Financing of social expenditure

The funding for social protection comes from multiple sources, and international standards are followed to ensure uniform reporting of this financing. These standards are important to maintain comparability of social spending within the Nordic countries as well as in comparison to other EU countries.

The components of financing

The database uses the European system of integrated social protection (ESSPROS) nomenclature to collect and present statistics on social expenditure. This expenditure is sourced from various places, such as public authorities, employers, and insured individuals or households. Funding for social expenditure is categorized by its source, and in some cases, funds are established to ensure future payments. These funds may also cover ongoing payments if specified by the rules.

When it comes to funding through return on investment, pension funds play a significant role. The expenditure statistics include the net amounts transferred to funds and the money used from funds to finance ongoing expenses.

Benefits provided by public authorities exclusively to their employees are considered employer benefits. Similarly, certain benefits paid by employers to their employees, like benefits for sickness absence, are viewed as being financed by the employer even if they would be considered part of the employee's salary in other contexts.

It's important to note that the social expenditure data does not include user charges for healthcare and social services. However, according to the ESSPROS nomenclature, returns on property investments are considered part of the financing.

Administration costs

Administration costs are considered as one single entry in expenditure calculations. Ideally, only the expenses incurred for directly managing social expenditure are accounted for. Nevertheless, there are instances where it becomes challenging to distinguish administration costs from other expenses related to payroll or general operations.

Relevant link

Further information on the definitions on the ESPROSS nomenclature used when reporting social expenditure are available in this publication: European system of integrated social protection statistics, 2022 edition.