MINISTERS’ DEPUTIES

CM Documents

CM(2021)155

26 October 2021[1]

1418th (Budget) meeting, 23-25 November 2021 11 Programme, Budget and Administration   11.2 Co-ordinating Committee on Remuneration (CCR) b. Annual adjustment of salaries for staff of the Co-ordinated Organisations at 1 January 2022 – 281st report Item to be considered by the GR-PBA at its meeting on 2 November 2021

 

Introduction

1.            The draft Programme and Budget for 2022-2025 operationalises the decisions taken at the 131^st Session of the Committee of Ministers in Hamburg in May 2021 on the Strategic Framework of the Council of Europe. The draft Programme constitutes the Organisation’s mission for the four years to come.

2.            The draft budgets for 2022-2023 set out the human and financial resources necessary for the Organisation to implement the Programme and, by doing so, fulfil its mission. The Secretary General is convinced that maintaining the Council of Europe’s budgetary resources at their current level in real terms is key in enabling the Council of Europe to fully implement the draft Programme presented and meet the challenges to our common values, particularly in the current context, at a reasonable cost. In this context, it is recalled that any salary adjustment to be awarded within the biennium will be covered by the budgetary envelope.

3.            The draft Ordinary Budget for 2022 contains a reserve for price increases of €1.0M corresponding to a 0.4% annualised inflation rate for France at the end of February 2021.[2] The purpose of this reserve is to cover inflation on expenditure, including remuneration of staff.

4.            The draft Ordinary Budget also contains a reserve for staff expenditure amounting to €1.4M which results from staff cost containment measures introduced in prior years. These savings have been allocated to the reserve for staff expenditure in anticipation of a possible salary adjustment for 2022 higher than the inflation rate of 0.4% applied to the draft budget.

5.            Taking into account the reserve for price increases and the reserve for staff expenditure, the Ordinary Budget has a budgetary cover of approximately €2.4M, corresponding to a salary adjustment of just over 1.2%.

6.            The Co-ordinating Committee on Remuneration (CCR) recommendation for the 2022 salary adjustment for France is +3.7%. This is comprised of a neutral result (neither an increase or decrease in real terms) for the reference index corresponding to the evolution of remuneration in the eight reference countries, an annualised inflation of 1.9% for France at the end of June, 1.7% purchasing power parity to ensure that staff in different duty stations maintain equivalent purchasing power and 0.1% remaining from the application of the moderation clause in 2021 (cf. CM/Del/Dec(2020)1391/11.2ab).[3]

Affordability clause

7.            According to Article 7 of the applicable remuneration adjustment procedure (“Affordability clause”) (see Box 1 below), the Committee of Ministers may decide not to award a salary adjustment recommended by the CCR, to award it only in part or to postpone it, in the event specific budgetary or economic circumstances so warrant.As objective conditions that can justify such a decision, the clause refers, inter alia, to a situation “(…) following an international economic crisis; (…) or where the financial impact of a CCR recommendation would cause a variation in the total staff expenditure of such magnitude that it would jeopardise the functioning or mission of the Organisation”.

Box 1[4]

8.            When making its recommendation, the CCR noted that whilst the recommendation was entirely in accordance with the salary adjustment method agreed within the Co-ordination, the recommended adjustments would cause budgetary difficulties for some organisations. It recommended that organisations so affected look to resolve the budgetary problems by considering invoking their affordability clauses, where appropriate, and/or negotiating with staff members. They also acknowledged the efforts made by staff in previous years.

9.            The Budget Committee expressed its concern about the application of the salary adjustment in its entirety and its possible impact on the Programme and Budget. It noted that, despite forecast increases in GDP, member States were faced with tough economic choices resulting from the Covid-19 pandemic. It recommended that the Committee of Ministers and the Secretary General explore all possible avenues for a salary adjustment commensurate with the budgetary situation of the Organisation (cf. CM(2021)135).

10.          The OECD Economic Outlook[5] considers that the global economic recovery “will remain precarious and uncertain in all countries until [the virus is under control]. Failure to ensure the global suppression of the virus raises the risks that further new, more-transmissible variants continue to appear, or that the number of cases surges again in the Northern hemisphere during the winter months, with containment measures having to be reintroduced (…). In such circumstances, stricter containment measures might need to be used again, confidence and private sector spending would be weaker than in the baseline, and some capital would be scrapped. In such a scenario, output would remain weaker than the pre-crisis path for an extended period. World GDP growth could drop to under 3% in 2022, with G20 inflation also being pushed below 3% and unemployment rising further.” According to weekly reports of the World Health Organisation,[6] Europe remains one of the most affected regions and the pandemic is still not under control.

11.          These challenges, and their social and political consequences, were at the very focus of the Secretary General’s attention when preparing the Strategic Framework and the draft Programme and Budget for 2022-2025. Taking into account the level of uncertainty about the economic situation that member States are facing as much as the need for the Organisation to be able to fulfil its mission after two years of activities disrupted by the pandemic, the Secretary General considers of the utmost importance to consolidate the Organisation’s capacity to respond to Europe’s challenges while at the same time mitigating possible legal risks resulting from a possible application of the affordability clause.

12.          A decision not to accept the CCR recommendation could lead to successful appeals before the Administrative Tribunal, and to the subsequent obligation to find additional savings in the Ordinary Budget of €3.9M, including suppressing 40 posts to be able to pay the recommended salary adjustment in its entirety in a zero real growth environment. The Secretary General underlines that following the suppression of 264 posts on the Ordinary Budget between 2010 and 2021, the Organisation’s room for manoeuvre has shrank to a very low level and would result in activities having to be reduced or suspended. As the draft Ordinary Budget includes, as explained above (cf. para. 5 above), reserves for a potential adjustment of approximately 1.2%, a decision not to award any salary adjustment at all, i.e. not using these reserves for the purpose of adjusting the salaries, would increase the legal risk of possible appeals having a realistic prospect of success, at the expense of the capacity of the Organisation to function correctly and to fulfil its mission.

13.          The Secretary General considers therefore important to take all the necessary measures to ensure the highest possible level of compliance with the CCR recommendation within the available budgetary envelope, while ensuring at the same time the Organisation’s proper functioning and its capacity to fulfil its mission with the necessary human resources, maintaining its attractivity as employer, and recognising the efforts already made by staff in the past. The Secretary General considers that staff interests are as much about the possibility of preserving their purchasing power as they are about working under conditions of employment conducive to the fulfilment of their mission, including an appropriate level of staffing of teams and contractual security.

14.          Against this background, it is proposed to award the 2022 salary adjustment in part by applying the affordability clause as follows for staff based in France:

-      1.2% would be awarded as of 1 January 2022;

 

-      a further 0.7% would be awarded on 1 December 2022, allowing salaries of staff based in France in practice to catch up with the inflation rate for France by the end of 2022 in the spirit of preserving the Organisation’s capacity of action while safeguarding its attractivity and its staff’s interests;

-      the remaining 1.8% would not be awarded.

To ensure the equal treatment of all staff, the rate of adjustment would be adapted for each of the various duty stations.[7]

15.          The salary adjustment proposed above would be awarded without requiring any further post suppressions in 2022, preserving the Organisation’s main asset, its human capital. In 2023, sustainable savings would need to be found for the impact of 0.7%, amounting to €0.9M. These savings would be found in the staff departure scheme to be implemented next year.

16.          Lastly, the Secretary General would also propose that the non-awarded amount (1.8%) would offset possible future negative salary adjustments derived from the current adjustment method, in order to mitigate the negative impact on the Organisation’s attractivity and staff in the long run.

17.          Whilst this proposal is based on a carefully thought-through and balanced consideration of all interests at stake, there remains the risk that a decision not to accept the CCR recommendation in its entirety may lead to appeals before the Administrative Tribunal, and to the subsequent obligation to find additional savings and to suppress posts.

18.         

Appendix 1: The co-ordination system and the salary adjustment method[8]

A.         Where does the salary adjustment come from?

1.         The salary adjustment is presented to the Committee of Ministers on a yearly basis in the form of a recommendation to the six Co-ordinated Organisations^[9] by the Co-ordinating Committee on Remuneration (CCR). The CCR is composed of national representatives of member States, principally experts from Ministries of Finance.

2.         The salary adjustment is calculated by the CCR using a mathematical formula. The method in force is to be adopted by the Committee of Ministers in November 2021.^[10] This method runs until end 2025 and may be extended for two additional years.

The method is based on the following elements:

The method reflects changes over the past year; there is thus a “time lag” effect.

3.         The application of the method can and does result both in increases and decreases in salary. For 2011 and 2014 the method indicated a negative adjustment of respectively -0.2% (-1.7% in real terms) and -0.8% (-1.8% in real terms).

4.         The moderation clause aims at limiting volatility in the salary adjustment. Should the evolution of the reference index be below 98.0 or above 102.0, the part beyond these thresholds shall be delayed to either the last day of the year when the salary adjustment calculation in question would have taken effect or the first day of the subsequent year as decided by the Committee of Ministers.

B.         Is the recommendation of the CCR binding?

5.         The recommendation of the CCR is presented to the GR-PBA and then to the Committee of Ministers, along with the Secretary General’s proposal on how to deal with the salary adjustment recommendation.

6.         When taking a decision on the salary adjustment, the Committee of Ministers is bound by the salary adjustment method which it adopted. According to Article 7 (affordability) of the method, the Committee of Ministers reserves the sovereign right to take special measures concerning the implementation of the adjustment resulting from the application of the salary adjustment method, if specific budgetary and/or economic circumstances so warrant, in particular to decide that the annual adjustment recommended by the CCR be awarded in part or not at all, and also on the timing for the payment of any adjustment. This clause specifies the objective conditions under which this Article could be invoked (cf. box 1 above).

Appendix 2: Budgetary impact of the salary adjustment