Components of Balance of International Payments, Current Account

2 - Primary income

'Primary income' includes incomes that accrue to institutional units as a consequence of their involvement in processes of production or ownership of assets that may be needed for purposes of production. A major item of primary income is compensation of employees that represents the income accruing to individuals in return for their labour input into production processes. Property income is that part of primary income that accrues by lending or renting financial or natural resources, including land, to other units for use in production. Receipts from taxes on production and imports (less subsidies on production and imports) are treated as primary incomes of governments even though not all of them may be recorded as payable out of the value-added of enterprises. Primary incomes do not include the payments of social contributions to social insurance schemes and the receipt of benefits from them, current taxes on income, wealth, etc. and other current transfers.

2.1 - Compensation of employees

'Compensation of employee' includes the total remuneration, in cash or in kind, payable by an enterprise to an employee in return for work done by the latter during the accounting period. Compensation of employees is recorded on an accrual basis; that is, it is measured by the value of the remuneration in cash or in kind that an employee becomes entitled to receive from an employer in respect of work done during the relevant period, whether paid in advance, simultaneously or in arrears of the work itself. In productivity analysis, compensation of employees is equivalent to the cost of labour services.

2.2 - Investment income

'Investment income' refers to income receivable by the owner of a financial asset in return for providing funds to another institutional unit. The terms governing the payment of investment income are usually specified in the financial instrument created when the funds are transferred from the creditor to the debtor. Such arrangements are typically made only for a limited period of time, after which the funds must be returned.