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MINISTERS’ DEPUTIES |
CM Documents |
CM(2020)63 |
13 May 2020[1] |
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1378th meeting, 11 June 2020 11 Programme, Budget and Administration
11.1 Co-ordinating Committee on Remuneration (CCR) – a. 2019 activity report – Chairman’s Report Item to be considered by the GR-PBA at its meeting on 28 May 2020 |
I. Introduction
1. Co-ordination was created in 1958 and today includes six international organisations: the European Space Agency (ESA), the European Centre for Medium-Range Weather Forecasts (ECMWF), the Council of Europe (CoE), the European Organisation for the Exploitation of Meteorological Satellites (EUMETSAT), the Organisation for Economic Co-operation and Development (OECD) and the North Atlantic Treaty Organization (NATO). These Organisations employ more than 14 000 officials and over 8 000 former officials or their dependants receive a pension from the Co-ordinated Pension Scheme. At 1 January 2019, 58 countries were members of the Co‑ordinated Organisations (CO). In addition to the six Co-ordinated Organisations, a further 28 international organisations have Associated Organisation status.
2. This mechanism (Co‑ordination) was created in order to relieve the Governing bodies of the Co‑ordinated Organisations of the need to individually set the remuneration and pensions of their officials. The system operates on the basis of tripartite discussions among three Committees: the Co-ordinating Committee on Remuneration (CCR) composed of national delegates of the member countries of the Organisations, the Committee of Representatives of the Secretaries/Directors-General (CRSG) composed of representatives of the Secretaries/Directors-General of the Organisations, and the Committee of Staff Representatives (CRP) composed of staff representatives of the Organisations.
II. The Committees
3. At the June 2015 session of Co‑ordination, I was elected Chairman of the CCR for an initial three‑year period beginning 1 July 2015. My mandate was renewed in June 2018 for another year, and again in March 2019, until 30 June 2020. The Vice‑Chairman and Legal Adviser of the CCR, Mr Peter Olson, was elected at the December 2015 session. His mandate began on 1 January 2016 and was renewed in June 2017 for another two years until 31 December 2019. Mr Olson decided not to seek re‑election and the CCR has elected Ms Marianna Fucci to the post of Vice‑Chairperson and Legal Adviser of the CCR from 1 January 2020, for a mandate of two years.
4. Mr Patrice Billaud-Durand (NATO) was Chairman of the CRSG and the Vice-Chairmen were Mr Xavier Imbert (ESA) and Mr Jean-Pierre Couchinave (OECD). Mr Christian Overbeck (ESA) replaced Mr Imbert as Vice‑Chairman from 1 July 2019 and was subsequently named Chairman from 1 January 2020. Ms Floricica Olteanu (NATO) will replace him as Vice‑Chairperson.
5. Mr Jean-Pierre Cusse (OECD) was Chairman of the CRP and Mr Gabriele Cascone (NATO) and Mr Alain Bataillé (ECMWF) were Vice-Chairmen. During the September 2019 session, Mr Bataillé was elected Chairman and Mr Miguel Lopez (ESA) and Mr Carlos Suarez Gonzalez (NATO) were elected Vice‑Chairmen.
6. In 2019, there was a total of three Co-ordination sessions where the Committees met separately and also in bilateral and in tripartite meetings. The Committees also had the opportunity to meet the Executive Directors of the six Co-ordinated Organisations at the July and September 2019 sessions.
7. Throughout 2019, the International Service for Remunerations and Pensions (ISRP) provided technical and administrative assistance in the area of remunerations and pensions, and prepared the working documents that form the basis of the work of Co-ordination.
III. Recommendations
8. The activities of the Committees gave rise to eight CCR recommendations that were submitted as Reports to the Governing bodies of the six Co‑ordinated Organisations (see the list of Reports in the Annex).
9. Apart from recurrent topics such as the annual adjustment of salaries and allowances, the Co‑ordination meetings were mainly devoted to the review of the education allowance and the review of the Co‑ordinated Pension Scheme. The CCR also discussed the review of the salary adjustment method.
IV. Main activities
A. Special adjustments for Turkey at 1 October 2018
[260th, 261st and 262nd Reports, CCR/R(2019)1, 2 and 3]
10. The remuneration adjustment method [244th Report, CCR/R(2016)7 & ADD1] provides for a special adjustment of salaries when the relevant consumer price index in a country shows an increase of more than 7% over three consecutive months since the beginning of the reference period of 1 July year n to 1 July year n+1. A similar provision was replicated in the methods of adjustment of the allowances/supplements expressed in absolute value [242nd Report, CCR/R(2016)6] and of the installation allowance [229th Report, CCR/R(2014)4].
11. The harmonised index of consumer prices in Turkey passed this threshold in September, October and November 2018. The CCR therefore recommended a special adjustment of 7% at 1 October 2018 of the salaries, the allowances/supplements expressed in absolute value and the installation allowance.
B. Creation of a salary scale for officials serving in Luxembourg [259th Report, CCR/R(2019)4]
12. For historical reasons related to NATO’s move from France to Belgium and Luxembourg, the salary scales for A and L grade staff in Luxembourg were the same as for A and L grades in Belgium. Over time, the cost of living in Luxembourg has risen more quickly than in Belgium, which is causing recruitment and retention problems at NATO agency NSPA in Luxembourg. The CCR recognised the urgent operational difficulties faced by NSPA and supported the principle of a specific Luxembourg salary scale (using purchasing power parities for A/L grades). A draft report with date of entry into force of the salary scale of 1 January 2020 was prepared and sent to delegations for approval under a silent procedure ending on 11 January 2019. Due to the breaking of the silent procedure by two countries, a Chairman’s report was issued on 29 January 2019.
C. Amendments to the Co-ordinated Pension Scheme Rules [263rd Report, CCR/R(2019)5]
13. Following extensive discussions on the Co‑ordinated Pension Scheme in recent years, it was agreed to examine pension issues overall rather than modifying elements in isolation. After much debate, the CSRG (without the support of the OECD) made a proposal that restricted the conditions of entitlement to the education allowance for pensioners and changed the annual adjustment of pensions (until now based on the salary adjustment) to an annual inflation‑based adjustment. The proposal also included some technical amendments. The CCR adopted the 263rd Report and agreed to remove the reform of the Co‑ordinated Pension Scheme from the 2020 work programme. The CRP was unanimously opposed to any amendments to the Co‑ordinated Pension Scheme.
D. Annual salary adjustment at 1 January 2020 [264th Report, CCR/R(2019)6]
14. In accordance with the salary adjustment method of the 244th Report [CCR/R(2016)7 and ADD1], the CCR adopted the 264th Report on the salary adjustment for staff of the Co-ordinated Organisations at 1 January 2020. With regard to the reference countries (Belgium, France, Germany, Italy, Luxembourg, Netherlands, Spain and United Kingdom), the annual salary adjustment index was above 100. For the other 20 member countries of the Co-ordinated Organisations for which salary scales have been established, none had a salary adjustment index below 100. There were purchasing power parity corrections for 13 countries: 12 corrected upwards (Canada, France, Germany, Greece, Hungary, Iceland, Japan, the Netherlands, Norway, Portugal, Spain and Sweden) and one downwards (Italy). The adoption of the Report did not give rise to any particular comments from the CRSG and the CRP.
E. Annual adjustment of the allowances/supplements expressed in absolute value at 1 January 2020 [265th Report, CCR/R(2019)7]
15. In accordance with the adjustment method of the 242nd Report [CCR/R(2016)5], the CCR adopted the 265th Report on the adjustment of allowances/supplement expressed in absolute value at 1 January 2020. The annual adjustment of the monthly amounts in force in Belgium corresponded to the weighted average of percentage changes during the reference period of the monthly dependent child allowance amounts in the reference countries. For other countries, the amounts were calculated by applying the purchasing power parities to the amounts in Belgium. The adoption of the Report did not give rise to any particular comments from the CRSG or the CRP.
F. Review of the staff contribution rate to the Co-ordinated Pension Scheme
[266th Report, CCR/R(2019)8]
16. In accordance with Article 41 of the Co‑ordinated Pension Scheme Rules, the CCR approved an increase in the staff contribution rate to the Co-ordinated Pension Scheme to 11.8% of basic monthly salary, with effect at 1 January 2020. The CRSG and the CRP duly noted the CCR’s recommendation, which resulted from the strict application of the adjustment method for the contribution rate and took account of the downward impact of the change of the annual adjustment of pensions to an inflation-based adjustment. However, the CRP expressed reservations with regard to certain actuarial assumptions that had been used to calculate the adjustment of the contribution rate.
G. Education allowance
17. The review of the education allowance began in the September 2017 session, with the examination of a background document. The CRSG made a preliminary draft proposal for revisions to the allowance at the March 2018 session. A draft proposal was examined at the June 2018 session and a revised proposal was discussed at the September 2018 session. The CCR presented its position to the other colleges at the December 2018 session. Discussion continued at the March and July 2019 sessions. The CRSG further revised its proposal to take into account some concerns that had been raised by the CCR. Discussion will continue at the February 2020 session.
H. New salary structure
18. In 2011, the CCR validated the work of the working group on the new salary structure in the Co‑ordinated Organisations, which had recommended that Organisations wishing to modernise their salary structure do so by introducing a single spine. On the basis of this recommendation, NATO is introducing this new structure and provided an update on this issue at the July 2019 session; a progress report is planned for the June 2020 session.
I. Review of the salary adjustment method
19. The current salary adjustment method covers the period from 1 January 2017 to 31 December 2020 and requires that proposals to amend the rules as from 1 January 2021 be submitted for examination by the CCR before 1 March 2019. Preliminary discussions on the review of the method were held at the December 2018 session. The CRSG considered that it was not possible to draw any conclusions on the fitness of the current method (244th Report), given that the “complete” method, that is with the moderation clause included in the addendum, had only been applied for three adjustments (at 1 January 2018, 1 January 2019 and 1 January 2020). In order to allow sufficient time to assess the current method, the CRSG proposed that the CCR issue a report recommending a renewal of the current method, including the moderation clause, for a period of three years between 1 January 2021 and 31 December 2023.
V. 2020 Programme of Work
20. Apart from recurrent topics such as the annual adjustment of salaries and allowances/supplements, the CCR has included in its work programme the follow-up of the review of the education allowance, a review of the calculation method for the daily subsistence allowance and the review of the salary adjustment method.
VI. Conclusion
21. The discussions on the education allowance have not been particularly controversial. Some CCR delegations would have wished to see the education allowance terminated for tertiary level education but this proposal has not been pursued. A CRSG proposal to allow lump sum payments for tuition fees based on an average has been rejected by both the CCR and the CRP. Despite the work put in by the ISRP on producing a review methodology for the allowance, concerns remain with some CCR delegations about that methodology and therefore about agreeing the automaticity of its use. I am confident that with some understanding on all sides these concerns can be alleviated and an agreement reached early in 2020.
22. The review of the Co-ordinated Pension Scheme (CPS) has clearly been the most controversial debate of this year. Discussions about reforming the CPS had been going on for several years and the CCR eventually decided to undertake a holistic review.
23. After examining a number of quite radical proposals, the CCR came to the conclusion, after considering the legal advice given to it, that three potential reforms of the CPS were viable. These were the removal of the entitlement to the education allowance from pensioners, a change in the annual adjustment method to one based on inflation and a revised normal retirement age. All three reforms were discussed in some detail with the other colleges. One Co-ordinated Organisation and the CRP as a whole took the stance that the CPS was untouchable and that they therefore could not agree with any of the potential reforms. The CCR’s legal advice maintained that the CPS is not untouchable and that some reforms are indeed allowable. The unwillingness of the CRP and the OECD to entertain any reform of the CPS meant that the focus of negotiations in the final session was principally between the CCR and the five Co‑ordinated Organisations willing to consider some reform, though all delegates were kept regularly and fully informed of progress.
24. A proposal of the CRSG (minus the OECD) to recommend the first two reforms was eventually agreed and the question of a change to the retirement age taken out of the work programme. In agreeing to the CRSG’s (minus the OECD) proposal, the CCR decided to give the Co-ordinated Organisations the flexibility to determine the transition period for the withdrawal of the education allowance from pensioners, but with a minimum period of at least five years, to enable each Organisation to prevent undue hardship to individual pensioners.
25. A final point on pensions is that it is been alleged by some that in reforming the CPS the CCR has somehow “gone back on its word”. I have to say that I think this is wrong for several reasons. The first is that some opposed to the reforms – or indeed any reforms – have mistakenly referred to the “Noordwijk compromise” of 1994 as constituting an agreement that the CPS could not be changed. This is simply incorrect; the “Noordwijk compromise” was an agreement on how the employee contribution rates to the pension scheme should be calculated. Another reason I think that it is incorrect to say that the CCR has gone back on any previous agreement is quite simply that times change. The CPS has become an increasingly expensive scheme for the Co-ordinated Organisations and, while it has now been replaced by successor schemes, it does not mean that the CPS cannot or should not be the subject of review. Nor can the CCR of today be completely constrained by what has been agreed in the past, even though, as I see it, there has been no agreement that prevents some modest reforms to the CPS. The reforms enacted must meet certain legal criteria in not harming individual pensioners excessively nor can they be purely arbitrary in nature but the CCR is confident that the reforms agreed meet these legal tests.
26. Whatever views delegates from the three committees take on the CPS reforms, all will be, I am sure, glad to move on to other matters. 2020 will see further discussions on the salary adjustment method (SAM) and a review of the daily subsistence allowances (DSA). Both these topics have generated lengthy discussions in the past and I hope that all three committees will see the benefit of some give and take in the negotiations.
27. There have been two representations about the nature and format of Co-ordination meetings. First, the Executive Directors have asked that Co-ordination sessions should last a single day in tripartite format (as opposed to two or two and half days at present). The Chair is open to this suggestion when the agenda permits and I will seek opportunities to try this out if possible during 2020, subject to agreement from the two co-Chairs. I note that because the CCR does not meet regularly outside the three Co‑ordination sessions, it has become the practice for the first of the three days allowed for the session or a large part of it to be a “CCR-only” day.
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ANNEX
LIST OF CCR REPORTS ADOPTED IN 2019
CCR/R(2019)8 266th Report Review of the staff contribution rate to the Co‑ordinated Pension Scheme (CPS)
CCR/R(2019)7 265th Report Annual adjustment of allowances/supplements expressed in absolute value at 1 January 2020
CCR/R(2019)6 264th Report Annual adjustment of salaries for staff of the Co‑ordinated Organisations at 1 January 2020
CCR/R(2019)5 263rd Report Amendments to the Co-ordinated Pension Scheme Rules
CCR/R(2019)4 259th Report Creation of a salary scale for officials serving in Luxembourg
CCR/R(2019)3 262nd Report Special adjustment of ceilings of the installation allowance at 1 October 2018 for Turkey
CCR/R(2019)2 261st Report Special adjustment of the allowances/supplements expressed in absolute value at 1 October 2018 for Turkey
CCR/R(2019)1 260th Report Special adjustment of salaries in Turkey at 1 October 2018