CEB/2008/HLCM/23 for Coordination 9 September Declining Professional Staff Salaries in Europe. Note by IAEA

Transcription

1 UNITED NATIONS SYSTEM CEB Chief Executives Board CEB/2008/HLCM/23 for Coordination 9 September 2008 HIGH-LEVEL COMMITTEE ON MANAGEMENT (HLCM) Sixteenth Session United Nations Secretariat New York, September 2008 Agenda item 14A Declining Professional Staff Salaries in Europe Note by IAEA Background 1. There is a serious concern amongst euro-denominated duty stations that P staff salaries have decreased significantly in real terms, and have not kept pace with local inflation. 2. The ICSC Secretariat has confirmed that the declining value of euro salaries is largely, if not entirely, caused by the post adjustment Out of Area expenditure weights (OOA). The Commission has noted that it would need to be persuaded by evidence to change the current OOA weights. 3. The IAEA tabled an intervention at the July 2008 meeting of the ICSC, and the Chair confirmed that ACPAQ will be considering the matter in January The ICSC has now provided the salary and inflation data for six duty stations in Europe. Of these, four are in the euro zone (Madrid, Paris, Rome, and Vienna), and two are in other currencies (Geneva (CHF) and London (GBP)). A Serious Issue 5. Euro-denominated duty stations report that the quality of candidates for vacancies often results in too few well qualified candidates short-listed for interview. The salary offered is a factor influencing this serious situation. 6. In addition, there is a serious lack of equity emerging between duty stations, and staff in euro duty stations are suffering in this regard. The Evidence 7. Salary and inflation data have been graphed for each duty station. The first graphs (Figures 1.1, 2.1, 3.1, 4.1, 5.1, and 6.1) show the raw data for Net Take-Home Pay (), and the local consumer price index (). Appendix 1 outlines the basis for choosing these data. 8. The second graphs (Figures 1.2, 2.2, 3.2, 4.2, 5.2, and 6.2) show real, that is, after deducting the effect of local inflation.

2 Page 2 9. The third graphs (Figures 1.3, 2.3, 3.3, 4.3, 5.3, and 6.3) show the monthly loss of income over the past seven years for P-4(VI) professional staff compared with what would have been paid had there been full compensation for local inflation. 10. The graphs show a serious decline in real pay for each of the four euro-denominated duty stations (Madrid, Paris, Rome and Vienna). The reductions in pay for P-4(VI) staff, in real terms, are as follows: Reduction in Current Pay* Madrid -1 (i.e. about 10,000 p.a.) Paris -9% (i.e. about 7,000 p.a.) Rome -1 (i.e. about 7,000 p.a.) Vienna -12% (i.e. about 8,000 p.a.) * Reduction in current pay, in real terms, compared with those protected from local inflation 11. These pay reductions are principally due to the OOA. The ICSC Secretariat has confirmed that: the OOA was set at a time when the [U.S.] dollar was stable ; the serious decline in the U.S. dollar vis-à-vis the Euro (see Figure 7) was not expected ; and this has affected the decline in European salaries. Geneva and London are not affected in the same way; they are denominated in CHF and GBP where exchange variations against the U.S. dollar are different. Out of Area Expenditure 12. The 2005 Place to Place Surveys revealed the following actual OOA expenditure in each of the four duty stations, but the ICSC set the currently applied OOA weight as indicated: Survey OOA weight Current OOA weight Madrid 1.12% 23.58% Paris 3.97% 23.42% Rome % Vienna 5.84% The OOA weights have been set higher than the survey data suggest to maintain stability in pay in soft currency duty stations (according to ACPAQ). However, it is clear that there is no such pay stability for euro-denominated duty stations. In fact there have been serious, inequitable and damaging (both to staff and employers) reductions in salaries in eurodenominated duty stations. 14. There is statistically sound evidence and persuasive policy evidence that the OOA should be set at not more than 6% for euro-denominated duty stations. These duty stations are experiencing a particular and unusual situation that must be addressed. Impact on Agencies of Setting OOA at 6% 15. By setting the OOA at 6%, rather than 23., salaries would rise to eliminate about three quarters of the experienced decline. The consequential rise in salaries would be similar to many salary increases that are evident in the attached graphs. 16. Each Agency has a different budget profile, so the costs associated with salary increases will differ. As an example, about 2 of the total budget of the IAEA is for salaries of professional staff. If professional staff salaries were to increase by 8%, the additional cost would

3 Page 3 be about 1. of the total budget. This is a sustainable cost that is worth incurring in the interests of both staff and the UN organizations. 17. Setting salaries appropriately would also alleviate emerging and serious difficulties with increasing competition in recruiting staff of the best quality. The UN must be able to attract the most competent technical staff, to retain its global relevance. 18. Thousands of professional staff in euro duty stations lost tens of thousands of euros over the past 7 years, compared with those whose earnings have been protected from inflation. This can never be recovered by staff, and can only be considered as savings to Member States. Recommendation 19. It is recommended that the HLCM: 1. Note with concern the significant decline in professional salaries in euro-denominated duty stations, in real terms, over the past 7 years; 2. Request the HR Network to consider this report further, either by video conference or electronically, and to report its recommendations to the HLCM by 31 October 2008; 3. Encourage ACPAQ and the ICSC to resolve this issue.

4 Page 4 Figure 1.1: Madrid - Increase in Net Take-Home Pay (), and increase in inflation (). Madrid - Net Take Home Pay and Figure 1.2: Madrid - Net Take-Home Pay after deducting effect of inflation. Madrid - Net Take Home Pay after Figure 1.3: Madrid - Accumulated loss of income over period July 2001 to July Madrid - P4(VI) paid 39,000 below inflation and currently paid 10,000pa below inflation Euros

5 Page 5 Figure 2.1: Paris - Increase in Net Take-Home Pay (), and increase in inflation (). Paris - Net Take Home Pay and Figure 2.2: Paris - Net Take-Home Pay after deducting effect of inflation. Paris - Net Take Home Pay after -1 Figure 2.3: Paris - Accumulated loss of income over period July 2001 to July Paris - P4(VI) paid 19,000 below inflation and currently paid 7,000pa below inflation Euros

6 Page 6 Figure 3.1: Rome - Increase in Net Take-Home Pay (), and increase in inflation (). Rome - Net Take Home Pay and Figure 3.2: Rome - Net Take-Home Pay after deducting effect of inflation. Rome - Net Take Home Pay after -1-1 Figure 3.3: Rome - Accumulated loss of income over period July 2001 to July Rome - P4(VI) paid 19,000 below inflation and currently paid 7,000pa below inflation Euros

7 Figure 4.1: Vienna - Increase in Net Take-Home Pay (), and increase in inflation (). Vienna - Net Take Home Pay and CEB/2008/HLCM/23 Page Figure 4.2: Vienna - Net Take-Home Pay after deducting effect of inflation. Vienna - Net Take Home Pay after -1-1 Figure 4.3: Vienna - Accumulated loss of income over period July 2001 to July Vienna - P4(VI) paid 28,000 below inflation and currently paid 8,000pa below inflation Euros

8 Page 8 Figure 5.1: Geneva - Increase in Net Take-Home Pay (), and increase in inflation (). Geneva - Net Take Home Pay and 1 Figure 5.2: Geneva - Net Take-Home Pay after deducting effect of inflation. Geneva - Net Take Home Pay after Figure 5.3: Geneva - Accumulated increase in income over period July 2001 to July Geneva - P4(VI) paid CHF 8,000 above inflation and currently declining CHF 500 CHF 400 CHF 300 Swiss Franc CHF 200 CHF 100 CHF 0 -CHF 100 -CHF 200 -CHF 300

9 Page 9 Figure 6.1: London - Increase in Net Take-Home Pay (), and increase in inflation (). London - Net Take Home Pay and Figure 6.2: London - Net Take-Home Pay after deducting effect of inflation. London - Net Take Home Pay after 1-1 Figure 6.3: London - Accumulated loss of income over period July 2001 to July London - P4(VI) paid 1,900 below inflation and not stable Stg

10 Page 10 Figure 7: Exchange rate changes between US dollar and euro from July US$-Euro Exchange Rate 1 Jul-01 Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Percentage Change Appendix 1: Choice of Data Why Net Take-Home Pay and not Net Income? Staff payslips show the Net Income paid to staff. From this figure, employee contributions to the pension fund are deducted. The amount remaining is the Net Take-Home Pay (from which other payments may be made in the local currency). The amount that is deducted for the pension contribution is calculated in U.S. dollars. The local cost of pension contributions has varied significantly as the U.S. dollar has varied significantly. However, the salary setting methodology takes account of that variation, so this part of the staff salaries should be excluded from this analysis. In fact, the declines evident in the attached graphs are even greater if Net Income were to be used. Why start analysis on July 2001? The decline in purchasing power experienced in euro-denominated duty stations became increasingly clearly experienced as the U.S. dollar to euro exchange rate deteriorated over the past seven years. July 2001 was therefore chosen as coinciding with the beginning of the continuous and serious decline in this exchange rate. As shown in Figure 7, the exchange rate deteriorated by 4 over less than seven years. For Vienna, 1 July 2001 was also the date on which P salaries were adjusted following a survey. Therefore, for that duty station in particular, the salaries were set appropriately on that date, so it then forms a useful base on which to make further analyses.