

NZSIC

New Zealand Standard Industrial Classification.

Ancillary industry

When a geographic unit predominantly provides services to other geographic units in the same enterprise or group of enterprises, it is assigned an ancillary ANZSIC. This indicates the predominant industrial activity of the units to which the services are provided. For example, an office serving several factory units would have a primary industry reflecting the administration activity, while the ancillary industry would reflect the factory activity. The business demography statistics in this release use the ancillary industry when one exists, and the primary industry otherwise.

Employee count (EC)

Head count of salary and wage earners sourced from taxation data. EC data is available on a monthly basis. The EC count used for the derivation of business demography statistics is for the February month.

Employment size groups

EC data in this release has been summarised into six employment size groups:

  • 0 EC
  • 1–5 EC
  • 6–9 EC
  • 10–19 EC
  • 20–49 EC
  • 50–99 EC
  • 100+ EC

Enterprise

A business operating in New Zealand. It can be a company, partnership, trust, estate, incorporated society, producer board, local or central government organisation, voluntary organisation or self-employed individual.

Geographic unit / Business location

A separate operating unit engaged in New Zealand in one, or predominantly one, kind of economic activity from a single physical location or base.

More information

For more information, follow the link from the Technical notes of this release on the Statistics NZ website.

Copyright

Information obtained from Statistics NZ may be freely used, reproduced, or quoted unless otherwise specified. In all cases Statistics NZ must be acknowledged as the source.

Liability

While care has been used in processing, analysing and extracting information, Statistics NZ gives no warranty that the information supplied is free from error. Statistics NZ shall not be liable for any loss suffered through the use, directly or indirectly, of any information, product or service.

Timing

Timed statistical releases are delivered using postal and electronic services provided by third parties. Delivery of these releases may be delayed by circumstances outside the control of Statistics NZ. Statistics NZ accepts no responsibility for any such delays.

Next release...

New Zealand Business Demography Statistics: At February 2007 will be released in October 2007.

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